2016 (12) TMI 1626 - AT - Income Tax

Enhancement of additional tax under section 143(1A) - depreciation disallowance - Held that - In the present case, it is an accepted position that the assessee, a State Government undertaking, is running into huge losses from year to year and the partial disallowance of depreciation in one year thus does not result in any tax evasion because it will anyway be allowed in subsequent period, and, in this case, much before any tax benefit is availed form the same. The depreciation disallowance thus is only a timing difference, and, given the continuous losses being incurred by the assessee, it is wholly tax neutral. In any event, there is no material brought on record by the revenue authorities to show that the assessee attempted to evade taxes. In view of the above discussions, and respectfully following the law laid down in the case of CIT vs. Sati Oil Udyog Limited (2015 (3) TMI 854 - SUPREME COURT) we are of the considered view that enhancement of additional tax under section 143(1A) was not legally sustainable. As we hold so, we make it clear that in the present appeal we are only concerned about the additional tax enhanced in the impugned order, and out observations should be construed in this context only. The additional tax under section 143(1A), to the extent impugned in this appeal, stands deleted.- Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing appeal.
2. Challenge to CIT(A)'s order regarding additional tax levy under section 143(1A) of the Income Tax Act, 1961 for the assessment year 1991-92.
3. Legal sustainability of enhancement of additional tax under section 143(1A).

Analysis:

Issue 1: Condonation of delay in filing appeal
The appeal was initially dismissed by the Tribunal as time-barred by 791 days. However, the Gujarat High Court disagreed with this decision and opined that the delay should be condoned as it was a fit case for the same. Consequently, the matter was remitted to the Tribunal for adjudication on merits.

Issue 2: Challenge to CIT(A)'s order
The appeal challenged the CIT(A)'s order upholding the Assessing Officer's decision to levy additional tax under section 143(1A) of the Income Tax Act, 1961. The Assessing Officer had noted discrepancies in the depreciation claim made by the assessee during scrutiny assessment proceedings, leading to an increase in the additional tax levied. The CIT(A) upheld this decision, prompting the appeal to the Tribunal.

Issue 3: Legal sustainability of enhancement of additional tax
The Tribunal referred to a Supreme Court judgment which highlighted that section 143(1A) could only be invoked if there was an attempt by the assessee to evade tax lawfully payable. In this case, it was noted that the assessee, a State Government undertaking, was consistently incurring losses. The partial disallowance of depreciation did not amount to tax evasion as it would eventually be allowed in subsequent periods. The Tribunal found that there was no evidence to suggest tax evasion by the assessee. Consequently, the Tribunal held that the enhancement of additional tax under section 143(1A) was not legally sustainable and deleted the additional tax amount in question.

In conclusion, the Tribunal allowed the appeal, emphasizing that its decision was based on the specific additional tax amount challenged in the appeal. The judgment was delivered on December 19, 2016, after considering the legal position and relevant facts of the case.