Object Of Section 143(1a) Is The Prevention Of Evasion Of Tax

Rajasthan State Electricity Board v. Dy. CIT (2020) 424 ITR 704 187 DTR 457 / 313 CTR745 / 115 taxmann.com 330 / 273 Taxman 1 (SC).

THE SUPREME COURT HELD THAT

The object of S. 143(1A) isthe prevention of evasion of tax - The burden of proving that the assessee has soattempted to evade tax is on the Revenue which may be discharged by establishingfacts and circumstances from which a reasonable inference can be drawn thatthe assessee has, in fact, attempted to evade tax lawfully payable by it.

APPLICABLE PROVISIONS

INTIMATION U/S. SECTION 143(1A)

Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:—

(a) the total income or loss shall be computed after making the following adjustments, namely:—
(i) any arithmetical error in the return; or
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return.
(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;
(iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return.
(v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or
(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:

Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:

Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made

ANALYSIS

As the name states, an Intimation under Section 143(1) is only an Intimation and not a Scrutiny/ Assessment Order. Intimation under Section 143(1) is an auto-generated letter by the computers of the Income Tax Department without any human interference.
Intimation under Section 143(1) is sent only in the following 3 cases:-

1. Where any tax or interest is found payable on the basis of the return after making adjustments referred to in Section 143(1) and after giving credit to the taxes and interest paid; or
2. Where any tax on interest if found refundable on the basis of the return after making adjustments referred to in Section 143(1) and after giving credit to the taxes and interest paid; or
3. Where adjustments referred to in Section 143(1) have been made resulting in increase/ reduction of loss declared by the assessee and no tax or interest is payable by the assessee and no tax or interest is refundable to the assessee.
The maximum time period for sending intimation under Section 143(1) is 1 year from the end of the financial year in which the income tax return is filed.

BRIEF FACTS

1. An intimation under S. 143(1)(a) of the Income Tax Act, 1961 dated 12.02.1992 was issued by the Assessing Officer disallowing 25% of the depreciation, restricting the depreciation to 75%.

2. Additional tax under Section 143(1A) of the Income Tax Act,1961amounting to Rs.8,63,64,827/-was demanded.

3. The assessee filed an application under Section 154 of the Income Tax Act, 1961 dated 18.02.1992 praying for rectification of the demand.

4. The assessee also filed a petition under Section 264 of the IncomeTax Act, 1961 against the demand of additional tax.

5. In the petition it was stated that even after allowing only 75% of depreciation the income of the assessee remained to be in loss to Rs.3,43,94,90,393/-.

6. The assessee prayed for quashing the demand of additional tax.

7. The application filed under Section 154 of the Income Tax Act, 1961was rejected by the Assessing Officer on 28.02.1992.
8. The revision petition under Section 264 of the Income Tax Act, 1961 came to be dismissed by the Commissioner of Income Tax by order dated 31.03.1992.

9. Aggrieved by the order of the Commissioner ofIncome Tax challenging the demand of additional tax which was reduced to amount ofRs.7,67,68,717/-Writ Petition No.2267 of 1992 was filed by the assessee in the High Courtof Judicature for Rajasthan, Bench at Jaipur.

10. Learned Single Judge vide judgment dated 19.01.1993 allowed the writ petition quashing the levy of additional tax under Section143(1-A).

11. The Revenue aggrieved by the judgment of the learned Single Judge filed a Special Appeal which has been allowed by the Division Bench of the High Court videits judgment dated 13.11.2007 upholding the demand of additional tax.

12. The assessee aggrieved by the judgment of the Division Bench has come up in this appeal.

13. On appeal to Supreme Court held that,the object of s. 143(1A) is the prevention of evasion of tax. As it has the deterrent effect of preventing tax evasion, it should be made to apply onlyto tax evaders. It can only be invoked where it is found on facts that the lesser amount stated in the return filed by the assessee is a result of an attempt to evade tax lawfully payable by the assessee. The burden of proving that the assessee has so attemptedto evade tax is on the Revenue which may be discharged by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it.

14. Order of division bench is set aside,and levy of addition tax was quashed.

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