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[2007] 291 ITR 460 (Madras) HIGH COURT OF MADRAS Commissioner of Income-tax v. NEPC Textiles Ltd. P.D. DINAKARAN AND MRS. CHITRA VENKATARAMAN, JJ. T.C. (A) NO. 2689 OF 2006 JANUARY 2, 2007 Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income â–  Penalty is not leviable when assessment does not show any taxable income but net loss [Assessment year 1996-97] As held in Ramnath Goenka v. CIT [2003] 259 ITR 229 , penalty is imposable only in cases where tax has been levied and no penalty can be levied when the result of the computation made by the Assessing Officer is a loss. In other words, penalty is not leviable when the assessment does not show any taxable income but net loss. CASE REVIEW CIT v. Prithipal Singh and Co. [2001] 249 ITR 671 (SC) and CIT v. A. Hariraman [2006] 282 ITR 607 (Mad) followed & relied upon. JUDGMENT P.D. Dinakaran, J.-The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal dated May 12, 2006, made in I.T.A. No. 1673/Mds/2002 for the assessment year 1996-97. 2. The Revenue is the appellant. The issue raised in this appeal relates to the assessment year 1996-97. The assessee-company filed its return of income disclosing a loss of Rs. 3.59 crores. On completion of the assessment, the Assessing Officer reduced the loss to Rs. 87.93 lakhs and treated the reduction of loss being difference arising on account of undisclosed income. The Assessing Officer also passed an order under section 271(1)(c ) of the Act levying penalty of Rs. 89.64 lakhs for concealment of income. Aggrieved by the order imposing penalty, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), who cancelled the penalty and allowed the assessee's appeal. On appeal at the instance of the Revenue, the Income-tax Appellate Tribunal dismissed the appeal by holding that penalty cannot be levied under section 271(1)(c) where the assessed income was loss. Hence, this appeal by the Revenue raising the following question of law : "Whether, on the facts and circumstances of the case, the Tribunal was right in cancelling the penalty under section 271(1)(c) of the Income-tax Act, 1961 on…

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