2002 (4) TMI 46 - HC - Income Tax

Summary

Issues Involved:
1. Constitutional validity of section 143(1A) of the Income-tax Act, 1961.
2. Retrospective operation of section 143(1A) of the Income-tax Act, 1961.

Summary:

1. Constitutional Validity of Section 143(1A):
In C.R. Nos. 2072 of 1993 and 2089 of 1993, the petitioners challenged the constitutional vires of section 143(1A) of the Income-tax Act, 1961. The learned single judge held that the provisions in sub-section (1A)(a) of section 143 of the Income-tax Act, 1961, substituted by the Finance Act, 1993, are constitutionally valid. There was no challenge to this decision, and thus, the court did not need to address this issue further.

2. Retrospective Operation of Section 143(1A):
The primary issue before the court was the retrospective operation of the provisions of section 143(1A) substituted by the Finance Act, 1993. The learned single judge quashed the orders/intimations issued by the Revenue imposing additional income-tax under the said sub-section, holding that the retrospective operation given to the provisions therein that additional income-tax is to be imposed where the loss declared by an assessee is reduced as a result of adjustment is ultra vires the Constitution.

The court referred to the Supreme Court's decision in CIT v. Hindustan Electro Graphites Ltd. [2000] 243 ITR 48, where it was held that the levy of additional tax carries the imprint of penalty and is not automatic under section 143(1A). The Supreme Court emphasized that imposing additional tax retrospectively, when the return filed was correct as per the law at the time of filing, is unjust and shocks the conscience.

The court also considered the judgment in Asst. CIT v. J. K. Synthetics Ltd. [2001] 251 ITR 200, where the Supreme Court upheld the retrospective amendment but did not support the retrospective imposition of penalty.

The court concluded that the retrospective operation of the amended provision imposing additional income-tax is arbitrary and ultra vires the provisions of article 14 of the Constitution. The act or omission for which no additional income-tax was payable as per the law in force at a given time cannot be subjected to additional taxation with retrospective effect.

Conclusion:
The Writ Appeals Nos. 365 of 1998 and 345 of 1998 were dismissed. The Income-tax Appeals Nos. 3 of 1999, 4 of 1999, 5 of 1999, 6 of 1999, 7 of 1999, 7 of 2000, 8 of 2000, and 20 of 1999 were disposed of with specific directions, affirming the decision of the learned single judge regarding the retrospective imposition of additional income-tax.