2005 (2) TMI 68 - HC - Income Tax

Leviability of additional tax For the assessment year 1989-90 the appellant filed a return declaring losses. - Subsequently it filed a revised return declaring loss of Rs. 1, 07, 35, 100. The Assessing Officer issued notice to the appellant proposing to levy additional tax under section 143(A) on account of reduction in the net loss declared by it. - whether the amended section 143(1A) could be applied to the appellant s case in relation to the assessment year 1989-90. It is well-settled that the provisions of the Act as the same stand amended on the 1st day of April of any financial year are applicable to the assessment of that year - the return for the assessment year 1989-90 must have been filed after April 1, 1989. Therefore the law as it was obtaining on April 1 1989 i.e. the amended section 143(1A) of the Act was rightly applied by the Tribunal to the assessee s case Assessee s appeal is dismissed

Summary

Issues Involved:
1. Legality of orders annexures P-2 and P-4.
2. Leviability of additional tax on returned loss.
3. Ignoring precedents in Modi Cement Ltd. v. Union of India and Sati Oil Udyog Ltd. v. CIT.
4. Retrospective application of amended section 143(1A) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of Orders Annexures P-2 and P-4:
The appellant questioned the legal sustainability of the orders annexures P-2 and P-4. The Tribunal had reversed the relief granted by the Commissioner of Income-tax (Appeals) based on the interpretation of section 143(1A) of the Income-tax Act. The Tribunal reasoned that section 143(1A)(a) was designed to encourage honest returns and discourage manipulation of figures, thus justifying the levy of additional tax on adjusted amounts. The court upheld this interpretation, finding no discrimination or illegality in the Tribunal's decision.

2. Leviability of Additional Tax on Returned Loss:
The appellant argued that additional tax should not be levied as the returns filed showed a net loss. The Tribunal, however, held that the provisions of section 143(1A) applied even when the declared loss was reduced due to adjustments. The Supreme Court's judgment in Asst. CIT v. J.K. Synthetics Ltd. supported this view, confirming that additional tax could be levied retrospectively on reduced losses. The court agreed with the Tribunal, stating that the law allowed for additional tax on adjusted returns showing reduced losses.

3. Ignoring Precedents in Modi Cement Ltd. v. Union of India and Sati Oil Udyog Ltd. v. CIT:
The appellant cited precedents from Modi Cement Ltd. v. Union of India and Sati Oil Udyog Ltd. v. CIT to argue against the levy of additional tax. However, the Tribunal and the court relied on the Supreme Court's later judgment in Asst. CIT v. J.K. Synthetics Ltd., which overruled the earlier decisions. The court noted that the latest judgment clarified the applicability of section 143(1A) to cases of reduced declared losses, thus rendering the appellant's reliance on older precedents ineffective.

4. Retrospective Application of Amended Section 143(1A):
The appellant contended that the retrospective amendment made by the Finance Act, 1993, effective from April 1, 1989, should not apply to returns filed for the financial year 1988-89. The court examined the argument and cited precedents indicating that the law as amended on the first day of April of any financial year applies to the assessments of that year. It concluded that since the return for the assessment year 1989-90 was filed after April 1, 1989, the amended section 143(1A) was applicable. The court affirmed that the Tribunal correctly applied the law as amended on April 1, 1989, to the appellant's case.

Conclusion:
The court dismissed the appeal, upholding the Tribunal's decision to levy additional tax under section 143(1A) on the appellant's adjusted returns showing reduced losses. The questions raised by the appellant were answered against it, affirming the legality and applicability of the amended provisions of the Income-tax Act.