ORDER
D.C. Agrawal, A.M.
This is an appeal filed by the assessee and is directed against the order of CIT(A) passed on 23-11-2000 for the assessment year 1996-97 confirming the levy of penalty of Rs. 41,40,000 under section 271(1)(c).
2. The facts, in brief, are that the assessee filed return of income on 30-11-1996 declaring a total income of Rs. 7,10,10,760 and was finally assessed at a loss of Rs. 5,20,61,940 vide assessment order dated 29-1-1999. The assessing officer initiated penalty proceedings under section 271(1)(c) for concealment of income. An appeal against quantum was filed before CIT(A) but the same was withdrawn by the assessee and the assessing officer received the dismissal order of appeal in his office in January, 2000. Thus, the quantum of loss as determined in the assessment order dated 29-1-1999 became final. In the assessment order, the assessing officer mainly made two additions viz., 1. Bottle support expenses of Rs. 80 lakhs, 2. Bogus purchases at Rs. 10 lakhs. About these two additions, the assessing officer had discussed in detail in paras 5 and 6 of his penalty order, for the sake of convenience the same is reproduced as under :
“Bottler’s support expenses Rs. 80 lakhs
It was mentioned in assessment order that assessee has claimed bottler’s support expenses of Rs. 80 lakhs. In the profit and loss account, the assessee has booked the expenditure of Rs. 67,71,527 under the head distribution related cost. The assessee was required to justify this claim of expenditure and to file the complete particulars of these expenses. In response to this, the assessee filed a revised computation of income along with a copy of revised audited balance sheet and profit and loss account and in this revised computation, the assessee has added back amount of Rs. 44,50,000 being the excess provision under the head distribution related cost. Accordingly, distribution related costs were claimed in the revised computation at Rs. 23,21,527 as against Rs. 67,71,527 booked in the original profit and loss account. During the assessment proceedings, the assessee has submitted that the provisions for bottler’s support expenses under the head distribution related costs was made in the books to the tune of approximately Rs. 80 lakhs. The assessee has appointed Pure Drinks (New Delhi) Ltd. as bottler company for its non-alcoholic beverages as per the agreement entered between these parties. Pure Drinks (New Delhi) Ltd. was required to make payments to some parties from whom it purchased bottles and other items. The assessee- company feared that Pure Drinks (New Delhi) Ltd. may not make payment to its creditors in time and as such company’s business with Pure Drinks (New Delhi) Ltd. may suffer. Accordingly, it was contended that the assessee had to make payments to the creditors of Pure Drinks (New Delhi) Ltd. The assessee has undertaken the liability of Pure Drinks (New Delhi) Ltd. and as such made payment also of approximately Rs. 25.5 lakhs during the year. Subsequently, the assessee itself has written back Rs. 44,50,000. It was also contended that in subsequent financial year 1997-98 relevant to assessment year 1998-99, an amount of Rs. 19,75,876 has been claimed from Pure Drinks (New Delhi) Ltd. and to this extent the provision has been written back in the books of account. The assessee has further submitted that this expenditure also includes expenditure of Rs. 3.95 lakhs. The consists of work done in laboratory of Rs. 3.49 lakhs and work done on the concentrated room Rs. 45,000. The assessing officer observed that this amount was also capital in nature. After considering all these facts, the assessing officer has made an addition of Rs. 80 lakhs. The assessing officer pointed out that it is not possible to accept that it is a liability of the assessee-company under the contract to pay to the creditors of Pure Drinks (New Delhi) Ltd. The assessee. has entered into the contract with Pure Drinks (New Delhi) Ltd. and as such, there is no fear why Pure Drinks (New Delhi) Ltd. will not honour its own commitment. The agreement with Pure Drinks (New Delhi) Ltd. is in writing and various rights and liabilities of the assessee-company and Pure Drinks (New Delhi) Ltd. are clearly mentioned therein. In the written agreement, there was no obligation for assessee to pay off creditors of Pure Drinks (New Delhi) Ltd. Thus, there was no basis why assessee should pay to the creditors of Pure Drinks (New Delhi) Ltd. It was also observed that out of the provision of Rs. 80 lakhs, subsequently, the assessee has itself written off Rs. 44,50,000 in the revised computation and further Rs. 19,75,876 in assessment year 1998-99. In the absence of any contract to make payment or to bear the liability of payment of the creditors of Pure Drinks (New Delhi) Ltd. it is not possible to accept that it was a contractual obligation of the assessee to make the payment. Hence there was no liability, which can be claimed as expenses incurred for the business in commercial expediency.
Bogus purchases Rs. 10 lakhs :
In the purchase account, the assessee has booked expenditure of Rs. 63,49,316. It was noticed during assessment proceedings that under this head, the assessee had also booked expenditure of Rs. 10 lakhs payable to Pure Drinks (New Delhi) Ltd. The assessee was required to justify this cost of purchases. The assessee has simply filed copy of account of Pure Drinks (New Delhi) Ltd. as appearing in the books of assessee. Despite opportunities given by the assessing officer, the assessee has not furnished the copy of any purchase bills or other bills of expenses issued by Pure Drinks (New Delhi) Ltd. In the account of Pure Drinks (New Delhi) Ltd. the assessee has passed an entry dated 31-12-1995 mentioning that credit of Rs. 10 lakhs is allowed to Pure Drinks (New Delhi) Ltd. as bottler’s support expenses, whereas, in reply dated 29-12-1998, the assessee submitted that amount of Rs. 10 lakhs represents the cost of sales relating the payment of Pure Drinks (New Delhi) Ltd. towards dry parts. Thus, in the reply dated 29-12-1998, the assessee has shifted the position. Assessee failed to reconcile these two positions. In the absence of bill of Pure Drinks (New Delhi) Ltd. for the purchase of dry parts, the claim of the assessee of purchases from Pure Drinks (New Delhi) Ltd. was not substantiated and thus was not accepted. An addition of Rs. 10 lakhs was made on account of bogus purchases. ”
3. In para 5.2, he observed that the return was already accepted under section 143(1)(a) on 22-1-1999 but when it was taken up for scrutiny and assessee was confronted as to how the assessee had made a claim of distribution related cost of Rs. 67,71,527, the assessee came forward with a revised computation filed on 8-12-1998 and withdrawn the claim of Rs. 44,50,000. Thus, as per assessing officer, if the case would not have been selected for scrutiny, the assessee would not have withdrawn the claim to the extent he withdrew. A revised audited financial statement for the period ending 31-3-1996 (the revised audit was done on 19-5-1997) was also filed with revised computation of income. It is pertinent to note that along with the return of income filed on 30-11-1996, a copy of audited balance sheet, profit and loss account showing a claim of Rs. 44,50,000 was filed. According to assessing officer, the revised figures were available when the audit was also revised and the assessee could have filed the revised return upto 31-3-1998, but it chose not to file such revised return. It withdrew the claim finally only on 8-12-1998 when he was confronted by the assessing officer in scrutiny. The assessee, further wrote back a sum of Rs. 19,75,876 out of the claim of Rs. 67,71,527 in the assessment year 1998-99. According to the assessing officer, there was no basis for making a provision in the books of account and it was only to inflate the cost and consequently the loss. Since total claim was of Rs. 80 lakhs in all, the assessing officer drew the conclusion that the assessee had furnished inaccurate particulars of income and is liable for penalty under section 271(1)(c) read with Expln. 1 thereunder. The assessee relied on the following decisions before assessing officer in support of his argument that it is a case of loss returned and loss assessed and as there is no positive income, penalty cannot be levied under section 271(1)(c).
(1) CIT v. N. Krishnan (1999) 240 ITR 47 (Ker)
(2) CIT v. Prithipal Singh & Co. (1990) 183 ITR 69 (P&H)
(3) ITO v. Sudha Pharmaceuticals (P) Ltd. (1983) 17 TTJ (Chd) 518
4. The assessing officer, however, relied on the following decisions for levying the penalty
(1) Atul Kumar Deovrat & Co. v. CIT (1987) 168 ITR . 286 (Cal)
(2) P.R. Basavappa & Sons v. CIT (2000) 243 ITR 776 (Kar)
The CIT(A) while confirming the penalty observed as under
“I have very carefully gone through the facts of the case and rival submissions.
“I do not find much force in the arguments of the Authorised Representative of the appellant. Her fundamental argument as mentioned in serial (viii) above that after all additions or disallowances made by the assessing officer, the loss has merely been reduced and there is no loss of tax collection to the exchequer is not tenable, This issue has already been taken care by the assessing officer while he referred to the decision of the Hon’ble Karnataka High Court in the case of P.R. Basavappa & Sons v. CIT (2000) 243 ITR 776 (Kar), wherein it has been held that the word ‘income’ includes ‘loss’ also and since the loss declared had been reduced, the penalty under section 271(1)(c) was impossible. All the arguments of the Authorised Representative as mentioned above, are merely to cover up the main issue raised by the assessing officer. Firstly, if revised accounts were prepared as long back as 19-5-1997, in the fitness of things, the appellant should have immediately filed a revised return of income which was not done at all. Besides, there is considerable force in the argument of the assessing officer that had the case not been selected for scrutiny assessment, these facts would not have come to light and the assessee would have escaped the addition of Rs. 90 lakhs made in the assessment order. Further, the Authorised Representative of the appellant could not satisfactorily explain as to why the appeal filed before the CIT(A) against the order of assessment was withdrawn during the appellate proceedings. Keeping the above facts in view and keeping the facts of addition under the above two heads as discussed by the assessing officer in the penalty order, I am strongly of the view that the appellant tried to conceal its income to the extent of Rs. 90 lakhs by furnishing inaccurate particulars with regard to the claim of expenses as discussed in detail. Accordingly, it is liable to penalty under section 271(1)(c) of Income Tax Act, 1961. Therefore the penalty imposed of Rs: 41,40,000 under section 271(1)(c) is hereby confirmed.”
5. Before us, the learned Authorised Representative of the assessee relied on the decision of Hon’ble Supreme Court in (i) CIT v. Prithipal Singh & Co. (2001) 249 ITR 670 (SC) (ii) Ahmedabad Special Bench’s decision in Asstt. Commissioner v. Apsara Processors (P) Ltd. (2005) 92 TTJ (Ahd)(SB) 645 for the proposition that where returned income and assessed income is loss, then no penalty under section 271(1)(c) can be levied, He also referred to a decision of Tribunal, Mumbai in ITA No. 3331/Mum/1999 in the case of Dy. CIT v. Galaxy Dyeing & Printing Mills (P) Ltd. Mumbai, delivered on 9-3-2004.
6. On the other hand, the learned Departmental Representative relied on the decision of Hon’ble Bombay High Court in CIT v. Chemieqwp Ltd. (2004) 265 ITR 265 (Bom), which is the decision of jurisdictional High Court on the issue and supported the orders of authorities below.
7. We have heard the rival submissions and perused the material on record. So far as the question of concealment is concerned, we are of the view that the assessee had not filed accurate particulars of income regarding his income/loss, as found by assessing officer and CIT(A) and not contested by the assessee. In penalty ,proceedings, the assessee had filed incorrect audit report under section 44AB with the original return. The circumstances under which the assessee had to carry out second audit on 19-5-1997 was not spelt out and above all the assessee could have revised its return after it received second audit report on 19-5-1997, but it chose not to do so. It was compelled to disclose the second audit report when scrutiny was carried out and after being asked to explain about the inflation of cost. The assessee incorrectly made a claim of liability in the return even after being pointed out in the revised audit, did not revise the computation suo motu and allowed the limitation for filing revised return to expire by 31-3-1998.
8. We are of the view that the assessee had consciously withheld from the department the revised computation as per revised audit report which was available to it by 19-5-1997, wherein the wrong claim made in the original return and original audit report was pointed out. Similarly, in respect of booking of expenditure of Rs. 10 lakh payable to Pure Drinks (New Delhi) Ltd., we are of the view that the claim was incorrect and on being asked by assessing officer, it changed its explanation though not substantiated. On this point also the assessee has filed inaccurate particulars. This case is thus covered under Expln. 1 to the section 271(1)(c).
9. Now, we come to the legal arguments of the assessee that penalty cannot be levied in a case, where returned income and assessed income are loss, by relying on the decision of Prithipal Singh (supra). We are unable to agree with this contention. The Special Bench decision in Apsara Processors’ case (supra) was given by holding that if there are two views possible on one issue then the one favourable to the assessee should be followed. That is, one view is that penalty for concealment cannot be levied in a case where returned income and assessed income is loss. This view is supported by the decision of Hon’ble Punjab & Haryana High Court in Prithipal’s case (supra), confirmed on facts by Hon’ble Supreme Court (2001) 249 TTR 670 (SC) (supra) and also supported by Hon’ble Kerala High Court’s decision in CIT v. N. Krishnan (supra). The other view is that after amendment in the Act by Taxation Laws (Amendment) Act, 1975, which was with effect from 1st April, 1976, penalty for concealment can be levied even in a case where returned income and assessed income are loss. This view is supported by decision of Hon’ble Bombay High Court in CIT v. Chemiequip Ltd. (supra) and by decision of Hon’ble Karnataka High Court in P.R. Basavappa & Sons v. CIT (supra). The Tribunal (SB) in Apsara Processors’ case (supra) observed as under on pp. 21 and 22
“21. Be that as it may, there are two views on this issue. At one hand, the Hon’ble Karnataka High Court in the case of P.R. Basavappa & Sons (supra) and the Hon’ble Bombay High Court in the case of Chemiequip Ltd. (supra) have held that (penalty) under section 271(1)(a) is leviable where the assessed income is loss while contrary view is taken by Punjab & Haryana High Court in the case of N. Krishnan (supra).
22. In the case of CIT v. Vegetable Products Ltd. (supra), the apex court held at p. 195 of the report as under
………… On the other hand, if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted. This is well accepted rule of construction recognised by this court in several of its decisions. Hence, all that we have to see is, what is the true effect of the language employed in section 271(1)(a)(i). If we find that language to be ambiguous is capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so, because the provision relates to imposition of penalty.”
Thus, following a interpretation that is favourable to the assessee, the Special Bench in Apsara Processors case (supra), did not upheld the levy of penalty for concealment. In Galaxy Dying & Printing Mills’ case (supra), there was no finding as to the filing of inaccurate particulars of income and on applicability of Expln. 1 to section 271(1)(c). Further, the question as to why the decision of Honble jurisdictional High Court in Chemiequip’s case (supra) given after considering the Prithipal Singh’s case (supra) would not be followed in the jurisdiction of Honble Bombay High Court is not considered.
10. In fact, Honble, Bombay High Court in Chemiequip’s case (supra) had considered Prithipal Singh’s case (supra) decided by Honble Punjab & Haryana High Court and the ratio given therein was not affirmed.
“The expression ‘the amount of tax sought to be evaded’ has been defined in the newly introduced Expln. 4 to section 271(1) for the purposes of section 271(1)(iii) which was introduced with effect from 1-4-1976 by the Taxation Laws (Amendment) Act, 1975. The said expression contemplates that where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income the base for quantum would be the tax that would have been chargeable on the income concealed, had such income been the total income. Therefore, after 1-4-1976, the quantum of penalty is linked with amount of tax sought to be evaded. Therefore, Expln. 4 applies to cases where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or it has the effect of converting that loss into income. Therefore, the Tribunal erred in coming to the conclusion that section 271(1)(c) was not applicable as the finally assessed income was a reduced loss. Explanation 4 was not in existence during the assessment year 1970-71. The judgment of the Punjab & Haryana High Court in CIT v. Prithipal Singh & Co. (1990) 183 ITR 69 (P&H) was applicable to the assessment year 1970-71, whereas we are concerned with assessment year 1988-89 when Expln. 4 was in the statute. One more aspect needs to be mentioned. By the Finance Bill, 2002, section 271 of the Income Tax Act has been amended vide clause 97. By clause 97(f) of the Finance Bill, 2002, it is claimed that in cases where the amount of income in respect of which particulars have been concealed, has the effect of reducing the loss declared in the return, then the amount of tax sought to be evaded shall be the tax that would have been chargeable on the amount of such income as if such income was the total income. This amendment is clarificatory in nature, it is so stated in the Finance Bill, 2002; Notes on Clauses (see (2002) 254 ITR (SC) 175, 1761. Therefore, the view, which we have taken is also supported by subsequent amendment. In the circumstances, the Tribunal erred in holding that section 271(1)(c) was not applicable as the final assessed income was a reduced loss. The Tribunal has failed to take into account clause (a) of Expln. 4 as it stood at the relevant time. Question No. 1 is, therefore, answered in negative, i.e., in favour of the department and against the assessee.
11. Hon’ble Supreme Court in Prithipal Singh’s case (supra) declined to interfere on the facts of the case and confirmed the order of Hon’ble Punjab & Haryana High Court in Prithipals case (supra) as under :
“We have heard learned counsel and find that on the facts of this case, no interference is called for.”
Thus, interference was not called for in the decision of Hon’ble Punjab & Haryana High Court’s verdict in Prithipal Singh’s case (supra) “on facts of this case” i.e. the case of Prithipal Singh (supra), one of the important fact in that case, was the assessment year which was 1970-71.
12. Now, the question arises for consideration is as to whether decision of Hon’ble Supreme Court in Prithipal Singh’s case (supra), creates a binding precedence.
12.1 Article 141 of the Constitution would show that, what binds the Courts and Tribunals is the law declared by the Supreme Court and not its mere order dismissing the appeals. A law is said to be declared when the issue is raised, argued before and considered by the court followed by a statement of law containing the judicial basis for disposal of the legal problem before it. In State of UP & Anr. v. Synthetics & Chemicals Ltd. & Anr. 1991 (4) SCC 139 delivered on 18-7-1991, it was observed by Hon’ble Supreme Court as under (para 41 of the order)
“Does this principle extend and apply to a conclusion of law, which was neither raised nor preceded by any consideration. In other words, can such conclusions be considered as declarations of law ? Here again, the English Courts and jurists have carved out an exception to the rule of precedents. It has been explained as a rule of sub silentio ‘A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind.’ (Salmond on Jurisprudence 12th Ed., p. 153). In Lancaster Motor Co. (London) Ltd. v. Brernith Ltd. (1941) 1 KB 675, 677: 1941 (2) All ER 11, the court did not feel bound by earlier decision as it was rendered ‘without any argument, without reference to the crucial words of the rule and without any citation of the authority’ it was approved by this Court, in Municipal Corporation of Delhi v. Gurnarn Kaur (1989) 1 SCC 101. The Bench held that, precedents sub silentio and without arguments are of no moment’. The Courts thus, have taken recourse to this principle for relieving from injustice perpetrated by unjust precedents. A decision which is not expressed and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be law declared to have a binding effect as is contemplated by Art. 141. Uniformity and consistency are core of judicial discipline. But that which escapes in the judgment without any occasion is not ratio decidenci. In B. Shama Rao v. Union Territory of Pondicherry AIR 1967 SC 1480, it was observed, ‘it is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and principles laid down therein.’ Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be a declaration of law or authority of a general nature binding as a precedent. Restraint in dissenting or overruling is for a sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law.”
(Emphasis, italicised in print, supplied)
12.2 In Krishna Kumar v. Union of India 1990 (4) SCC 207, the Constitution Bench held that a decision of the Supreme Court which does not set out the facts or the reasons for the conclusions or direction given, cannot be treated as a binding precedent under article 141 of the Constitution (para 19 of the judgment).
Para 20. “In other words, the enunciation of the reasons or principle upon which a question before a court has been decided is alone binding as a precedent. The ratio decidendi is the underlying principle, namely, the general reasons or the general grounds upon which the decision is based on the test or abstract from the specific peculiarities of the particular case which gives rise to decision. The ratio decidendi has to be ascertained by an analysis of the facts of the case and the process of reasoning involving the major premise consisting of a pre-existing rule of law, either statutory or Judge-made, and minor premise consisting of the material facts of the case under immediate consideration. If it is not clear, it is not the duty of the court to spell it out with difficulty in order to be bound by it. In the words of Halsbury, (4th Ed., Vol. 26 para 573) :
“The concrete decision alone is binding between the parties to it, but it is the abstract ratio decidendi, as ascertained on a consideration of the judgment in relation to the subject-matter of the decision, which alone has the force of law and which when it is clear, it is not part of Tribunal’s duty to spell out with difficulty, a ratio decidendi in order to bound by it, and it is always dangerous to take one or two observations out of a long judgment and treat them as if they gave the ratio decidendi of the case. If more reasons than one are given by a Tribunal for its judgment, all are taken as forming the ratio decidendi.'”
12.3 Similar views have been expressed by Hon’ble Supreme Court in Government of India v. Workmen of State Trading Corporation 1977 (11) SCC 641. In that case, the learned Single Judge of Madras High Court relied on the decision of Hon’ble Supreme Court in G. Govinda Rajulu v. A.P. State Construction Corpn. Ltd. (1956) Supp SCC 651. As to whether this decision would create a binding precedent, Hon’ble Supreme Court held in Workmen of State Trading Corpn. (supra) case, that, para 4 : “We need say no more as it is obvious from the decision relied on that it does not set out the facts or the reasons for the conclusions or direction given. It can, therefore, not be treated as a binding precedent.”
Thus, after reviewing various decisions of Hon’ble Supreme Court on the question of binding precedence, as to whether in non-speaking order like the one given in Prithipal Singh case (supra) would create a binding precedence, we are of the view that decision in Prithipal Singh case (supra) rendered by Hon’ble Supreme Court does not create a binding precedence as it was rendered on a particular set of facts. The important fact in that case the assessment year was 1970-71. Therefore, that decision does not lay a binding precedence for the cases pertaining to assessment year 1976-77 onwards.
13. By a resolution dated 2-3-1970, the Government of India appointed a committee of experts headed by Justice K.N. Wanchoo to examine and suggest legal and administrative measures for countering tax evasion and avoidance in the field of direct taxes and to recommend concrete and effective measures for preventing tax evasion. In its final report, the Wanchoo Committee observed (pp. 24-27), in respect of levy of penalty in cases where returned income is a loss and after detecting concealment the assessed income becomes either a positive income or a reduced loss. In para 2.74 it recommended
“2.74 We are not unaware that linking concealment penalty to tax sought to be evaded can, at times, lead to anomalies. We would recommend that, in cases where the concealed income is to be, set off against losses incurred by an assessee under other heads of income or against losses brought forward from earlier years, and the total income thus, gets reduced to a figure smaller than the concealed income or even to a minus figure, the tax sought to be evaded should be calculated as if the concealed income were the total income.”
13.1 As a result of this recommendation Expln. 4(a) was inserted in section 271(1)(c) as under :
“Explanation 4-For the purpose of clause (iii) of this sub-section, the expression ‘the amount of tax sought to be evaded’,
(a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceed the total income assessed, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income;”
13.2 The scope and effect of the amendments made by Taxation Laws (Amendment) Act, 1975, has been elaborated in department Circular No. 204 dated 24-7-1976. In particular, in respect of Expln. 4(a) to section 271(1)(c) this department circular states as under
“New Expln. 4 defines ‘the amount of tax sought to be evaded’. According to the definition, this expression will ordinarily mean the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed. In a case, however, where on setting off the concealed income against any loss incurred by the assessee under other head, of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure, ‘the tax sought to be evaded’ will mean the tax chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression ‘tax sought to be evaded’ given earlier is a case to which Expln. 3 applies. Here, the tax sought to be evaded will be the tax chargeable on the entire total income assessed.”
(Emphasis, italicised in print, supplied)
Thus, from the perusal of recommendations of K.N. Wanchoo Committee and the departmental circular issued on the subject, we are of the view that Expln. 4 to section 271(1)(c) intended to levy penalty not only in a case, where after addition of concealed income, a loss returned after assessment becomes positive income but also in a case where addition of concealed income reduces returned loss and finally assessed income is also a loss. This view is also supported by the decision in the case of CIT v. P.R. Basavappa & Sons (supra), wherein it was held that
“Earlier the penalty was with reference to the actual concealed income or tax thereon. The word ‘income’ has been defined under section 2(24) of the Act which is an inclusive definition. Section 4 is the charging section which creates the liability of tax on total income. The word ‘income’ includes loss also CIT v. Harprasad & Co. (P) Ltd. (1975) 99 ITR 118 (SC). In Atul Kumar Deovrat & Co. v. CIT (1987) 168 ITR 286 (Cal), the Calcutta High Court has upheld the levy of penalty under section 271(1)(c) in respect of the claim for loss on purchase and sale of shares which was not allowed in the assessment proceedings. It is contended that income in section 271(1)(c) should be of positive figure. In CIT v. Prithipal Singh & Co. (2001) 249 ITR 670 (SC), the Punjab & Haryana High Court held that the income as envisaged in section 271(1)(c) means positive income. If the loss declared has been reduced penalty under section 271(1)(c) cannot be levied. This decision is in respect of the assessment year 1970-71, i.e., before the insertion of the above Explanation and hence cannot help the case of the assessee. For the same reasons, the decisions given in CIT v. India Sea Foods (1976) 105 ITR 708 (Ker), assessment year 1968-69; CIT v. C.R. Niranjan (1991) 187 ITR 280 (Mad), assessment year 1969-70; CIT v. Jaora Oil Mill (1981) 129 ITR 423 (MP), assessment year 1968-69, are not applicable. (Emphasis, italicized in print, supplied). Thus, following these two decisions, particularly of jurisdictional High Court in Chemiequip’s case (supra), we hold that penalty for concealment is leviable in loss case (returned income assessed income both are loss).”
14. The learned Authorised Representative for the assessee has relied on the decision of Tribunal Mumbai in ITA No. 3331/Mum/1999 in the case of Dy. CIT v. Galaxy Dyeing & Printing Mills (P) Ltd. However, we are unable to agree, in view of clear decision of Hon’ble Bombay High Court in Chemiequip’s case (supra). Further, in the case of Galaxy Dyeing (supra) there was no finding of concealment or of filing inaccurate particulars given by the Tribunal whereas, in the present case, we have found that assessee had filed inaccurate particulars of income. It is difficult to accept the proposition, as laid down in Galaxy Dyeing & Printing case (supra) that if a case is decided ex parte by Hon’ble Bombay High Court as in Chemiequip’s case (supra), it does not lay down a binding precedence.
15. Further, there were amendments in section 271(1)(c) by Taxation Laws (Amendment) Act, 2002. The effect of this amendment was considered by Hon’ble Bombay High Court in Chemiequip’s case (supra) and held that the amendment is clarificatory in nature as per clarificatory notes on clauses in the Finance Bill, 2002. Once, a view is taken by Hon’ble Bombay High Court that penalty is leviable in a case where returned income and assessed income both are loss and the decision of Hon’ble Punjab & Haryana High Court in Prithipal Singh’s case (supra) was distinguished, we have to respectfully follow the decision of Hon’ble Bombay High Court being jurisdictional High Court. The concept that if two views are possible then, the one which is favourable to the assessee should be followed would be applicable beyond the jurisdiction of Bombay High Court and not within. Thus, we hold that the assessee had filed inaccurate particulars of income and that within the jurisdiction of Hon’ble Bombay High Court the decision of Chemiequip’s case (supra) would be applicable and penalty for concealment would be levied in a case where assessed income is a reduced loss, we decline to interfere with the order of CIT(A) and dismiss the appeal of assessee.
16. In the result, the appeal of the assessee is dismissed.