Additional tax levy fails where rectification reduces assessable income to nil and removes the basis for charge.

Additional tax under section 143(1A)(b) of the Income-tax Act could not survive after rectification under section 154 reduced the assessee's assessable income to nil. The rectification accepted the assessee's claim and, after adjustment of carried-forward losses, left no taxable income on which the earlier enhanced figure could support an additional levy. Continuing the charge on the pre-rectification amount was therefore erroneous and showed non-application of mind. The levy was set aside in favour of the assessee, and no refund issue arose because no additional tax had been paid.

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Issues: Whether additional tax could be levied under section 143(1A)(b) of the Income-tax Act, 1961, when rectification under section 154 of the Income-tax Act, 1961 had reduced the assessee's assessable income to nil.

Analysis: The rectification order accepted the assessee's contentions and determined the assessable income as nil after adjustment of carried-forward losses. Once the income stood reduced to nil, there remained no basis for charging additional tax on the earlier enhanced figure. The continuation of additional tax on Rs. 1,64,772 despite the rectified nil income was therefore erroneous and reflected non-application of mind. The court also noted that no refund issue arose as no additional tax had been paid.

Conclusion: The levy of additional tax was unsustainable and was set aside in favour of the assessee.

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