AI Drafter 
TaxTMI 
TaxTMI 
1995 (10) TMI 78
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....; 11,84,991 --------- 15,22,803 Less : Set off of- Rs. Unabsorbed loss of A.Y. 87-88 : 5,60,641 Unabsorbed depn. of A.Y. 87-88: 8,14,407 Unabsorbed inv. allowance of A.Y. 83-84:  ....
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....sp; 3,34,950 Surcharge @ 8% thereon 26,796 -------- Total : 3,61,746 3. The Assessing Officer issued an intimation under sec. 143(1)(a) of the Act, dated 31-3-1991, wherein the income returned was shown at Rs. 6,09,004 and the income without recourse to the provisions of the sec. 115J and after adjustments made under sec. 143(1)(a) was determined at ....
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....sp; Total income : Nil ------------- The Assessing Officer thereupon levied additional tax under sec. 143(1A) of an amount of Rs. 1,34,140 on the aforesaid two adjustments of Rs. 11,30,814 (ie., Rs. 7,86,766 + Rs. 3,44,048). 4. The assessee made an application under sec. 154, seeking rectification of the adjustments made under sec. 143(1)(a) which was rejected by the Assessing Officer by his order dated 2-7-1991. 5. The assessee preferred an appeal to the CIT (Appeals) raising the ground that the adjustments made in the intimation were not in the nature of prima facie adjustments and, therefore, did not fall within the purview of the provisions of sec. 143(1)(a) and that such adjustments warrant action for rectification under sec. 154. It appears....
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....their rival submissions. In our opinion, it would not be correct to say that the provisions of sec. 143 and sec. 115J cannot simultaneously be applied. Sec. 143 provides the machinery for assessment whereas section 115J provides the extent of total income. The scope of total income of a person is first determined under section 5 of the Act. Where such determination of income is found to be less than 30% of the book profits, section 115J deems such 3096 as total income of the assessee. Such deeming is only for levying tax for that year and would not affect the determination of the assessee's right to carryforward of unabsorbed depreciation under section 32(2), investment allowance under section 32A(3), business loss under section 72(1)(ii), speculation loss under section 73, capital gains under section 74, under other sources under section 74A(3) or deduction under section 80J(3). Both sections 143 and 115J thus have different fields of operation. In a situation where section 115J becomes applicable, it has to be taken into consideration and given effect to while making the assessment under section 143. Merely because section 115J comes into play, it cannot be said that it becomes a....
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....5J cannot simultaneously be applied for determining the tax liability of an assessee. The consequent finding that therefore the exercise of making adjustments was only for the purposes of section 115J and not section 143 is also not correct. He seems to have accepted the assessee's contention that no additional tax can be levied if the exercise was under section 115J and not under section 143. As aforesaid, the exercise is to be made under section 143 itself, whether for determination of income in the usual course or by application of the provisions of section 115J. To this extent, we agree with the learned departmental representative that the CIT (Appeals) was wrong. 8. The matter, however, does not end there. The assessee supports the order of the CIT (Appeals) on the ground : (1) that the two adjustments are not prima facie disallowable claim ; (2) that they do not increase the total income within the meaning of section 143(1A)(a)(ii)(A) ; and (3) that the amounts are not disallowed in the final assessment and, therefore, the additional tax is to be reduced to nil by virtue of the provisions of section 143(1A)(b). 9. The amount of Rs. 7,86,766 represents the liabi....
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....s made under the first proviso to clause (a) of sub-section (1),--- (i) the income declared by any person in the return is increased ; or (ii) the loss declared by such person in the return is reduced or is converted into income, the Assessing Officer shall, ---- (A) in a case where the increase in income under sub-clause (i) of this clause has increased the total income of such person, further increase the amount of tax payable under sub-section (1) by an additional income-tax calculated at the rate of twenty per cent on the difference between the tax on the total income so increased and the tax that would have been chargeable had such total income been reduced by the amount of adjustments and specify the additional income-tax in the intimation to be sent under sub-clause (i) of clause (a) of sub-section (1) ; (B) in a case where the loss so declared is reduced under sub-clause (ii) of this clause or the aforesaid adjustments have the effect of converting that loss into income, calculate a sum (hereinafter referred to as additional income-tax) equal to twenty per cent of the tax that would have been chargeable on the amount of the adjustments as if it had been the tota....
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....tent of Rs. 3,44,035, even thereafter the income of the assessee was nil because of the availability of carried forward losses of a much higher figure. In these circumstances, we are of the opinion that no additional tax can be levied on the assessee. 10. The matter can be dealt with from a different angle as well. The provisions of section 143(1A)(b) provide that where as a result of an order under section 143(3), 154, 250 254, 260, 262, 263 or 264, the amount on which additional income-tax is payable under clause (a) has been increased or reduced, as the case may be, the additional income-tax shall be increased or reduced accordingly. The adjustments which were made by the Assessing Officer under section 143(1)(a) were not repeated in the assessment made under section 143(3). Therefore, on a plain reading of the provisions of clause (b) of sub-section (1A) of section 143, the additional tax is to be reduced to nil. This is also explained by the Central Board of Direct Taxes in circular No. 636 dated 31-8-1992 the relevant paragraph of which reads as under : " Modification in the procedure for assessment :--- 47. Under section 143(1A) of the Income-tax Act, an assessee is....