[1] IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------- INCOME TAX APPEAL No. 68 of 2005 C I T AJMER V/S M/S BHILWARA WEAVING MILLS Mr. KK BISSA, for the appellant / petitioner Mr. YOGESH SHARMA, for the respondent Date of Order : 16.5.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. ORDER ----- This appeal by the revenue is admitted vide order dated 22.08.2005 by framing following substantial question of law: “Whether in the facts and circumstances of the case, the Tribunal was right in holding that for the assessment year 1990- 91 no penalty under Section 271(1)(c) of the Income Tax Act, 1961 could be levied by holding that the Explanation 4 which came into effect w.e.f. 1.4.1976 did not apply to cases where the amount of income in respect of which particulars have been concealed or incorrect particulars have been furnished has the effect of reducing loss declared in the return and the return is not converted into the return of income? Brief facts of the case are that the assessee filed his return of income for the assessment year 1990- 91 showing a loss of Rs.16,35,440. During the course of assessment proceedings, AO made trading addition of Rs.16,02,663 and imposed penalty under Sec.271(1)(c) to the tune of Rs.8,42,648 vide order dated 25th May 1993. This order was set aside by CIT(Appeals) and the appeal filed by revenue was dismissed by ITAT, against which this appeal has been filed. [2] We have heard learned counsel for the revenue. In our view, the controversy involved in the present case is squarely covered by the recent judgment of Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd. Vs. Commissioner of Income-tax, reported in [2007) 289 ITR 83 (SC), wherein it has been held that penalty under Sec.271(1)(c) in cases prior to 01.04.2003 i.e. the amendment made in Explanation 4 (a) of the Finance Act of 2002 could be attracted only in cases where even after considering the concealed income the total income assessable would be attracting some liability of tax and consequently if even after adding the concealed income the total return remains in loss, the penalty under Sec.271(c) is not at all attracted. In that view of the matter, following the said judgment, the question as framed is answered in affirmative in favour of the assessee and against the revenue. Consequently, the appeal is dismissed. (KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J. jpa/