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TMI Blog2020 (3) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... - on written down value of assets instead of 75% depreciation. Under the unamended Section 32(2) of the Income Tax Act, 1961 the assessee was entitled to claim 100% depreciation. However, after the amendment the depreciation could only be 75%. The assessee supported the returns with provisional revenue account, balance sheet as on 31.03.1991, details of gross fixed assets, computation chart and depreciation chart. No tax was payable on the said return by the assessee. No notice under Section 143(2) of the Income Tax Act, 1961 was received by the assessee. 3. An intimation under Section 143(1)(a) of the Income Tax Act, 1961 dated 12.02.1992 was issued by the Assessing Officer disallowing 25% of the depreciation, restricting the depreciation to 75%. Additional tax under Section 143(1-A) of the Income Tax Act, 1961 amounting to Rs. 8,63,64,827/- was demanded. The assessee filed an application under Section 154 of the Income Tax Act, 1961 dated 18.02.1992 praying for rectification of the demand. The assessee also filed a petition under Section 264 of the Income Tax Act, 1961 against the demand of additional tax. In the petition it was stated that even after allowing only 75% of deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to file an incorrect return. It is submitted that such additional tax could only become payable in case where assessee was assessed to an income for the purpose of tax and could not apply where there was no income or there was loss. The intent of the Legislature in enacting provision of Section 143(1-A) was to ensure that the assessee also declares his loss in the return correctly and where the assessee deliberately or intentionally filed false returns, he was liable to pay additional Income Tax. It is submitted that unabsorbed losses and unabsorbed depreciation were to be carried forward to future years to be set off against profits and it did not in any manner affect business loss. He submits that business loss suffered by the assessee had not reduced because of the bonafide mistake committed by the appellant in calculating the depreciation. The assessee was in loss and continued to be in loss. Reduction in depreciation from 100% to 75% did not amount to reduction in loss and additional tax under Section 143(1-A) of the Income Tax Act, 1961 was only to prevent evasion of tax. He submits that when additional tax had clear and specific imprint of penalty, the Revenue could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed; (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed: Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments: Provided also that an intimation under this clause shall not be sent after the expiry of two years from the end of the assessment year in which income was first assessable." 11. Sub-section (1-A), as it originally read, was thus: "143. (1-A)(a) Where, in the case of any person, the total income, as a result of the adjustments made under the first proviso to clause (a) of sub-section (1), exceeds the total income declared in the return by any amount, the Assessing Officer shall,- (i) further increase the amount of tax payable under sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1991-92. The substituted sub-section (1-A) makes it clear that where the loss declared by an assessee had been reduced by reason of adjustments made under sub-section(1)(a), the provisions of sub-section (1-A) would apply. As noted above the Commissioner of Income Tax while rejecting the revision petition of the petitioner has taken the view that whenever adjustment is made, additional tax would be charged @ 20% of the tax payable on such excess amount. The excess amount refers to the increase in the income and by implication the reduction in loss where even after the addition there is negative income. Whether there should be levy of additional tax in all circumstances and cases where loss is reduced, is the question to be answered in the present case. 14. By Taxation Laws (Amendment) Act, 1991 in Section 32 third proviso was inserted to the following effect: "Provided also that, in respect of the previous year relevant to the assessment year on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een chargeable had such total income been reduced by the amount of adjustments. In cases where the loss declared in the return has been reduced as a result of the aforesaid adjustments or the aforesaid adjustments have the effect of converting that loss into income, the Bill seeks to provide that the assessing officer shall calculate a sum (referred to as additional income tax) equal to twenty per cent of the tax that would have been chargeable on the amount of the adjustments as if it had been the total income of such person. The proposed amendment will take effect from 1-4-1989 and will, accordingly, apply in relation to Assessment Year 1989-1990 and subsequent years." 16. Learned counsel for the Revenue has rightly submitted that object of Section 143(1-A) was the prevention of evasion of tax. The memorandum explaining the provisions of the Finance Bill as noted above was also to persuade to the assessee to file Income Tax Return carefully to avoid mistakes. 17. This Court in Commissioner of Income Tax, Gauhati vs. Sati Oil Udyog Limited and another, (2015) 7 SCC 304, had occasion to consider elaborately the provisions of Section 143(1-A), its object and validity. There was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer." 25. Taking a cue from Varghese case, we therefore, hold that Section 143(1-A) can only be invoked where it is found on facts that the lesser amount stated in the return filed by the assessee is a result of an attempt to evade tax lawfully payable by the assessee. The burden of proving that the assessee has so attempted to evade tax is on the Revenue which may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it. Subject to the aforesaid construction of Section 143(1-A), we uphold the retrospective clarificatory amendment of the said section and allow the appeals. The judgments of the Division Bench2 of the Gauhati High Court are set aside. There will be no order as to costs." 19. This Court in the above case upheld the constitutional validity of Section 143(1-A) (as inserted by the Finance Act, 1993) subject to holding that Section 143(1-A) can only be invoked w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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