Judgment

Dr. Arijit Pasayat, J. —

1.Leave granted.

2.Expressing doubt about the correctness of the Judgment rendered by a Division Bench of this Court in Virtual Soft Systems Ltd. V. Commissioner of Income Tax, Delhi,1 (2007 (9) SCC 665), a reference has been made by another Division Bench by Order dated 7.4.2008 to a larger Bench. The question which was decided in Virtual’s case (supra) was as to whether the penalty under Section 271 (1) (c) of the Income Tax Act, 1961 (in short the ‘Act’) can be levied if the returned income is a loss. This question has to be considered in the background of the amendment made by Finance Act, 2002 (in short ‘Finance Act’) w.e.f. 1.4.2003 in Explanation 4 to Section 271(1)(c)(iii) of the Act. In Virtual’s case (supra) the department placed reliance on Notes on Clauses relating to the aforesaid amendment to submit that the amendment was clarificatory in nature and consequentially it was applicable retrospectively. This argument was rejected by this Court in para 52 of the Judgment. The Division Bench while making reference was of the view that the true effect of the amendment was not considered, as it was prima facie of the view that merely because the