Additional tax on adjusted returns upheld as a valid anti-evasion levy under the Income-tax Act

Section 143(1A) of the Income-tax Act, which imposes additional tax on adjusted returns, was upheld as a valid anti-evasion measure. The classification between assessees who make truthful disclosure and those who understate income, overstate loss, or claim improper expenditure was found to rest on an intelligible differentia with a rational nexus to the object of the levy, so the Article 14 challenge failed. The levy was also held to fall within Parliament's taxing competence and not to amount to deprivation of property without authority of law.

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Issues: Whether section 143(1A) of the Income-tax Act, 1961, levying additional tax on adjusted returns, is unconstitutional as violative of Article 14 of the Constitution of India and beyond the legislative competence of Parliament.

Analysis: The provision was upheld as a measure intended to promote truthful disclosure in returns and to discourage understatement of income, overstatement of loss, or improper claims of expenditure. The classification between assessees who correctly disclose their income and those who do not was held to be based on an intelligible differentia and to have a rational nexus with the object of the levy. The levy was also found to be within the taxing power of Parliament and not to amount to deprivation of property without authority of law.

Conclusion: The challenge to section 143(1A) failed; the provision was held to be neither discriminatory nor unconstitutional, and the levy was sustained.

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