Demand For Additional Tax U/s 143(1-A) IT Act Can Be Made Only If Assessee Intended To Evade Tax: SC [Read Judgment]

The Supreme Court has observed that the Section 143(1-A) of the Income Tax Act (demand for Additional Tax) can only be invoked when 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 contention taken in this appeal was that the 20% additional tax sought to be imposed under Section 143(1-A) is in the nature of penalty and can be levied only when the assessee had intentionally sought to file an incorrect return. It was submitted that such additional tax could only become payable in case where assessee was assessed to an income for the purpose of tax and could not apply where there was no income or there was loss. In this case, according to the assessee, the 100% depreciation was claimed by the assessee in the return due to a bonafide mistake.

The bench comprising Justices Ashok Bhushan and Mohan M. Shanthanagoudar noted that in Commissioner of Income Tax, Gauhati vs. Sati Oil Udyog Limited and another, (2015) 7 SCC 304, the Supreme Court had considered the provisions of Section 143(1-A), its object and validity. The constitutional validity of Section 143(1-A) (as inserted by the Finance Act, 1993) was upheld subject to holding that Section 143(1-A) 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 by the assessee.

Taking note of the facts and records in this case, the bench held that there was a mechanical application of Section 143(1-A).

It is true that while interpreting a Tax Legislature the consequences and hardship are not looked into but the purpose and object by which taxing statutes have been enacted cannot be lost sight. This Court while considering the very same provision i.e. Section 143(1-A), its object and purpose and while upholding the provision held that the burden of proving that the assessee has 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. In the present case, not even whisper, that claim of 100% depreciation by the assessee, 25% of which was disallowed was with intent to evade tax. We cannot mechanically apply the provisions of Section 143(1-A) in the facts of the present case and in view of the categorical pronouncement by this Court in Commissioner of Income Tax, Gauhati vs. Sati Oil Udyog Limited and another(supra), where it is held that Section 143(1-A) can only be invoked when 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. In view of the above, we hold that mechanical application of Section 143(1-A) in the facts of the present case was uncalled for.

Case no.: CIVIL APPEAL NO.8590 of 2010
Case name: RAJASTHAN STATE ELECTRICITY BOARD vs DY. COMMISSIONER OF INCOME TAX(ASSESSMENT)
Coram: Justices Ashok Bhushan and Mohan M. Shanthanagoudar
Counsel: Sr.Adv Arijit Prasad and Adv Rupesh Kumar

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