LOSS IN RETURN INCOME CAN DRAW PENALTY TOO: SC

The Supreme Court ruled that penalty can be imposed on an assessee even if the return income is a loss. The amendment made by the Finance Act, 2002, which came into effect from April 1, 2003, in Explanation 4 to Section 271(1)(c)(iii) of the Income Tax Act could be applied retrospectively. A bench comprising Justice Arijit Pasayat, Justice P Sathasivam and Justice Aftab Alam said Explanation 4(a) to Section l271(i)(c) of the Act intended to levy the 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 the returned loss and finally the assessed income is also a loss or a minus figure. The court said that even during the period between April 1, 1976 to April 1, 2003 the position was that the penalty was leviable even in a case where addition of
concealed income reduces the returned loss. It said that when the word “income” is read to include loss it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable
prior to the period of April 1, 2003.