I-T Tribunal Scraps Concealment Penalty On Losses

Losses will not longer subjected to concealment penalty. The Mumbai bench of the Income Tax Appellate Tribunal has "deleted the concealment penalty" with regards to companies and individuals reporting losses in the accounting year. This decision gives a sigh of relief to all assessees who have been levied a penalty on account of reduction in loss of income.

The tribunal in its decision upheld that concealment penalty can be attracted only on positive income and not on negative income. "In the absence of determination of tax, penalty cannot be determined," the tribunal confirmed.

The change in the law followed the case fought by Kalyani Leasing Pvt Ltd, argued by advocate Prakash Jotwani against the Income-Tax office. Even as the tribunal accepted that the company had "deliberately attempted" to conceal the actual facts of the income, it stated: "penalty under Section 271(1)(c) is not leviable when the ultimate income determined results in a loss".

 

Henceforth, all assessees whose income shows a loss will not be liable to pay any concealment penalty despite an earlier "explanation to Section 271(1)(c) of the Income Tax Act."

What used to happen earlier is that income-tax officers used to reduce the losses shown by assessees, and raise a penalty demand for concealment. The tribunal pointed out that on the one hand the assessee incurred a loss which is then reduced by the assessment officer, and couple with this, the officer imposes a penalty for concealment.

Legal experts said this judgement could encourage bad practices. Owners could show fraudulent expenses and thereby post losses in a particular fiscal.