High Court Of Karnataka
ICDS Ltd. vs. DCIT
Sections 143(1)(a), 143(1A)
Asst. Year 1993-94
G.C. Bharuka & K. Sreedhar Rao, JJ.
IT Appeal No. 309 of 2001
7th February, 2002
Counsel Appeared
G. Sarangan with S. Parthasarathi, for the Appellant : E.R. Indra Kumar, for the Respondent
JUDGMENT
G.C. BHARUKA J. :
The assessee has preferred this appeal under s. 260A of the IT Act, 1961 (in short “the Act”). The substantial question of law involved in this appeal is : “Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the assessee is liable to pay additional income-tax under s. 143(1A)(a) of the Act?” The appellant is a company incorporated under the Companies Act, 1956. For the asst. yr. 199394, the appellant filed a return showing the total income (before deductions under Chapter VI-A) of Rs. 1,49,14,477. After scrutiny of the said return under s. 143(1A), the AO sent an intimation to the appellant under s. 143(1)(a)(i) of the Act intimating levy of additional income-tax being at Rs. 4,15,018. The additional income-tax was levied by the AO because of addition of Rs. 33,00,000 which the appellant has claimed as deduction under the head “Interest-tax”. After receiving the above intimation, the assessee filed an application under s. 154 of the Act, claiming that it was entitled to 100 per cent depreciation in respect of 150 tonne air-conditioner costing 1.13 crores, which has not been granted by the AO while making the adjustment under s. 143(1A). The said application was rejected by the AO under his order dt. 21st March, 1994. The appellant questioned the said order before the CIT(A) who, after consideration of the relevant facts and the statutory provisions, held that the assessee was entitled to 100 per cent depreciation on the above air-conditioner as claimed. Accordingly, by order dt. 26th Feb., 1994, he directed the AO to allow permissible depreciation while making adjustments under s. 143(1A). The admissible depreciation worked out to Rs. 42,45,271. If this deduction is adjusted against the addition of Rs. 33,00,000, then the income gets reduced to Rs. 42,45,271. Thus, the ultimate adjustment did not result in any increase in the income. Subsequently, the appellant filed a revised return on the basis of which a regular assessment under s. 143(3) was completed. But, curiously, the AO without giving effect to the appellate order dt. 26th Feb., 1994, directing the AO to grant additional depreciation by way of adjustment under s. 143(1)(a), in the demand notice issued under s. 156 of the Act included the amount of additional income-tax as well being for Rs. 4,15,018. Against this demand notice, the appellant preferred an appeal before the CIT(A), who, considering the facts noticed above and the provisions contained under s. 143(1A), held that the inclusion of additional income-tax in the demand notice was impermissible in law.
The Department, being aggrieved by this order, questioned the same before the Tribunal, which by its impugned order dt. 29th June, 2001, by wrongly relying on the judgment of the Supreme Court in the case of Asstt. CIT vs. J.K. Synthetics Ltd. (2001) 166 CTR (SC) 498 : (2001) 251 ITR 200 (SC) has set aside the order of the CIT(A) and restored the levy of additional income-tax. In order to appreciate the contentions raised at the Bar and the reasoning given by the Tribunal, we have to look at sub-s. (1A) of s. 143, as it stood at the material time. It reads thus : “143. Assessment.— (1) xxxx (1A)(a) Where as a result of the adjustments made under the first proviso to cl. (a) of sub-s. (1),— (i) the income declared by any person in the return is increased ; or (ii) the loss declared by such person in the return is reduced or is converted into income, the AO shall,— (A) in a case where the increase in income under sub-cl. (i) of this clause has increased the total income of such person, further increase the amount of tax payable under sub-s. (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 increased and the tax that would have been chargeable had such total income been reduced by the amount of adjustments and specify the additional income-tax in the intimation to be sent under sub-cl. (i) of cl. (a) of sub-s. (1) ; (B) in a case where the loss so declared is reduced under sub-cl. (ii) of this clause or the aforesaid adjustments have 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 amount of the adjustments as if it had been the total income of such person and specify the additional income-tax so calculated in the intimation to be sent under sub-cl. (i) of cl. (a) of sub-s. (1) ; (C) where any refund is due under sub-s. (1), reduce the amount of such refund by an amount equivalent to the additional income-tax calculated under sub-cl. (A) or sub-cl. (B) as the case may be. (b) Where as a result of an order under sub-s. (3) of this section or s. 154 or s. 250 or s. 254 or s. 260 or s. 262 or s. 263 or s. 264, the amount on which, additional income-tax is payable under cl. (a) has been increased or reduced, as the case may be, the additional income-tax shall be increased or reduced accordingly, and,— (i) in a case where the additional income-tax is increased, the AO shall serve on the assessee a notice of demand under s. 156 ; (ii) in a case where the additional income-tax is reduced, the excess amount paid, if any, shall be refunded.”
7. From the reading of cl. (a) of sub-s. (1A) of s. 143 of the Act as extracted above, it is clear that the AO can levy additional income-tax only if pursuant to adjustments made to the return, the income is found to have increased or the loss declared in the return is reduced or is converted into income. This section does not provide that even in a case where after adjustments the income gets reduced then also the AO can levy additional income-tax. Further, as provided under cl. (b) of subs. (1A) of s. 143, for computation of additional income-tax, the AO has to give due credence to any order passed under s. 154 of the Act. Keeping in view these statutory provisions and the interpretational rule of strict construction of charging sections in tax laws, it can unhesitantly be said that the Tribunal has erred in reversing the order of the CIT(A).
8. So far as placing of reliance by the Tribunal on the judgment of the Supreme Court in the case of Asstt. CIT vs. J.K. Synthetics Ltd. (supra) is concerned, the Tribunal has misdirected itself on this count as well. This is for the simple reason that in this judgment, mere perusal of facts of the case shows that it was a case where after adjustment, loss declared by the assessee had been reduced. On these facts the Supreme Court by taking note of the amended provisions held that the amended provisions, which were retrospective in nature, cover even the cases where the loss is reduced as a result of adjustment made under sub-s. (1)(a) of s. 143. But, this is not the situation here. As we have already indicated, the present case is a case where after adjustment, the returned income has merely reduced. Sub-s. (1A) of s. 143 of the Act did not cover such a situation permitting levy of additional income-tax as has been sought to be done in the present case. Therefore, impugned levy of additional income-tax does not have any legal sanction. For the aforesaid reasons, we set aside the order of the Tribunal. Thus the appeal is allowed.
[Citation : 258 ITR 635]
