1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR. O R D E R S.B. CIVIL WRIT PETITION No.217/2000. : : M/s K. P. & Company & Anr. Vs. Union of India & Ors. : : Date of Order 16.4.2009 HON'BLE MR.JUSTICE MOHAMMAD RAFIQ Mr. Anant Kasliwal for the petitioners. Mr. R. B. Mathur for the respondents. Reportable Heard learned counsel for the parties. 2. This writ petition has been filed by the petitioners interalia challenging the intimation dated 11.9.1990 issued to them under Section 143 (1) (e) of Income Tax Act (for short “the Act”), order dated 23.10.1997 by which his appeal against the aforesaid order was dismissed by Income Tax Appellate Tribunal, Jaipur (for short “the Tribunal”), order dated 12.5.1998 by which application filed by petitioners was dismissed and further orders dated 23.3.1999 and 30.8.1999 whereby misc. petitions filed by petitioners were again dismissed by the Tribunal. 2 3. Petitioner No.1 is the registered partner-ship firm of which petitioner No.2 is a partner. Firm is engaged in the business of manufacturing and export of carpets. Petitioners filed return of income for the assessment year 1989-90 on 29.12.1989 declaring nil taxable income. In that return, the cash assistance of Rs.59,16,711/- received by the assessee as capital receipt under the Export Import Policy of the Central Government was reduced from its net profits, in view of law laid down by Special Bench of Income Tax Appellate Tribunal in the case of Gedore Tools India Private Ltd. (251 TD 193). The Assessing Officer issued a notice under Section 143 of the Act dated 30.3.1990 requiring the assessee to attend the office and explain particulars of the return in greater details. It so happened that the Parliament in the meantime amended Section 28 of the Act by Finance Act, 1990, which was given retrospective effect from 12.4.1962. Clause (iiib) thereof provided for inclusion of any cash assistance (by whatever name called) received or receivable in pursuance of Export Policies of the Government of India against the export as a taxable receipt. According to assessee, it filed a revised computation of income showing therein the amount of compensatory allowance as income on 14.6.1990. This revision was made by way of simple 3 application supported by revised computation statement to Deputy Commissioner of Income Tax (Assessment), Special Range-I, Jaipur. It was claimed that assessee also deposited a sum of Rs.3,52,510/- as the tax under Section 140-A of the Act. The revenue however asserts that even prior to that deposit of tax, the Assessing Officer had issued a notice and intimation to assessee under Section 143 (1) (a) on 11.6.1990 assessing total income at Rs.14,81,740/-. The assessee was by the aforesaid information directed to deposit tax to the tune of Rs.6,59,317/-, but the assessee states that he received that intimation only on 15.6.1990, a day after he voluntarily filed revised computation of deposit tax by him. 4. Shir Anant Kasliwal, learned counsel for the assessee has argued that question for determination is that cash compensatory allowance is declared as capital gain by the assessee in view of position of law existing at the time he originally filed return. It was by virtue of change in the position of law subsequently brought within the purview of Section 143 (1) (a) of the Act. It is neither a loss carried forward nor a deduction. The cash assistance is rather a capital receipt received by assesseee as compensation for hardship and losses incurred during the course of export. The 4 Assessing Officer as also the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal were wholly unjustified in holding that filing of revised computation of income alongwith a letter addressed to Deputy Commissioner (supra) cannot be taken as revised return only because it was not filed on prescribed performa. It was argued that technicalities cannot be allowed to come in the way of granting justice to the assessee. Learned counsel cited Division Bench judgment of Calcutta High Court in Modern Fibotex India Ltd. & Anr. Vs. Deputy Commissioner of Income Tax & Ors. : ITR 1995 (212), Page 496 wherein it was held that question of adjustment must be determined by applying the law on the date when the return was filed. It was further held that intimation under Section 143 (1) (a) cannot be issued after the issuance of notice under Section 143 (2) of the Act. Learned counsel submitted that since in the present case notice under Section 143 (2) of the Act was issued on 30.3.1990, the Assessing Authority had been left with no power thereafter to again issue intimation under Section 143 (1) (a) of the Act. Learned counsel also cited judgment of Supreme Court in Income Tax Vs. Hindustan Electro Graphites Ltd : ITR 2000 (Vol. 243), Page 48 and argued that view taken by Division Bench of Calcutta High Court has been 5 approved and reiterated by Supreme Court in this judgment, which held that income by way of cash compensatory support became taxable retrospectively, but that was amended by Section 28 of Finance Act, which amendment could not have been known before the Finance Act came into force. It was held that levy of additional tax bears all the characteristics of penalty. If the return as originally filed by the assessee was correct as per law on the date of its filing, and if by virtue of subsequent amendment the cash compensatory is held to be a capital gain, requiring assessee to pay additional tax, which has the implication of penalty, is wholly unjustified. 5. Shri R. B. Mathur, learned counsel appearing for revenue opposed the writ petition and submitted that intimation under Section 143 (1) (a) of the Act was sent to the assessee on 11.6.1990 and thus the return was proposed and an additional demand was created on that very day by passing an appropriate order. The assessee cannot escape his liability under Section 143 (1) (a) by merely writing a letter dated 13.6.1990 with a revised statement of computation of income, which in fact was filed in the office of Deputy Commissioner, Income Tax on 14.6.1990. It was 6 argued that Assessing Officer as also the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal rightly held that revised computation of income must be filed duly in the prescribed manner, therefore, mere sending of simple letter informing about change of total income cannot be accepted as a revised income. Learned counsel submitted that correctness of view expressed by Supreme Court in Hindustan Electro Graphites Ltd. (supra) by two-Judge Bench of Supreme Court has been doubted by three-Judge Bench of Supreme Court in Assistant Commissioner of Income Tax Vs. J. K. Synthetics Ltd. : ITR 2001 (Vol.251), Page 200, wherein it was held that retrospectively substituted sub-section (1A) of Section 143 made it clear that where the loss declared by the assessee had been reduced by reason of adjustments made under sub-section (1) (a), the provisions of sub-section (1A) applied and the additional tax would be imposed. The Supreme Court in similar facts of that case held that it is nobody's case that a retrospective amendment has rendered a correct return filed by the assessee incorrect. The question here is only whether a loss which is reduced by reason of the application of the provisions of sub-section (1) (a) falls within the ambit of sub-section (1A) of Section 143, can be taken as income. Thus holding, the three-Judge bench of the Supreme 7 Court expressed its reservations about the correctness of judgment in Hindustan Electro Graphite Ltd's case (supra). In fact, case of revenue stands on some what better footings because in the instant case, the assessee had originally filed return declaring nil income and by reason of addition of compensatory allowance, in the revised statement of income, it has itself admitted the profit. Learned counsel cited Division Bench judgment of Madhya Pradesh High Court in Sanctus Drugs Pharmaceuticals Private Ltd. & Anr. Vs. Union of India & Ors : ITR 1997 (Vol.225), Page 252 on the same point. Lastly Shri R. B. Mathur cited the judgment of Devision Bench of this Court in Deputy Commissioner of Income Tax (Assessment) Jaipur & Anr. Vs. Rajasthan State Electricity Board : RLR 2008 (1), 103 and argued that Division Bench in identical circumstances relying on the judgment of Supreme Court in J. K. Synthetics Ltd. (supra) and Sanctus Drugs (supra) has held that under section 143 (1A) the Act, the assessee may not be able to reduce the tax by showing loss first and then reducing the loss under Section 143 (1A). In fact, the Division Bench upheld validity of that provision. In view of authoritative law declared by Supreme Court and by this Court, the writ petition be dismissed. 8 6. I have given my anxious consideration to the rival submissions and perused the material on record. 7. Entire gamut of arguments made on behalf of assessee is that additional tax by virtue of subsequent amendments, would have the characteristics of penalty and if the originally filed return of the assessee was correct as per law applicable on that day, levy of additional tax taking into account income by way of cash compensatory support was not warranted. No doubt, the two-Judge Bench of Supreme Court in Hindustan Electro Graphites Ltd (supra) supports that view point. But then, subsequent judgment in J. K. Synthetics Ltd. (supra) by three-Judge Bench of the Supreme Court distinguished judgment of Hindustan Electro Graphites Ltd (supra) and held that : “It is nobody's case that a retrospective amendment has rendered a correct return filed by the assessee incorrect. The question here is only whether a loss which is reduced by reason of the application of the provisions of sub-section (1) (a) falls within the ambit of sub-section (1A).” Consequence of amendment, therefore, would be that entitlement of petitioner to declare the cash assistance 9 as capital receipt would go because of effect of judgment of Special Bench of Income Tax Appellate Tribunal in Gedore Tools stood nullified by virtue of Finance Act, 1995 w.e.f. 1.4.1967. In view of this situation arising as a result of retrospective amendment, Supreme Court in J. K. Synthetics Ltd. (supra) held that the question that arises is only whether loss, which is reduced by reason of application of the provisions of sub-section of Section 143 (1) (a), falls within the ambit of sub-section (1A) of Section 143. Even otherwise, as far as this Court is concerned, that issue stands concluded by judgment of Division Bench in RSEB (supra) wherein also the judgment of Supreme Court in J. K. Synthetics Ltd. (supra) was followed. Relevant extract therefrom is as under :- “The substituted sub-section (1A), therefore, made it clear that even where the loss declared by assessee had been reduced by reason of adjustments made under sub-section (1) (a), the provisions of (1A) would apply. This being retrospective amendment, it covers the controversy in this appeal and, therefore, the appeal would have to be decided in favour of the Revenue”. 10 Effect of revision in the income of assessee on account of fact that cash compensation, which was earlier claimed by him as capital receipt, would now be treated as income, would be that a return, which was earlier filed with nil income, would now be liable to be revised with that much amount as profit thereby deducting additional tax as intended by the Parliament. In view of above, intention or motive on the part of assessee in not declaring that component as income would be immaterial because cash compensation receipt under the import export policy of Government of India would now be treated as income and that is the effect of amending Finance Act, 1990. In view of above discussions, I do not find any merit in the present writ petition, which is accordingly dismissed. (MOHAMMAD RAFIQ)J. A.Arora/- Item No.H/1.