O/TAXAP/726/2017 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 726 of 2017 PR. COMMISSIONER OF INCOME TAX - VADODARA -1....Appellant(s) Versus GUJARAT ELECTRICITY BOARD....Opponent(s) Appearance: MR KM PARIKH, ADVOCATE for Appellant(s) No. 1 MR MANISH J SHAH, ADVOCATE for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV Date : 25/09/2017 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue is in appeal against judgment of Income Tax Appellate Tribunal dated 19.12.2016 raising following questions for our consideration: (A) Whether on facts and in circumstances of case, ITAT was right in law in deleting enhancement of additional tax under section 143(1A) of Act, without taking note of fact that additional tax was levied on permissible adjustment as per provisions of section 143(1)(a)? [B] Whether on facts and circumstances of case, ITAT was justified in law in granting relief to assessee by holding that enhancement of additional tax u/s. 143(1A) of Act is legally not sustainable ? Page 1 of 5 HC-NIC Page 1 of 5 Created On Fri Nov 17 10:35:56 IST 2017 O/TAXAP/726/2017 ORDER 2. issue pertains to additional tax to be charged under section 143(1A) as it stood at relevant time. assessment year under consideration is year 1991 92. As per then prevailing provisions of section 143, Assessing Officer made certain prima facie adjustments in terms of sub section (1) of section 143 of Income Tax Act, 1961 ('the Act' for short). This had effect of reducing loss declared by assessee in return of income. Assessing Officer was of opinion that with aid of provisions of sub section (1A) of section 143 as amended by Finance Act, 1993 with retrospective effect from 01.04.1989 on such reduced losses, any tax at rate of 10% would have to be levied. Tribunal however by impugned judgment, allowed assessee's appeal and reversed orders passed by Assessing Officer and Commissioner of Income Tax (Appeals). Tribunal relied upon and referred to judgment of Supreme Court in case of Commissioner of income Tax and others v. Sati Oil Udyog Ltd. and another reported in [2015] 372 ITR 746 (SC) in which it was held and observed that section 143(1A) can be invoked Page 2 of 5 HC-NIC Page 2 of 5 Created On Fri Nov 17 10:35:56 IST 2017 O/TAXAP/726/2017 ORDER where it is found on facts that lesser amount stated in return filed by assessee was result of attempt to evade tax lawfully payable by assessee and burden of proving such fact is on Revenue. Tribunal observed that assessee was government undertaking and was since long running into huge losses year after year. partial disallowance of depreciation in year under consideration in any case would not result into any evasion of tax. In short, assessee would earn no benefit out of reduced depreciation which can always be claimed in later years. 3. We may notice that section 143(1A) prevailing at relevant time provided for levying of additional tax at rate of 20% where in case of assessee, total income as result of adjustments made under first proviso to sub section (1) of section 143 exceeded total income declared in return filed by assessee. By Finance Act of 1993, sub clause (a) of section 143(1) was replaced by new clause with retrospective effect from 01.04.1989 by virtue of which said formula of levying 20% additional tax was made applicable also in case of less return. Page 3 of 5 HC-NIC Page 3 of 5 Created On Fri Nov 17 10:35:56 IST 2017 O/TAXAP/726/2017 ORDER 4. This amendment came up for consideration before Supreme Court in case of Sati Oil Udyog Ltd. (supra) in which, it was observed that amendment was clarificatory in nature but that levy being penal in nature, could be invoked only where lesser amounts stated in return by assessee was with attempt to evade tax lawfully payable. Court held and observed as under: 22. Taking cue from Varghese's case, we therefore, hold that section 143(1A) can only be invoked where it is found on facts that lesser amount stated in return filed by assessee is result of attempt to evade tax lawfully payable by assessee. burden of proving that assessee has so attempted to evade tax is on Revenue which may be discharged by Revenue by establishing facts and circumstances from which reasonable inference can be drawn that assessee has, in fact, attempted to evade tax lawfully payable by it. Subject to aforesaid construction of section 143(1A), we uphold retrospective clarificatory amendment of said section and allow appeals. judgments of Division Bench of Gauhati High Court are set aside. There will be no order as to costs. 5. It was in this background, Tribunal in present case found that necessary facts did not establish said requirement. assessee was government company and was running into huge losses Page 4 of 5 HC-NIC Page 4 of 5 Created On Fri Nov 17 10:35:56 IST 2017 O/TAXAP/726/2017 ORDER year after year consistently. reduction of loss was only on account of disallowance of depreciation claimed by assessee. Tribunal also noted that if disallowance was on dispute of machinery not having been installed during year under consideration, such depreciation would always be available to assessee in later years. Since there was consistent loss offered by assessee, this shifting of depreciation to later year would have no impact on its tax. 6. In result Tax Appeal is dismissed. (AKIL KURESHI, J.) (BIREN VAISHNAV, J.) ANKIT Page 5 of 5 HC-NIC Page 5 of 5 Created On Fri Nov 17 10:35:56 IST 2017 Pr. Commissioner of Income-tax - Vadodara -1 v. Gujarat Electricity Board