Summary
The Supreme Court quashed additional income tax imposed after a bona fide excessive depreciation claim reduced the assessee’s declared loss. Although the retrospective amendment to Section 143(1-A) covered loss reductions, its application required an attempt to evade lawfully payable tax, with that burden on the Revenue. No such attempt was alleged or established; the authorities had instead treated every adjustment as automatically attracting the levy.
Issues
- Whether the depreciation adjustment justified additional tax under Section 143(1-A).
- Whether that provision could be applied mechanically to a bona fide mistake reducing a returned loss.
Provisions considered
- Section 143(1-A)(a), as retrospectively substituted in 1993, Income Tax Act, 1961Applied to the assessment year but required the tax-evasion foundation identified in Sati Oil Udyog, not merely an adjustment reducing loss. (¶¶ 12, 13, 18, 19, 20, 21, 22)
Held
- The retrospective 1993 amendment covered reduction of a declared loss, even where income remained negative. That statutory coverage did not make every adjustment automatically liable to additional tax. (¶¶ 12, 13)
- Under Sati Oil Udyog, the provision could be invoked only where the lesser amount declared resulted from an attempt to evade lawfully payable tax. The Revenue bore the burden of establishing facts permitting a reasonable inference of such an attempt. (¶¶ 17, 18, 19, 22)
- The claim for 100% rather than the newly restricted 75% depreciation was a bona fide oversight, and the assessee remained in loss after adjustment. The Commissioner made no finding of evasion and relied only on automatic levy upon adjustment. Mechanical application in those circumstances was unwarranted. (¶¶ 14, 15, 20, 21, 22)
Result
Appeal allowed; Division Bench judgment and additional-tax demand dated 12 February 1992, as amended on 28 February 1992, set aside.