2001 (2) TMI 266 - AT - Income Tax

Tribunal Upholds Revenue's Appeals on Additional Tax; Emphasizes Constitutional Validity

The Tribunal allowed the appeals filed by the Revenue, upholding the levy of additional tax under section 143(1A) in all cases. The Tribunal concluded ... Additional Tax Issues Involved:1. Whether additional tax under section 143(1A) is chargeable on the loss return of income when the loss admitted by the assessee is changed to another loss figure after making adjustments under section 143(1)(a) of the Act.Issue-wise Detailed Analysis:1. Chargeability of Additional Tax under Section 143(1A):The primary issue in all appeals was whether additional tax under section 143(1A) of the Income Tax Act is chargeable when the loss admitted by the assessee is altered to another loss figure due to adjustments made under section 143(1)(a).Arguments and Considerations:- The Revenue argued that additional tax is chargeable even when the loss figure changes, citing consistent Tribunal decisions and the Karnataka High Court's ruling in Bidar Sahakari Sakkare Kharkhane Niyamat v. Union of India, which held that additional tax is a tax and not a penalty.- The Tribunal had previously taken divergent views, notably in the case of India Tin Industries P. Ltd., where it held that additional tax could not be levied when the loss admitted was converted into another loss figure due to prima facie adjustments.- The Tribunal's decision in India Tin Industries relied on the Supreme Court's ruling in CIT v. Hindustan Electro Graphites Ltd., which characterized additional tax under section 143(1A) as having the nature of a penalty. However, the Karnataka High Court upheld the constitutional validity of section 143(1A), including its retrospective amendment by the Finance Act, 1993.Distinguishing Supreme Court's Decision:- The Supreme Court in Hindustan Electro Graphites Ltd. dealt with a situation where a retrospective amendment made certain income taxable, which was not the case when the return was filed. The Court held that additional tax in such circumstances had the imprint of a penalty.- The Tribunal noted that the Supreme Court's decision did not specifically address the issue of additional tax in loss-to-loss cases and emphasized that the judgment should be read in the context of the specific facts of that case.Jurisdictional High Court's Binding Decision:- The Tribunal emphasized that the Karnataka High Court's decision in Bidar Sahakari Sakkare Kharkhane Niyamat, which upheld the constitutional validity of section 143(1A) and its application to loss cases, is binding in Karnataka.- The Tribunal acknowledged the conflicting views of other High Courts but concluded that the jurisdictional High Court's decision must prevail.Retrospective Amendment and Its Application:- The Tribunal considered the retrospective amendment to section 143(1A) by the Finance Act, 1993, which clarified that additional tax applies even when the loss is reduced to another figure of loss.- The Tribunal cited various decisions supporting the application of retrospectively amended laws, including Supreme Court rulings that the law as amended retrospectively should be applied to pending cases.Conclusion and Decision:- The Tribunal concluded that the levy of additional tax under section 143(1A) is valid even when the admitted loss is converted into another figure of loss due to prima facie adjustments.- The Tribunal reversed the CIT(A)'s orders canceling the levy of additional tax and upheld the Revenue's appeals, emphasizing adherence to the jurisdictional Karnataka High Court's binding decision.Final Outcome:The appeals filed by the Revenue were allowed, and the levy of additional tax under section 143(1A) was upheld in all the cases before the Tribunal.