Additional tax on loss reduction through depreciation disallowance under section 143(1A) turns on the adjustment's immediate effect.

Section 143(1A) is stated to apply where a prima facie adjustment under section 143(1)(a) increases income or reduces the loss returned, and a disallowance of excessive depreciation has that effect because depreciation forms part of the current-year income computation. The distinction between business loss and unabsorbed depreciation for carry-forward purposes under section 72 does not control the levy, because the relevant test is the immediate impact of the adjustment in the assessment year. On that basis, additional tax is leviable when a section 143(1)(a) adjustment reduces the returned loss by disallowing depreciation.

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Issues: Whether additional tax under section 143(1A) of the Income-tax Act, 1961 is leviable when a prima facie adjustment under section 143(1)(a) results in reduction of loss by disallowance of depreciation.

Analysis: Section 143(1A) applies where adjustments under section 143(1)(a) increase income or reduce the loss declared in the return. Depreciation is part of the computation of business income under section 32 read with section 29, and a reduction in an excessive depreciation claim directly reduces the loss returned. The distinction between business loss and unabsorbed depreciation for carry forward purposes under section 72 does not control the levy mechanism under section 143(1A), which is triggered by the net effect of the adjustment in the relevant year.

Conclusion: Additional tax is leviable where the Assessing Officer's adjustment under section 143(1)(a) reduces the returned loss on account of disallowance of depreciation. The issue is decided against the assessee.

Ratio Decidendi: For the purpose of section 143(1A), any prima facie adjustment under section 143(1)(a) that reduces the loss returned, including by disallowing part of the depreciation claim, attracts additional tax.

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