Case: Jt.Commr.Of Income Tax,Surat Vs. Saheli Leasing &amp; Industries Ltd

13. On return being filed by the Respondent/Assessee, an order under Section 143 (3) of the Act was passed on 27.2.1998, showing total income of Rs. NIL for assessment year 1995-199614. During the course of assessment proceedings, it was noticed that Assessee had claimed depreciation, which was viewed to be incorrect. Thus, an amount of Rs. 24,22,531/- was disallowed out of depreciation. Penalty proceedings under Section 271 (1) (c) of the Act were initiated. In response to the show cause notice issued by the Revenue, Assessee filed its reply denying the allegations and contending that no penalty can be imposed on it, when returned income was NIL15. Penalty was sought to be imposed in respect of an item having an effect in reducing the loss. No appeal was filed against the item, added to the income on account of which the loss was reduced. Admittedly, Assessee, a leasing company had claimed depreciation on plant and machinery @ 100% on various items. The statement of depreciation filed along with the computation of income showed the claim at Rs.1,05,08,824/-. On enquiries being made it was revealed that 100% depreciation was claimed along with Lease Agreements entered into with different parties. Even though, terms and conditions of the Lease Agreements entered into with different parties were the same, except the names of the parties had been changed. Even after dis-allowance of the said depreciation, the taxable income of the Assessee was NIL and hence, there was no tax liability. According to Assessee, in such a case no penalty under Section 271 (1) (c) could have been levied16. Deputy Commissioner of Income tax, Special Range-2, Surat, on the basis of the discussion in the order held that Assessee was liable to pay penalty, with reference to such additions to income to be treated as its total income, with reference to explanation 4 (a) to Section 271 (1) (c) of the Act. Accordingly, the penalty was levied on concealed income of Rs. 24,22,531/- at minimum rate of 100% of tax sought to be evaded. Thus, a penalty of Rs. 11,14,364/- was imposed on the Assessee17. Feeling aggrieved thereof, Assessee preferred an appeal before the Commissioner of Income Tax (Appeals-II). Considering various judgments of the Tribunal and the High Courts, the appeal of the Assessee came to be dismissed and penalty levied on it stood confirmed18. Assessee preferred further appeal before the Income-Tax Appellate Tribunal, Ahmedabad. Tribunal, on the strength of an earlier order passed by Special Bench of Ahmedabad Tribunal in the case of Apsara Processors (P) Ltd. and Ors. in ITA No. 284/Ahd./2004 dated 17.12.2004 came to the conclusion that no penalty can be levied, if the returned income and the assessed income is loss. Accordingly, the orders passed by the Assessing Officer as well as Commissioner (Appeals) were set aside and quashed and the penalty imposed on the Assessee was deleted. It was this order of the Tribunal which was carried further by filing Appeal under Section 260A of the Act in the High Court, which met the fate of dismissal by the Division Bench.

Court's reasoning:
27. In the aforesaid case, the expression "income" in the statute appearing in Section 2 (24) of the Act has been clarified to mean that it is an inclusive definition and includes losses, that is, negative profit. This has been held so on the strength of earlier judgments of this Court in CIT Vs. Harprasad and Co. P. Ltd (1975) 99 ITR 118  and followed in Reliance Jute and Industries Ltd. Vs. CIT (1979) 120 ITR 921. After elaborate and detailed discussion, this Court held with reference to the charging provisions of statute that the expression "income" should be understood to include losses. The expression "profits and gains" refers to positive income whereas "losses" represent negative profit or in other words minus income28. Considering this aspect of the matter in greater details, Gold Coin (supra)d the view expressed by two learned judges in Virtual Soft Systems (supra)30. The necessary consequence thereof would be that even if Assessee has disclosed NIL income and on verification of the record, it is found that certain income has been concealed or has wrongly been shown, in that case, penalty can still be levied. The aforesaid position is no more res integra and according to us, it stands answered in favour of the Revenue and against the Assessee31. The learned senior counsel appearing for the respondent Assessee, Mr. D.N Sawhney, contended that the observations made in Gold Coin (supra) can at best be treated as obiter but not as binding precedent. According to him, the earlier judgment of the Coordinate Bench in CIT Vs. Elphinstone Spinning and Weaving Mills Co. Ltd. XL ITR 142, would still hold the field and applies fully to the facts of the said case33. In a first glance, after considering arguments of both sides, we thought that matter required to be referred to a larger Bench for considering the issue involved in this appeal but on deeper scanning of the judgments in Gold Coin (supra) and Elphinstone (supra), we came to the conclusion that the ratio decidendi of Gold Coin (supra) fully covers the issue and the case of Elphinstone (supra) has no application to the facts of the said case34. Both cases are distinguishable on the following broad grounds, namely:(i) Gold Coin Health (supra) arose under the Income Tax Act, 1961, whereas Elphinstone(supra) arose under the repealed Income Tax Act of 1922. (Though this is only a distinguishing feature noticed in 2 decisions which is not of much significance)(ii) The question that fell for consideration in Gold Coin (supra) was what would be the true interpretation of Section 271 (1) (c) in the context of amendments made therein whereas, the question in Elphinstone (supra) was in relation to chargeability of "additional tax" on "dividend income" earned by Assessee under paragraphB of First Schedule to the Income Tax Act, 1922(iii) Elphinstone (supra) interpreted five words occurring inB of First Schedule namely; "additional", "additional Income Tax", "charge on the total income", "profits liable to tax" and lastly, "dividends payable out of such profits", whereas, in Gold Coins case, the question arose whether word "income" includes loss for the purpose of imposition of penalty u/s 271 (1) (c) and if Assessee incurs loss in any particular year then whether penalty u/s 271 (1) (c) can still be imposed on him. This has been categorically answered in Gold Coin (supra) in favour of Revenue and against the Assessee(iv) The object of imposing penalty is different than that of determining Assessees liability to pay tax or additional tax under any charging section. The interpretation applied to penalty provision thus, cannot be applied while interpreting any charging section for payment of income tax or additional tax. In other words, both provisions i.e. penalty and charging have different objects and consequences. They operate in different fields qua Assessee(v) The liability to pay additional tax under First Schedule on the income earned out of dividend implies that Assessee is first required to pay "tax" and then additional tax on the specified income. It was basically this issue which was examined in Elphinstone (supra) wherein Their Lordships considered the object for enacting first para of schedule. This object has nothing to do with penalty provisions(vi) A particular word occurring in one Section of the Act, having a particular object cannot carry the same meaning when used in different Section of the same Act, which is enacted for different object. In other words, one word occurring in different Sections of the Act can have different meaning, if the object of the two Sections are different and when both operate in different fields(vii) Question of law involved in this appeal is directly covered by the decision of Gold Coin (supra) and is to be answered accordingly(viii) Elphinstone (supra), therefore, has no bearing over the view taken in Gold Coin (supra) case and even if it had been taken note of, the decision taken therein would have been the same due to aforementioned distinguishing feature(ix) The issue involved in Gold Coin (supra) being entirely different than the one involved in Elphinstone (supra), the view taken by this Court in both the decisions are correct operating in the respective fields, requiring no reconsideration of the matter(x) In order to enable the Court to refer any case to a larger Bench for reconsideration, it is necessary to point out that particular provision of law having a bearing over the issue involved was not taken note of or there is an error apparent on its face or that a particular earlier decision was not noticed, which has a direct bearing or has taken a contrary view. Such does not appear to be a case herein. Thus, it does not need to be referred to a larger Bench as in our considered opinion; it is squarely covered by the judgment of this Court in Gold Coin (supra).