TMI Blog2015 (3) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... lso. That being the case, on facts here there is in fact no retrospective imposition of additional tax - such tax was imposable on losses as well from 1989 itself. Even on a reading of Section 143 1(a) which is referred to in Section 143 (1A), a loss is envisaged as being declared in a return made under Section 139. It is clear, therefore, that the retrospective amendment made in 1993 would only be clarificatory of the position that existed in 1989 itself. Taking a cue from the Varghese case [1981 (9) TMI 1 - SUPREME Court], we therefore, hold that Section 143 (1A) 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 (1A), we uphold the retrospective clarificatory amendment of the said Section and allow the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the order dated 14.12.1992. The learned Single Judge who heard the two petitions upheld Section 143 (1A) as amended in 1993 prospectively but held that insofar as it operated with effect from 1989 on losses made by companies, the section is arbitrary and unreasonable and would, therefore, have to be struck down. The Division Bench agreed with the Single Judge and dismissed the two writ appeals before it. 5. Shri Neeraj Kaul, learned Additional Solicitor General of India appearing on behalf of the appellants stated that the amendment made to Section 143 (1A) with retrospective effect was merely clarificatory and that even without such amendment, the same position would obtain qua losses as would obtain qua profits inasmuch as the expression income would comprehend both profits as well as losses. He cited a number of judgments before us which we will refer to presently. On being questioned by the Bench about the true construction of Section 143 (1A), he very fairly submitted that since the object of Section 143(1A) is to prevent tax evasion, the said Section would have to be read in the light of the aforesaid object. Despite being served, no one appears for the respondents. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sein incomeunder sub-clause(i) of this clause has increased the total income of such person, further increase the amount of tax payable under sub-section (1) by an additional income tax calculated at the rate of twenty per cent on the difference between the tax on the total income so increasedand the tax that would have been chargeablehad such total incomebeen reduced by the amount of adjustments and specify the additional income tax in the intimation to be sent under sub-clause(i) of clause(a) of sub-section(1); (B) in a case where the loss so declared is reduced under sub-clause (ii) of this clause or the aforesaid adjustmentshave the effect of converting that loss into income, calculate a sum(hereinafter referred to as additional income tax) equal to twenty per cent of the tax that would have been chargeable on the amountof the adjustmentsas if it had beenthe total income of such person and specify the additional income tax so calculated in the intimation to be sent under sub-clause (i) of clause(a) of sub-section(1); (C) where any refund is due under sub-section (1), reduce the amount of such refund by an amount equivalent to the additional income tax calculated under sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared in the return and what is assessed to tax. 9. A plain reading of the provision as it originally stood refers to the total income . 10. Mr. Kaul, learned Additional Solicitor General is right in referring to the definition of income in Section 2(24) of the Income Tax Act, 1995 and drawing our attention to the fact that the said definition is an inclusive one. Further, it is settled law at least since 1975 that the word income would include within it both profits as well as losses. This is clear from Commissioner of Income Tax Central, Delhi v. Harprasad Company Pvt. Ltd., (1975) 3 SCC 868, paragraph 17 of which lays down the law as follows: 17. From the charging provisions of the Act, it is discernible that the words income or profits and gains should be understood as including losses also, so that, in one sense profits and gains represent plus income whereas losses represent minus income [CIT v. Karamchand Prem Chand, (1960) 3 SCR 727 : 40 ITR 106 (SC): CIT v. Elphinstone Spinning and Weaving Mills, (1960) 3 SCR 953 : 40 ITR 143 (SC). In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 118] it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the period 1-4-1976 to 1-4-2003. Even in the Circular dated 24-7-1976, referred to above, the position was clarified by the Central Board of Direct Taxes (in short 'CBDT'). It is stated that in a case where on setting of the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case 'the tax sought to be evaded' will be tax chargeable on concealed income as if it is 'total income'. 16. The law is well settled that the applicable provision would be the law as it existed on the date of the filing of the return. It is of relevance to note that when any loss is returned in any return it need not necessarily be the loss of the previous year concerned. It may also include carried-forward loss which is required to be set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided 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 the income was first assessable. 13. Even on a reading of Section 143 1(a) which is referred to in Section 143 (1A), a loss is envisaged as being declared in a return made under Section 139. It is clear, therefore, that the retrospective amendment made in 1993 would only be clarificatory of the position that existed in 1989 itself. 14. It was pointed out to us that the reason for the retrospective amendment made in 1993 was the judgments of the Delhi High Court in Modi Cement Limited v. Union of India, (1992) 193 ITR 91 and JK Synthetics Limited v. Asstt. Commissioner of Income-Tax, (1993) 2000 ITR 594, and the Allahabad High Court held in Indo Gulf Fertilizers Chemicals Corpn. Ltd. v. Union of India, (1992) 195 ITR 485, which held that losses were not within the contemplation of Section 143(1A) prior to its amendment. 15. The J.K. Synthetics judgment of the Delhi High Court was expressly upset by this Court in (2003) 10 SCC 623. By the time this Court delivered its judgment, the retrospective amendment to Section 143 (1A) had alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Amending Act. Explanation to sub-section (3) of Section 9 of the Amending Act also provides for exclusion of the period between February 27, 1975 i.e. the date on which the judgment in Khemka case [AIR 1955 SC 765 : (1955) 2 SCR 483 : (1955) 6 STC 627] was delivered up to the date of the commencement of the Amending Act in computing the period of limitation for questioning any order levying penalty.In those proceedings the authorities concerned are sure to consider all aspects of the case before passing orders levying penalties. The contention that the impugned provision is violative of Article 19(1)(f) and (g) of the Constitution has, therefore, to be rejected. 17. In the present case as well, all assessees were put on notice in 1989 itself that the expression income contained in Section 143 (1A) would be wide enough to include losses also. That being the case, on facts here there is in fact no retrospective imposition of additional tax - such tax was imposable on losses as well from 1989 itself. 18. We have already stated in our judgment that the object of Section 143 (1A) is the prevention of tax evasion. Read literally, both honest asessees and tax evaders are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration of the relevant provisions of the Income Tax Act would go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the Revenue with administering the provisions of the Act with 'an evil eye and unequal hand'. 19. This case was cited before this Court in the J.K. Synthetics judgment which we have already dealt with, reported in (2003) 10 SCC 623. This Court first held that the judgment in Hindustan Electro Graphites had no application to the facts contained in the J.K. Synthetics case and then added that they had reservations about the correctness of the judgment in Hindustan Electro Graphites Limited principally because the assessee in that case had not challenged the provisions of Section 143 (1A). 20. In the present case, the question that arises before us is also as to whether bonafide assessees are caught within the net of Section 143 (1A). We hasten to add that unlike in J.K. Synthetics case, Section 143 (1A) has in fact been challenged on Constitutional grounds before the High Court on the facts of the present case. This being the case, we feel that since the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though not expressed, is implicit as constituting the basic assumption underlying the statutory provision. We think that, having regard to this well recognised rule of interpretation, a fair and reasonable construction of Section 52 sub-section (2) would be to read into it a condition that it would apply only where the consideration for the transfer is under-stated or in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in case of a bonafide transaction where the full value of the consideration for the transfer is correctly declared by the assessee. The Court further went on to hold:- Thus it is not enough to attract the applicability of Sub-section (2) that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15% of the value so declared, but it is furthermore necessary that the full value of the consideration in respect of the transfer is under-stated or in other words, shown at a lesser figure than that ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Revenue and the second condition being as much a condition of taxability as the first, the burden lies on the Revenue to show that there is understatement of the consideration and the second condition is fulfilled. Moreover, to throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely, that he did not receive any consideration beyond that declared by him. Finally, the Court held: We must therefore hold that Sub-section (2) of Section 52 can be invoked only where the consideration for the transfer has been understated by the assessee or in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him and the burden of proving such under-statement or concealment is on the Revenue. This burden may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is understatement of concealment of the consideration in respect of the transfer. S ..... 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