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Excess claim of dep. couldn’t be equated with tax evasion; no addition tax under old Sec. 143(1A)

March 20, 2020[2020] 115 taxmann.com 330 (SC)
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INCOME TAX : Section 143(1A) can only be invoked when lesser amount stated in return filed by assessee is a result of an attempt to evade tax lawfully payable by assessee, thus, where there was no observation to effect claim of 100 per cent depreciation by assessee, 25 per cent of which was disallowed was with intend to evade tax, section 143(1A) could not have been applied

Facts

• Assessee a Government Company filed return of income showing a loss amounting to Rs. 427 crores. Due to a bonafide mistake, assessee claimed 100 per cent depreciation of Rs. 334 crores on written down value of assets instead of 75 per cent depreciation.

• An intimation under section 143(1)(a) was issued by Assessing Officer disallowing 25 per cent of depreciation, restricting depreciation to 75 per cent. Additional tax under section 143(1A) amounting to Rs.8.64 crores was demanded. The assessee filed an application under section 154 praying for rectification of demand and also filed a petition under section 264 against demand of additional tax and prayed for quashing demand of additional tax. The application filed under section 154 was rejected and Commissioner rejected revision petition.

• On appeal by assessee, Single Judge allowed writ petition quashing levy of additional tax under section 143(1A).

• On Special Appeal by revenue, Division Bench of High Court upheld demand of additional tax.

• On appeal to Supreme Court:

Held

• The amendments brought by Finance Act, 1993 with retrospective effect i.e. from 1-4-1989 are fully attracted with regard to assessment in question i.e. for assessment year 1991-92. The substituted sub-section (1A) makes it clear that where loss declared by an assessee had been reduced by reason of adjustments made under sub-section(1)(a), provisions of sub-section (1A) would apply. As noted above Commissioner while rejecting revision petition of assessee has taken view that whenever adjustment is made, additional tax would be charged at the rate of 20 per cent of tax payable on such excess amount. The excess amount refers to increase in income and by implication, reduction in loss where even after addition there is negative income. Revenue has rightly submitted that object of section 143(1A) was prevention of evasion of tax.

• While interpreting a Tax Legislature consequences and hardship are not looked into but purpose and object by which taxing statutes have been enacted cannot be lost sight. This Court while considering very same provision i.e. section 143(1A), its object and purpose and while upholding provision held that burden of proving that assessee has attempted to evade tax is on revenue which may be discharged by revenue by establishing facts and circumstances from which a reasonable inference can be drawn that assessee has, in fact, attempted to evade tax lawfully payable by it. In instant case, not even whisper, that claim of 100 per cent depreciation by assessee, 25 per cent of which was disallowed was with intend to evade tax. Section 143(1A) cannot be mechanically applied in facts of instant case as section 143(1A) can only be invoked when lesser amount stated in return filed by assessee is a result of an attempt to evade tax lawfully payable by assessee. In result, appeal was to be allowed and judgment of Division Bench of High Court was to be set aside.

[Dy.CIT (Assessment) v. Rajasthan State Electricity Board [2008] 171 Taxman 331 (Rajasthan) - Set aside]

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