2003 (7) TMI 272 - AT - Income Tax

Summary

Issues:
1. Justification of sustaining demand of additional tax under s. 143(1)(a).

Analysis:
The appeal before the Appellate Tribunal ITAT Chandigarh-B was against the order of the CIT(A), Patiala for the assessment year 1994-95. The main issue raised in the appeal was regarding the demand of Rs. 1,44,838 as additional tax charged by the Assessing Officer (AO) under section 143(1)(a) of the Income Tax Act. The AO had initially allowed a deduction under section 80HHC based on the return of income filed by the assessee, but later observed an excess deduction claimed due to undervaluation of traded export goods. Subsequently, the AO rectified the deduction amount and revised the additional tax to Rs. 1,44,838. The assessee challenged this additional tax before the CIT(A), arguing that no additional tax should be levied as the total income remained nil even after adjustments. However, the CIT(A) upheld the AO's order, stating that additional tax is chargeable based on income before deductions under Chapter VI of the IT Act.

The assessee then appealed to the ITAT Chandigarh-B, reiterating their argument that no additional tax should be charged when the total income remains nil after adjustments. The assessee also cited a judgment of the Rajasthan High Court to support their contention that additional tax should only be levied on increased income. After considering the submissions of both parties, the ITAT noted that the total income declared by the assessee remained nil even after adjustments, except for the excess claim under section 80HHC. The Tribunal analyzed section 143(1A) of the IT Act, which provides for additional tax when the income declared in the return is increased or loss is reduced. It was observed that the section does not mandate additional tax when a claim is reduced without affecting the income or loss declared. Referring to the Rajasthan High Court judgment, the ITAT concluded that no additional tax was warranted in this case where the total income remained nil. Consequently, the ITAT set aside the CIT(A)'s order and deleted the additional tax charged by the AO, allowing all grounds of appeal raised by the assessee.

In conclusion, the ITAT Chandigarh-B ruled in favor of the assessee, holding that no additional tax should be levied when the total income remains nil after adjustments, in line with the provisions of the IT Act and supported by the judgment of the Rajasthan High Court. The appeal of the assessee was allowed, and the impugned additional tax charged by the AO was deleted.