Commissioner of Income Tax vs Nuchem Limited

Adarsh Kumar Goel, J.—The Revenue has preferred this appeal u/s 260A of the Income Tax Act, 1961 (in short, "the Act"), against the order dated December 7, 2007, passed by the Income Tax Appellate Tribunal, Bench "H", New Delhi, in I.T.A. No. 1958(Del) of 2007, for the assessment year 1995-96, proposing to raise the following substantial questions of law:

(i) Whether, on the facts and in the circumstances of the case, the hon''ble Tribunal is justified in holding that the judgment in Virtual Soft Systems Ltd. Vs. Commissioner of Income Tax, Delhi-I, will apply even after the insertion of Explanation 4 to Section 271(1)(c) of the Income Tax Act, 1961, with effect from April 1, 1976?

(ii) Whether, on the facts and in the circumstances of the case, the hon''ble Tribunal is right in deleting the penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961, on the ground that the total income of the assessee has been assessed at a loss figure?

(iii) Whether, on the facts and in the circumstances of the case, the hon''ble Income Tax Appellate Tribunal is right in confirming the deletion of penalty u/s 271(1)(c) by relying on the apex court decision in the case of Virtual Soft Systems Ltd. Vs. Commissioner of Income Tax, Delhi-I, though the issue of retrospectivity has been referred to the Chief Justice of the hon''ble Supreme Court as per (2008) 217 CTR (SC) 105

The assessee filed a return of loss. The Assessing Officer while deter mining the net income to be nil, made additions to the returned income. The Commissioner of Income Tax (Appeals) deleted some of the additions. The Assessing Officer initiated penalty proceedings in respect of the additions, which were sustained by the Commissioner of Income Tax (Appeals). On appeal, the Commissioner of Income Tax (Appeals) set aside the penalty on the ground that where the return is of loss and income assessed is nil, there could be no penalty. This view has been upheld by the Tribunal, inter alia, in view of the judgment of the hon''ble Supreme Court in Virtual Soft Systems Ltd. Vs. Commissioner of Income Tax, Delhi-I, , wherein it was held that in the absence of any positive income and tax being attracted, penalty for concealment could not be levied.

Learned Counsel for the Revenue submits that the view taken in Virtual Soft Systems Ltd. Vs. Commissioner of Income Tax, Delhi-I, has since been overruled in a subsequent judgment of the hon''ble Supreme Court in Commnr. of Income Tax-I, Ahmedabad Vs. Gold Coin Health Food Pvt. Ltd., .

In view of the above, the questions proposed have to be answered in favour of the Revenue and against the assessee.

Accordingly, we set aside the view taken by the Tribunal and remand the matter to the Tribunal for decision on the remaining points, which may survive.

The appeal is disposed of.