Case: RAJASTHAN STATE ELECTRICITY BOARD JAIPUR Vs. THE DY. COMMISSIONER OF INCOME TAX(ASSESSMENT) &amp; ANR

following has been laid down: 9. On a cursory reading of the provision, it is clear that the object of Section 143(1- A) is the prevention of evasion of tax. By the introduction of this provision, persons who have filed returns in which they have sought to evade the tax properly payable by them is meant to have a deterrent effect and a hefty amount of 20% as additional income tax is payable on the difference between what is declared in the return and what is assessed to tax. 18. Relying on earlier judgment of this Court in K.P. Varghese v. ITO, (1981) 4 SCC 173 , this Court in the above case held that provisions of Section 143(1-A) should be made to apply only to tax evaders. In paragraphs 21 and 25 following was laid down: 21. In the present case, the question that arises before us is also as to whether bona fide assessees are caught within the net of Section 143(1-A). We hasten to add that unlike in J.K. Synthetics case, Section 143(1-A) has in fact been challenged on constitutional grounds before the High Court on the facts of the present case. This being the case, we feel that since the provision has the deterrent effect of preventing tax evasion, it should be made to apply only to tax evaders. In support of this proposition, we refer to the judgment in K.P. Varghese v. ITO. The Court in that case was concerned with the correct construction of Section 52(2) of the Income Tax Act: (K.P. Varghese case, SCC p. 179, para 4 : SCR p. 639) 52. (2) Without prejudice to the provisions of sub-section (1), if in the opinion of the Income Tax Officer the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer of such capital asset by an amount of not less than fifteen per cent of the value declared, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer. 25. Taking a cue from Varghese case, we therefore, hold 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 payable by the assessee. The burden of proving that the assessee has so 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. Subject to the aforesaid construction of Section 143(1-A), we uphold the retrospective clarificatory amendment of the said section and allow the appeals. The judgments of the Division Bench 2 of the Gauhati High Court are set aside. There will be no order as to costs. 19. This Court in the above case upheld the constitutional validity of Section 143(1-A) (as inserted by the Finance Act, 1993) 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. 20. Applying the ratio of the above judgment in the present case, we need to find out as to whether 100% depreciation as mentioned in return filed by the assessee was a result of an attempt to evade tax lawfully payable by the assessee. 21. We have seen from the facts, as noted above, that even after dis-allowing 25% of the depreciation, the assessee in the return remained in loss and the 100% depreciation was claimed by the assessee in the return due to a bonafide mistake. By Taxation Laws (Amendment) Act, 1991, the depreciation in the case of Company was restricted to 75% which due to oversight was missed by the assessee while filing the return. The Commissioner of Income Tax by deciding the revision petition has also not made any observation to the effact that 100% depreciation claimed by the assessee was with intend to evade payment of tax lawfully payable by the assessee, rather the Commissioner in his order dated 31.03.1992 has observed that whenever adjustment is made, additional tax has to be charged @ 20% of the tax payable on such excess amount. 22. 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 intend 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]13. The amendments brought by Finance Act, 1993 with retrospective effect i.e. from 01.04.1989 are fully attracted with regard to assessment in question i.e. for assessment year 1991-92. The substituted sub- section (1-A) makes it clear that where the loss declared by an assessee had been reduced by reason of adjustments made under sub-section(1)(a), the provisions of sub-section (1-A) would apply. As noted above the Commissioner of Income Tax while rejecting the revision petition of the petitioner has taken the view that whenever adjustment is made, additional tax would be charged @ 20% of the tax payable on such excess amount. The excess amount refers to the increase in the income and by implication the reduction in loss where even after the addition there is negative income15. Prior to insertion of the above proviso the depreciation was not restricted to 75% of the amount calculated at the percentage on the written down value of such assets. The return was filed by the assessee on 31.12.1991, prior to which date the Taxation Laws (Amendment) Act, 1991 had come into operation. It was due to bonafide mistake and oversight that the assessee claimed 100% depreciation instead of 75%. The 100% depreciation of Rs.333,77,70,317/- was claimed on written down value of assets, 25% depreciation was, thus, disallowed restricting it to 75% and after reducing 25% of the depreciation loss remained to the extent of Rs.(-)3,43,94,90,393/-. Even as per reduction of 25% depreciation the return of loss income of the assessee remained. In claiming 100% depreciation the assessee claims that there was no intention to evade tax and the said claim was only a bonafide mistake. As noted above by the Finance Act, 1993 Section 143(1-A) was substituted with retrospective effect from 01.04.198916. Learned counsel for the Revenue has rightly submitted that object of Section 143(1-A) was the prevention of evasion of tax.The memorandum explaining the provisions of the Finance Bill as noted above was also to persuade to the assessee to file Income Tax Return carefully to avoid mistakes19. This Court in the above case upheld the constitutional validity of Section 143(1-A) (as inserted by the Finance Act, 1993) 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 assessee21. We have seen from the facts, as noted above, that even after dis-allowing 25% of the depreciation, the assessee in the return remained in loss and the 100% depreciation was claimed by the assessee in the return due to a bonafide mistake. By Taxation Laws (Amendment) Act, 1991, the depreciation in the case of Company was restricted to 75% which due to oversight was missed by the assessee while filing the return. The Commissioner of Income Tax by deciding the revision petition has also not made any observation to the effact that 100% depreciation claimed by the assessee was with intend to evade payment of tax lawfully payable by the assessee, rather the Commissioner in his order dated 31.03.1992 has observed that whenever adjustment is made, additional tax has to be charged @ 20% of the tax payable on such excess amount22. 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 intend 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.