2010 (11) TMI 74 - HC - Income Tax

Demand based of adjustment u/s 143(1A) - Held that - The substituted sub-section (1A), therefore, made it clear that even 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 (1A) would apply. This being a retrospective amendment, it covers the controversy in this appeal and, therefore, the appeal would have to be decided in favour of the Revenue. - CIT(A) & ITAT order reversed.

Summary

Issues:
Appeal under Section 260-A of the Income Tax Act against Tribunal's order for assessment year 1991-92. Dispute regarding additional tax demand under Section 154. Interpretation of Section 143(1)(a) and Section 143(1-A) of the Act. Application of amended provisions post Finance Act, 1993. Retrospective amendment of sub-section (1A) of Section 143. Decision on the appeal in favor of the Revenue.

Analysis:
The appeal before the High Court concerned the Tribunal's order related to the assessment year 1991-92 under Section 260-A of the Income Tax Act. The assessee had initially disclosed a loss of Rs. 65,89,492, which was adjusted by the assessing authority resulting in a demand for additional tax of Rs. 45,434. The assessee contested this demand through an application under Section 154, which was rejected by the assessing authority. Subsequently, the Commissioner of Income Tax (Appeals) allowed the appeal and deleted the additional tax demand. Both the CIT (Appeals) and the Tribunal supported the assessee's claim, emphasizing that additional tax could only be demanded if the income returned is increased or the loss is converted into a positive figure, not when the ultimate figure remains a loss.

The standing counsel argued that the amended provision of sub-section (1A) of Section 143, post the Finance Act, 1993, allows for the levy of additional tax even if the loss is reduced after adjustments. Referring to a relevant case law, it was highlighted that the additional tax can be imposed on the difference if the loss is reduced post-adjustments. The High Court analyzed the provisions of Section 143(1)(a) and Section 143(1-A) of the Act, focusing on the amendments brought about by the Finance Act, 1993. The retrospective amendment of sub-section (1A) clarified that even if the loss declared by an assessee is reduced due to adjustments under sub-section (1)(a), the provisions of sub-section (1A) would apply. Consequently, the High Court concluded that the orders of the Tribunal and the CIT (Appeals) were not sustainable and set them aside, deciding the appeal in favor of the Revenue.

In essence, the judgment delved into the interpretation of the Income Tax Act provisions, specifically Section 143(1)(a) and Section 143(1-A), in light of the amendments introduced by the Finance Act, 1993. The retrospective amendment of sub-section (1A) was crucial in determining the applicability of additional tax demands even in cases where the loss declared by the assessee had been reduced post-adjustments. The decision ultimately favored the Revenue, highlighting the significance of legislative amendments and their impact on tax assessments and demands.