1996 (12) TMI 10 - HC - Income Tax

Summary

Issues:
Assessment of losses for the years 1989-90 and 1990-91 under the Income-tax Act, 1961, Disallowances under section 43B, Additional tax levied under section 143(1A), Challenge to the retrospective amendment of section 143(1A), Constitutionality of section 143(1A)(a)(B), Applicability of levy of additional tax in cases of losses, Interpretation of the Finance Act, 1993.

Analysis:
The petitioner, an assessee, filed returns declaring substantial losses for the assessment years 1989-90 and 1990-91 under the Income-tax Act, 1961, seeking carry forward of the losses. The assessing authority made disallowances under section 43B, resulting in differences in the losses assessed. The authority rectified the mistake for 1989-90 under section 143(1A) and levied additional tax. Similar proceedings were conducted for 1990-91, leading to additional tax imposition. The petitioner challenged the levy of additional tax through revision petitions, questioning the retrospective amendment of section 143(1A) and its constitutionality, specifically sub-clause (B) of clause (a). The petitioner contended that the amendment, allowing levy of additional tax on assessed losses even after adjustments, was ultra vires the Constitution.

The court noted that the amendment to section 143(1A) specifically allowed for the levy of additional tax even in cases of losses, aiming to prevent tax evasion. Referring to a prior decision, the court held that the retrospective amendment by the Finance Act, 1993, did not violate constitutional provisions. The court emphasized that the purpose of the provision was to ensure tax compliance and prevent manipulation of losses to evade tax liabilities. The court rejected the petitioner's contentions, relying on the precedent and the legislative intent behind the amendment. Consequently, the original petitions challenging the levy of additional tax were dismissed, with no order as to costs.

In conclusion, the court upheld the validity of the retrospective amendment to section 143(1A) and the levy of additional tax on assessed losses, rejecting the petitioner's arguments against its constitutionality. The judgment reaffirmed the legislative intent to curb tax evasion and maintain tax compliance, emphasizing the significance of preventing misuse of loss declarations for tax avoidance purposes.