Madras H.C : These two writ petitions filed by the same petitioner raise an interesting question of law relating to the interpretation of s. 143(1)(a) of the IT Act

High Court Of Madras

Sukra Diamond Tools Pvt. Ltd. vs. DCIT

Sections 143(1)(a), 143(1A)

Asst. Year 1991-92, 1992-93

Kanakaraj, J.

Writ Petition Nos. 7751 & 7752 of 1994 & WMP Nos. 11854, 11855 & 23229 of 1994

12th September, 1996

Counsel Appeared

K.C. Rajappa, for the Petitioner : S.V. Subramanian for C.V. Rajan, for the Respondent

Kanakaraj, J.:

These two writ petitions filed by the same petitioner raise an interesting question of law relating to the interpretation of s. 143(1)(a) of the IT Act, 1961 (hereinafter called “the Act”), r/w s. 143(1A) of the Act. WP No. 7751 of 1994, relates to the levy of additional income-tax for the asst. yr. 1991-92 to the tune of Rs. 2,36,096. WP No. 7752 of 1994 relates to the levy of additional income-tax to the tune of Rs. 1,86,492 for the asst. yr. 1992-93. In both the cases identical question is raised for consideration.

Only a few more facts have to be noticed before plunging into the provisions of law and the interpretation of the same. For the year 1991-92 the petitioner returned a loss of Rs. 48,09,661 under s. 143(1)(a) of the Act, the assessing authority disallowed the sum of Rs. 22,41,328 and a further sum of Rs. 39,788 under s. 43B of the Act. The assessing authority intimated to the petitioner that the loss was determined at Rs. 25,28,545. He proceeded to levy additional tax under s. 143(1A) to the tune of Rs. 2,36,096. Similarly, for the asst. yr. 1992-93, the petitioner returned a loss of Rs. 48,47,744. The assessing authority disallowed under s. 43B of the Act, a sum of Rs. 16,21,656 and determined the loss at Rs. 32,26,088. He proceeded to levy additional tax under s. 143(1A) of the Act to the tune of Rs. 1,86,492.

Mr.K.C. Rajappa, learned counsel for the petitioner has taken me through the provisions of the IT Act and the various chapters of the Act for the purpose of understanding the scope and purport of the charging provisions vis-a- vis the computation provisions. Secs. 4 to 9 of the Act form the basis of the charge under the Act. Secs. 10 to 13 relate to the source of income which do not form part of the “total income”. Sec. 14 of the Act describes the various heads of income. In particular, s. 28 deals with the income from profits and gains of business. Sec. 29 provides for computation of the income under s. 28, in accordance with ss. 30 to 43D. Chapter VI relating to the aggregation of income, set off, and carry forward principles has some importance to the present writ petitions. Sec. 70 of the Act provides for the loss under one head of income to be set off under the same head. Sec. 71 provides for the loss under the one head of income to be set off under any other head of income. Sec. 72 of the Act relates to the principles of carrying forward and setting off business loss in the subsequent years. Sec. 80 of the Act relates to the submission of return for losses sustained by a person. The loss has to be determined in pursuance of a return under s. 139 (3) of the Act. Upon such determination only, the loss shall be carried forward and set off during the subsequent years (vide s. 157). In the Chapters relating to deductions to be made in computing the total income, s. 86 has some relevance for our purpose. It provides for certain sources of income which may form part of total income, but on which no income-tax is payable. Chapter XIV relates to the procedure for assessment. Sec. 139(1) relates to the return of income. Sec. 139(3) relates to the return to be filed where a person has sustained a loss under the head “Profits and gains of business or profession” or under the head “Capital gains” and further claims that the loss or any part thereof should be carried forward under sub-s. (1) of s. 72 or other provisions of law. The next provision of law which concerns us is s. 143 of the Act relating to the manner of assessment. Sub-s. (1) of s. 143(1)(a) says that if any tax or interest is found due on the basis of such return an intimation shall be sent to the assessee specifying the sum so payable. This is subject to sub-s. (2) of s. 143 enabling the AO to give notice and seek clarification. Sub-cl. (ii) of s. 143(1)(a) provides for refund on the basis of the return filed by the assessee. One important clause of the said sub-section is that if any loss carried forward, deduction, allowance or relief which on the basis of the information available in such return, is prima facie admissible and allowable, but which is not claimed in the return, shall be allowed by the assessing authority.

4. We now come to the most important section, viz., s. 143(1A)(a). Since the entire issue raised in these writ petitions relates to the said sub-section, the same is extracted : “143(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 20% 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 20% 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.”

5. I will refer to the other provisions of the Act as and when necessary. On the basis of the scheme of the Act Mr. K.C. Rajappa argues that the levy of additional income-tax is unwarranted and not contemplated under the Act. Learned counsel for the petitioner makes it clear that he is not challenging the validity of the said provisions of law, but is pleading for a reading down of the section so as to avoid the anomaly of levying additional income-tax when there is no income at all for the year in question. If on account of the loss declared by an assessee it is adjusted by the authority so as to convert that loss into income, there can be no objection to the levy of additional income-tax. But where the loss so declared is reduced and the adjustments made only results in loss to a lesser extent, there could be no levy of additional income-tax because there is no income at all. If the interpretation placed by the respondent is accepted it would go against the very scheme of the Act. Learned counsel projects the above contention of the petitioner under the following specific issues : (1) Where a return of loss is made under s. 139(3) is accepted after making adjustments and the adjustments result in continued loss to a lesser extent, no additional income-tax is exigible. (2) Unless there is a total income chargeable to tax in the hands of the assessee, there is no scope for the levy of the additional income-tax. In other words, unless there is some levy there is no question of adding to the said levy. (3) The provisions of s. 143(1A)(a) relating to the levy of additional income- tax where the loss returned by the assessee is reduced to a smaller extent of loss should be read down in such a manner as to be in tune with the charging provisions of the Act.

6. Learned counsel for the petitioner has relied on certain passages in Law of Income-tax by Sampath Iyengar, Vol. I, regarding the scope of the charging section levying an impost in respect of the total income of the previous year of every person. According to him, the concept of accrual or arisal of income under the Act is alone the main consideration for the charge to be attracted. Therefore, the concept of income-tax is unimaginable in the case where a person suffers loss. In CIT vs. Bangalore Transport Co. (1967) 66 ITR 373 (SC) : TC 13R.1084 an assessee submitted a return, claiming that it had earned no income from its business since it was taken over by the Government. But the ITO brought to tax a certain sum disclosed by the assessee’s audited accounts during that part of the year before it closed its business. A close scrutiny of the said decision shows that it has no relevance to the facts of the present case. The Supreme Court only held that it is not necessary that a business should be carried on till the end of the previous year and if before the conclusion of that year the business is closed, it cannot be said no profit at all may in law be deemed to accrue to the assessee. However, the Supreme Court observed that if at the end of the previous year, on making up accounts there is no overall income, the charge does not crystallise, because there is no income on which the charge of tax may settle. In CIT vs. Vadilal Lallubhai 1972 CTR (SC) 321 : (1972) 86 ITR 2 (SC) : TC 40R.740 the following passage is relied upon : “It is established on high authorities that the subject is not to be taxed unless the charging provision clearly imposes the obligation—see CIT vs. Ajax Products Ltd. (1965) 55 ITR 741 (SC) : TC 29R.136. As is often said that in interpreting a taxing provision one has merely to look to the words of the provision. The language employed in s. 44F cannot be said to be plain enough to bring to tax the receipts of the character with which we are concerned in these appeals.”

The Supreme Court further pointed out that in order to find out the legislative intent, we have to find out what was the mischief that the legislature wanted to remedy. The apex Court ultimately held that the deemed dividend contemplated by s. 2(6A)(c) cannot be considered as income under s. 44F of the Act. The next decision relied on is CIT vs. Harprasad & Co. P. Ltd. 1975 CTR (SC) 65 : (1975) 99 ITR 118 (SC) : TC 45R.89. In that case during the accounting period ending 30th April, 1954, relevant to the asst. yr. 1955-56, the assessee sold certain shares at a loss of Rs. 28,662, which was claimed as a revenue loss. Both the ITO and the appellate authority rejected the claim on the ground that the loss was a capital loss. The High Court held that the capital loss incurred in a year could be carried forward and set off against the capital gains in the subsequent years. The Supreme Court held, reversing the decision of the High Court, that the capital loss could not be determined and the assessee was not entitled to carry forward the loss of Rs. 28,662. No doubt, the Supreme Court observed that the capital gains did not form part of the “total income” of the assessee and could not be brought to charge and not liable to be computed under the Act. The following observations are relied upon : “Although s. 6 classifies income under six heads, the main charging provision is s. 3 which levies income-tax, on the “total income” of the assessee as defined in s. 2(15). An income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the “total amount of income, profits and gains referred to in s. 4(1)”. Secondly, it must be “computed in the manner laid down in the Act”. If either of these conditions fails, the income will not be a part of the total income that can be brought to charge.”

7. One of the decisions which necessitated the Parliament to amend s. 143(1A)(a) is the decision reported in Modi Cement Ltd. vs. Union of India (1991) 100 CTR (Del) 48 : (1992) 193 ITR 91 (Del) : TC 10R.346. On facts, that decision is identical to the present case in the sense that there was also a return declaring loss and after adjustment the loss was reduced to a lesser extent, but no income resulted or disclosed after adjustment. The Delhi High Court held that there was no scope for payment of any additional amount. This is because at that time s. 143(1A)(a) stood differently and that is precisely the reason why the amendment was made in the present shape which I have already quoted above.

8. The next argument of Mr. Rajappa is that machinery provisions are always subject to the charging section. Reliance is placed on Union of India vs. Bombay Tyre International Ltd. AIR 1984 SC 420. That was the famous case relating to the post-manufacturing expenses being included in the value of the excisable goods. Accepting the contention of the Revenue, it was held as follows : “Viewed from this standpoint, it is not possible to accept the contention that because the levy of excise is a levy on goods manufactured or produced the value of an excisable article must be limited to the manufacturing cost plus the manufacturing profit. We are of opinion that a broader based standard of reference may be adopted for the purpose of determining the measure of the levy. Any standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the levy. In our opinion, the original s. 4 and the new s. 4 of the Central Excise and Salt Act satisfy this test.” In coming to the said conclusion the apex Court had taken note of the well known proposition that the levy of a tax is defined by its nature, while the measure of the tax may be assessed by its own standard. It was also noticed that the standard adopted as the measure of the levy may indicate the nature of the tax, but it does not necessarily determine it. The observations of the Privy Council in 1936 AC 352, are apposite :”…..It is the essential characteristics of the particular tax charged that is to be regarded, and the nature of the machinery—often complicated—by which the tax is to be assessed is not of assistance, except in so far as it may throw light on the general character of the tax.”

9. Learned counsel for the petitioner relies on the said decision for the proposition that a provision of law can be read down where necessary. The apex Court had to consider the definition of the word “related persons” and found that the definition was so arbitrary that it included within the expression a distributor of the assessee. Observed the Supreme Court : “But it seems to us unnecessary to enter into that question because we are satisfied that the provision in the definition of “related person” relating to a distributor can be legitimately read down and its validity thus upheld. In our opinion, the definition of related person should be so read that the words “a relative and a distributor of the assessee” should be understood to mean a distributor who is a relative of the assessee.”

Learned counsel for the petitioner also relies upon the ratio of the judgment of the Supreme Court based on the cost of primary packing and the degree of secondary packing which is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. The apex Court indicated the extent of the cost which could be included in the value of the article for the purpose of excise duty. The entire endeavour of learned counsel for the petitioner is to show that the machinery provisions can be read down are limited in its application having regard to the charging section. Reliance is next placed on CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC) : TC 20R.148. That case related to the assessment of the goodwill of a business. The Supreme Court observed : “The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section.” In one sense that was a converse case where the apex Court held that it was not possible to hold that where a certain income seems to fall within the charging section, there is no scheme of computing or quantifying it.

10. K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) : TC 22R.105 is the next decision relied on by the petitioner. The purpose of relying on this decision is to suggest that if literal construction of a provision of law leads to absurdity, unjust result or mischief to be avoided. Then, a construction which renders provision of law as intra vires should be preferred. Brooke Bond & Co. Ltd. vs. CIT (1986) 57 CTR (SC) 25 : (1986) 162 ITR 373 (SC) : TC 45R.268 is again for the proposition that there must be a total income for the applicability of the charging section. The following passage is relied upon. “It is a cardinal principle of the law relating to income-tax that income-tax is a single charge on the total income of an assessee.” The apex Court proceeded to illustrate that the entire process of assessment is to find out the figure of taxable income which is assessed to tax.

Lastly, it is argued by Mr. Rajappa that no appeal is provided under s. 246 of the Act, and therefore, if any other interpretation is placed on s. 143(1A)(a) of the Act, then it will be totally unjust to the assessee. It is therefore, contended that it will be violating the principles enunciated in Art. 265 of the Constitution of India which says that no tax shall be levied or collected except by authority of law. For this proposition reliance is placed on K.T. Moopil Nair vs. State of Kerala AIR 1961 SC 552. In that decision it was laid down that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause in Art. 14 of the Constitution of India. The Supreme Court only said that if the same clause of property similarly situated, is subjected to an incidence of taxation, which results in inequality the law may be struck down as creating an inequality amongst holders of the same kind of property. In my opinion, this judgment does not support the proposition propounded by Mr. Rajappa. Learned counsel for the petitioner also refers to Arts. 269, 270 and 271 of the Constitution of India r/w Art. 366(28) of the Constitution of India relating to the definition of the word “tax” and contends that if by way of a Finance Act under Art. 271 of the Constitution of India, the additional income-tax had been levied by way of surcharge, the petitioner could have no defence to the levy. But in this case, by way of amending the s. 143 (1A)(a) of the IT Act, the levy is sought to be introduced and the same cannot be supported by any principle of interpretation.

Mr. S.V. Subramaniam, learned senior counsel for the respondents, takes me through the Finance Act, 1993, which introduced s. 143(1A)(a) in the present form and the fact that the same has been given retrospective effect from 1st April, 1989. With reference to cl. 23 of the Bill which introduced the amendment, the notes on clauses in the Finance Bill, 1993, explains, it is clearly observed as follows : “In cases, where the loss declared in the return has been reduced as a result of the aforesaid adjustments or the aforesaid adjustments have the effect of converting that loss into income, the AO shall calculate a sum (referred to as additional income-tax) equal to 20% 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 said additional income-tax in the intimation to be sent under sub-cl. (i) of cl. (a) of sub-s. 143, the AO shall reduce the amount of such refund by an amount equivalent to the additional income-tax calculated as aforesaid.” He also refers to the memorandum explaining the provision in the Finance Bill and says that the amended provisions are to have a deterrent effect and the purpose of the levy of additional income-tax is to persuade all the assessees to file their returns of income carefully to avoid mistakes. It is also explained that it was passed with a view to overcome certain judicial pronouncements, and what was imposed was only a sum calculated at 20% of the tax that could have been chargeable on the amount of the adjustments, as if it had been the total income of such person.

In other words, it is contended that what is levied is not an additional income-tax but only a sum which is called for the sake of convenience as additional income-tax. The decision of the Kerala High Court in Kerala State Coir Corpn. Ltd. vs. Union of India (1994) 121 CTR (Ker) 245 : (1994) 210 ITR 121 (Ker) : TC 10PS.3 is a case which is directly in point. In that case also the assessing authority accepted the return under s. 143(1)(a) of the Act and reduced the total loss. Consequently, on the basis of the amendment to s. 143(1A)(a) the assessing authority levied a sum equal to 20% of the difference. Thereupon the validity of the amendment itself was challenged in the writ petition. While upholding the amended provision of s. 143(1A)(a) the Kerala High Court observed : “Apart from that the object of s. 143(1A) is prevention of tax evasion. Its purpose is to see that the assessee makes a true and correct disclosure of his income and expenditure. A true picture of the loss has also to be made, inasmuch as the loss is liable to be carried forward to the succeeding years. The provision for additional tax is thus one intended to prevent evasion of tax, and such a legislation intended for purposes ancillary to the correct assessment of the income or the loss, and to prevent evasion of tax cannot be branded as arbitrary or struck down as such. The section is invoked only when the return filed does not accord with the realities.” Mr. Subramaniam also refers to the above cited decision in Union of India vs. Bombay Tyre International Ltd. (supra) and argues that only with a view to save a provision of law from being struck down, the Courts normally adopt the principles of reading down, if that is possible. He also relies on a decision in Minerva Mills Ltd. vs. Union of India AIR 1980 SC 1789 for suggesting that on the ground of reading down a section, the Court cannot read the directly opposite of what is indicated by the section. This is because the section is very clear that even in the case of a loss being reduced not to the extent of converting loss into income, the levy of 20% 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, is authorised. Unless the petitioner challenges the validity of the section, there is no scope at all for reading the provision of law in a different manner. I am of the opinion that the Revenue is fully justified in advancing the above argument.

15. In reply Mr. K.C. Rajappa argues that a provision of law cannot be interpreted by referring to the objects and reasons of an enactment. Reliance is also placed on certain passages in Interpretation of Statutes by Vepa P. Sarathi, to support the above proposition of law. Learned counsel then relied on a decision in Check Post Officer vs. K.P. Abdulla & Bros. 27 STC 1 striking down s. 42(3) of the Madras General Sales-tax Act, 1959 by holding that the provision of power relating to confiscation of goods and levy of penalty in lieu of confiscation by a Check Post Officer, is not a provision which is ancillary or incidental to the power to tax sale of goods under the relevant constitutional entry. He also relies on a decision in Madurai District Central Co-op. Bank Ltd. vs. ITO 1975 CTR (SC) 220 : (1975) 101 ITR 24 (SC) : TC 38R.463 for the proposition that there can be no levy of income-tax de hors the total income as per the charging section. In Khemka & Co. vs. State of Maharashtra 35 STC 571 (SC) the Supreme Court of India dealt with the power of the Sales-tax authorities of the State to impose the penalties payable by a dealer under the Central Sales-tax Act. The Supreme Court did not lay down that in addition to the imposition of tax a penalty also cannot be levied. In fact, this has been made clear by stating that penalty is in addition to tax and is a liability under the Act. It is further made clear by saying that penalty is within assessment proceedings just as tax is within assessment proceedings when the relevant Act by substantive charging provision levies tax as well as penalty. This decision does not in any way help the petitioner. Learned counsel for the petitioner also cited certain other decisions relating to the assessment orders involving determination of the total income.

One other case namely, R. Srinivasan & Co. vs. CIT (1974) 97 ITR 431 (Mad) : TC 50R.146 was also relied on to suggest that a penalty cannot be levied solely on the reasons given in the original order of assessment. There must be a consideration afresh that the assessee had deliberately concealed particulars warranting the levy of penalty.

So far as the question of a remedy being available to the petitioner for challenging the manner of adjustments or the correctness of the same, it is pointed out that either under s. 154 providing for rectification or under s. 264 providing for a revision are sufficient enough to give protection to an aggrieved party. In fact, in the counter- affidavit filed by respondents there is a reference to a revision petition having been filed and orders having been passed on 8th July, 1993. One other point that learned counsel for the respondents brings to my notice is that before s. 234 was introduced in the present form even a ‘Nil’ return if filed beyond the prescribed period attracted a minimum penalty of Rs. 25.

On the above arguments as supported by various decisions to which I have made a reference, it will now be convenient to take up the three points raised by learned counsel for the petitioner. The first and second points relate to the return being accepted with adjustments and the ultimate result showing the assessee as having suffered loss

to a lesser extent, not being exigible to tax. This argument is based on a fallacy. Similarly, the necessity for the existence of a total income chargeable to tax, is also based on a misconception. This is because the stand of the respondent is that the levy under s. 143(1A)(a) is not actually a levy of additional income-tax. Learned counsel for the respondents stresses the words in s. 143(1A)(a) which relates to the levy of a sum where the loss declared by an assessee is reduced. The words used show that the assessing authority is directed to calculate a sum which is for convenience referred to as additional income-tax. The sum so calculated shall be equal to 20% 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. The later part provides for the fixation of the quantum and the same will depend upon the status of the person and whether he is chargeable to tax and if so at a particular rate when the amount of the adjustments is deemed to be the total income. Therefore, it is argued for the respondents that there is no fiction of assuming the amount of the adjustments as the total income. The fiction is limited only for the purpose of calculating the sum, that is directed to be levied, for the default committed by the assessee. In this sense it may not be proper for the petitioner to go into the scope of the charging section or the existence of a total income chargeable to tax. Learned counsel for the respondents also refers to the notes on the Finance Bill, 1993, to which I have already made a reference for supporting his argument that the amendment was introduced only to overcome certain judicial pronouncements. It has been made clear in the notes on the clauses of the Finance Bill that the intention is to impose a penalty for filing an improper return. Therefore, it is not correct to say that under the impugned provision of law, the authorities are levying income-tax on the loss suffered by the assessee. Such an interpretation would be doing violence to the plain reading of the section. The argument that there must be some levy for increasing the same by way of additional income-tax also falls to the ground because there is no levy of income-tax as such, under the impugned provision of law. At the risk of repetition I must say that the impugned provision of law only directs the calculation of a sum and specifies the sum so calculated in the intimation to be sent under sub-cl. (i) of cl. (a) of sub-s. (1) of s. 143. If this distinction is kept in mind there is no room for any confusion. The various decisions relied on by the petitioner cannot have any application if the above interpretation is kept in mind. In this connection, a reference to a decision in Khemka & Co. vs. State of Maharashtra (supra), gives a clue to the power of the Government to impose penalty for certain defaults committed by the assessee. In this case, it has to be understood that the adjustments were made purely on the basis of the return submitted by the petitioners. In other words, the default was committed by the petitioner, in showing a higher loss for the subject assessment year knowing fully well that certain amounts were not eligible for credit under s. 43B of the Act. Therefore, that particular default on the part of the assessee incurs certain amount of penalty or punishment. It may be in the form of interest or it may be in the form of a levy based on certain calculations. The observation of the Supreme Court in the said decision will certainly support the stand of the Revenue. Observed the Supreme Court : “Penalty is not merely sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. Reference may be made to s. 28 of the Indian IT Act, 1922, where penalty is provided for concealment of income. Penalty is in addition to the amount of income-tax. This Court in Jain Bros. vs. Union India (1970) 77 ITR 107 (SC) : TC 49R.381 said that penalty is not a continuation of assessment proceedings and that penalty partakes of the character of additional tax.” I have, therefore, little hesitation in rejecting the first two points argued by learned counsel for the petitioner.

19. The third point is an attempt to persuade this Court to read down the said section, so that it will be in tune with the charging section. Even here, at the outset I am of the opinion that it is not necessary for the impugned provision of law, to be in tune with the charging section. This is because I have already held that there is no levy of income- tax or additional income-tax under the impugned provision of law. It is only a levy of sum calculated in a particular manner. That apart, the necessity for reading down a section will arise only if the Court is faced with the situation of striking down the provision of law. If the Court feels that instead of striking down the provision of law, the same can be saved by reading down the section, then such a course is adopted by Courts of law. Reference in this case may be made to paragraph 46 of the judgment in Union of India vs. Bombay Tyres (supra). Reference may also be made to a decision in Minerva Mills Ltd. vs. Union of India (supra) to which I have already made a reference. As rightly pointed out under the guise of reading down a section, the Court cannot read directly the opposite of what a section is intended for and what it plainly conveys. In this case, a plain reading of s. 143(1A)(a) of the Act shows that where even a loss is reduced, penalty is incurred and the same is calculated in the manner provided for in the said section. To read it otherwise, would be to re-write the section itself. Therefore, the third point also fails. Further, it has to be remembered that the petitioner is not challenging the validity of the impugned provision of law. What is more, in (1994) 121 CTR (Ker) 245 : (1994) 210 ITR 121 (Ker) : TC 10PS.3, cited supra, the provision of law has been upheld as intra vires and good and valid reasons are given for the imposition of the said sum which is to prevent tax evasion. It has to be remembered that a loss correctly determined can be carried over to the next year for adjustment against profits made in the next year. Therefore, it has an important part to play and any default on the part of the assessee has to be curtailed by an imposition of penalty.

Lastly, it was argued that the non-availability of a remedy to challenge the adjustments made by the assessing authority, I have already pointed out that both under s. 154 and under s. 264, there are remedies available to the petitioner to question the correctness of the adjustments. For all the above reasons, the writ petitions fail and they are accordingly, dismissed.

No costs.

In view of the disposal of the writ petitions, no further or separate orders are necessary in the connected WMPs and they are closed.

[Citation : 229 ITR 682]

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