IMPORTANT POINT
Where loss declared by an assessee had been reduced by reason of adjustments made u/s 143(1)(a) of Income Tax Act, provisions of Section 143(1A) of the Act would apply.

ORDER

C.A. 1636/1994 :

This appeal arises from the judgment of a learned Single Judge of the Delhi High Court on a writ petition. The writ petition was made absolute and the Revenue is in appeal.

2. The writ petitioner assessee had returned a net loss. After adjustments had been made by the taxing authorities under the provision of Section 143(1A), the amount of loss stood reduced. The taxing authorities under the provisions of Section 143(1A) sought to levy additional tax upon the assessee in this behalf and this was challenged in the writ petition.

3. Section 143(1)(a) reads thus :

"143. (1)(a) Where a return has been made under Section 139, or in response to a notice under sub-section (1) of Section 142-

(i) If any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under Section 156 and all the provisions of this Act shall apply accordingly; and

(ii) if any refund is due on the basis of such return, it shall be granted to the assessee :

Provided that in computing the tax or interest payable by, or refundable to the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :-

(i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified;

(ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed;

(iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed ;

Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments :

interest due under this Clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable."

Sub-section (1A), as it originally read, was thus :

"1A(a) Where, in the case of any person, the total income, as a result of the adjustments made under the first proviso to Clause (a) of Sub-section (1), exceeds the total income declared in the return by any amount, the Assessing Officer shall-

(i) further increase the amount of tax payable under Sub-section (1) by an additional income-tax calculated at the rate of twenty per cent of the tax payable on such excess amount and specify the additional income-tax in the intimation to be sent under Sub-clause (i) of Clause (a) of Sub-section (1);

(ii) Where any refund is due under Sub-section (1), reduce the amount of such refund by an amount equivalent to the additional income-tax calculated under Sub-clause (i)."

Sub-Section (1A) was amended by the Finance Act, 1993 with effect from 1.4.1989, which was the date upon which Sub-section (1A) had been introduced into the Act. The substituted Sub-section (1A) read thus :

"(1A) (a) Where as a result of the adjustments 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 t