1. This is a reference under Section 256(1) of the I.T. Act by the Income-tax Appellate Tribunal, Indore Bench, Indore, seeking our opinion on the following question arising out of its order dated 8th September, 1976:
' Whether, on the facts and in the circumstances of the case, the income concealed was Rs. 2'50 lakhs or Rs. 50,000 (sic) Section 271(1)(c) and the Tribunal was justified in law in reducing the quantum of penalty from Rs. 2.50 lakhs to Rs. 50,000?'
2. The assessee is an unregistered firm deriving income from the business of manufacture and sale of oil. For the assessment year 1968-69, it had returned a loss of Rs. 2 lakhs. The ITO directed the assessee to produce its books of account, etc., but on its failure to do so, assessment proceedings were completed under Section 144 of the I.T. Act and the total income was computed at Rs. 50,000 as against the returned loss of Rs. 2 lakhs. Penalty proceedings under Section 271(1)(c) of the Act were initiated and the case was referred to the IAC for imposition of penalty.
3. The IAC held that the Explanation to Section 271(1)(c) of the Act was attracted and since the assessee had not discharged the burden of proving the absence of gross and wilful neglect, penalty under Section 271(1)(c) of the Act for the concealment of income was leviable. According to the IAC, the income concealed was Rs. 2,50,000 inasmuch as the assessee had shown a loss of Rs. 2 lakhs whereas its income was computed at Rs. 50,000 and the entire sum was the concealed income of the assessee.
4. When the matter went before the Tribunal, the Judicial and the Accountant Members differed with regard to the quantum of penalty and the matter was referred to the third Member for opinion. The third Member agreed with the view of the Accountant Member and held thatfor the purposes of imposition of penalty under Section 271(1)(c) of the Act, the income concealed was the income actually determined, i. e., Rs. 50,000, and penalty was reduced to Rs. 50,000. At the instance of the Commissioner, the Appellate Tribunal has referred the case formulating the above-noted question for our opinion.
5. Clause (iii) of Section 271(1)(c) of the I.T. Act, as it was in force during the relevant assessment year, is reproduced below : Clause (iii)
' In the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished.'
6. The crucial words are ' the amount of the income '.
7. ' Income ' has been defined under Section 2(24) of the I.T. Act. It is an inclusive definition and it covers even such items which are not income in the natural sense of the word. The concept of income has been elaborately discussed by various authorities and we find a useful discussion at pp, 90 to 99 of Kanga & Palkhivala's Book, 7th Edn;, Vol. 1. It is not necessary for us to discuss in detail the natural or the statutory meaning of the word ' income ', but even in its broadest connotation, it refers to monetary return ' coming in ' and is conceptually contradictory to 'loss'. Section 4 of the Act taxes income and not loss. The contention that a loss can be used to set off the income in a particular year and can carried forward under certain circumstances to the following assessment years will not by any logic convert it into an income.
8. Looking at the issue from this angle, it is clear that for the assessment year in question, the income which was determined by the ITO under Section 144 of the I.T. Act was a sum of Rs. 50,000 and it was this income which was concealed by the assessee. The Tribunal was, therefore, right in holding that the income concealed was Rs. 50,000 and not Rs. 2,50,000 and was justified in reducing the quantum of penalty from Rs. 2,50,000 to Rs. 50,000.
9. We answer the question in the affirmative and in favour of the assessee. Costs will be borne by the revenue. Advocate's fee Rs. 150.