COMMISSIONER OF INCOME TAX Vs. ZAM ZAM TANNERS

JUDGEMENT

(1.) The Tribunal has referred the following question under Section 256(2) of the IT Act (hereinafter referred to as "Act") relating to the asst. yr. 1985-86 for opinion to this Court : "Whether the Tribunal was justified in confirming the view taken by the CIT(A) holding that Sub-clause (a) of Expln. 4 appended to Section 271(1)(c) of the IT Act, 1961, was applicable only if there was a positive income of an assessee and not applicable where even as a result of the detection of concealment or furnishing of inaccurate particulars of income, loss shown by such assessee got reduced or waived off ?"

(2.) The brief facts of the case are as follows. The assessee-opposite party (hereinafter referred to as the "assessee") is a registered firm deriving income from business of tanning raw hides. The assessee had filed a return of income showing a profit of Rs. 3,57,454 but subsequently the same had been revised to Rs. 5,01,579. After allowing deductions under Section 80HHC, even the revised return filed was at nil income. The assessing 'authority has also assessed the assessee at a nil income. Despite that the AO initiated penalty proceedings, on the difference of income shown in the original return and in the subsequent revised return, the explanation of the assessee that there was no positive income even after the revised income and, thus, no penalty provisions were attracted, was not accepted and a penalty under Section 271(1)(c) was imposed. Against the penalty order, the assessee filed appeal before CIT(A), which was allowed, and the penalty was deleted. Revenue filed appeal before the Tribunal, which was rejected. The Tribunal held as follows :

(3.) Heard Shri R.K. Upadhyaya, learned standing counsel for the Revenue, and Sri S.D. Singh, learned counsel for the respondent-assessee.