Commissioner Of Income-Tax vs Prithipal Singh And Co. on 20 July, 2000
4.4. The word "income" occurring in Clause (c) and (iii) of Section 271(1) of the Act refers to positive income only and not a loss. Penalty could be imposed only in addition to the tax payable. When there is no tax payable, the question of any penalty does not arise. In fact, evasion of tax is the sine qua non for imposition of penalty. If there is no taxable income or tax assessed for payment during a particular year, the question of evasion and consequently, penalty do not arise. The penal provisions of Section 271(1)(c), therefore, are attracted only in the case of an assessee having positive income and not loss, as the question of concealment of income to avoid payment of tax would arise only in the former case. Penalty is a deterrent measure to prevent evasion of tax and when there was no tax payable, there could be any such evasion so as to provide a scope for levying any penalty, vide CIT v. Prithipal Singh and Co. 183 ITR 69.