The additional tax levied at 20 per cent on prima facie adjustment under s. 143(1A) of the IT Act, 1961, is not unreasonable or violative of constitutional provisions.

V.K. SINGHAL, J.--The validity s. 143(1A) of the IT Act, 1961, has been assailed in all these writ petitions, on the ground of liability of additional tax being violative of the principles of natural justice, discriminatory, arbITRary, unreasonable and as such are in violation of Arts. 14 and 265 of the Constitution of India. The provisions of s. 143(1A) are as under:

"Sec. 143(1A)(a): Where, in the case of any person, the total income, as a result of the adjustments made under the proviso to cl. (a) of sub-s. (1), exceeds the total income declared in the return by any amount, the AO shall,-

(i) further increase the amount of tax payable under sub-s. (1) by an additional Income Tax calculated at the rate of 20 per cent of the tax payable on such excess amount and specify the additional Income Tax in the intimation to be sent under subcl. (i) of cl. (a) of sub-s. (1);

(ii) where any refund is due under sub-s. (1) reduce the amount of such refund by an amount equivalent to the additional Income Tax calculated under sub-cl. (i)

(b) where as a result of an order under s. 154 or s. 250 or s. 254 or s. 260 or s. 262 or s. 263 or s. 264, the amount on which additional Income Tax is payable under cl. (a) has been increased or reduced as the case may be, the additional Income Tax shall be increased or reduced accordingly, and,-

(i) in a case where the additional Income Tax is increased, the AO shall serve on the assessee a notice of demand under s. 156;

(ii) in a case where the additional Income Tax is reduced, the excess amount paid, if any, shall be refunded.

Explanation : For the purpose of this sub-section, "tax payable on such excess amounC means,-

(i) in any case where the amount of adjustments made under the proviso to cl. (a) of sub-s. (1) exceeds the total income, the tax that would have been chargeable had the amount of adjustments been the total income;

(ii) in any other case, the difference between the tax on the total income and the tax that would have been chargeable had such total income been reduced by the amount of adjustments."

2. Submission of the learned counsel for the petitioner is that the provisions for charging this additional Income Tax is penal in nature as the income declared in the return is to be increased on the basis of the documents on record requiring prima facie adjustment which may amount to inaccurate particulars and the nature of this additional tax should be that of penalty as provided under s. 271(1)(c) and being penal in nature, the assessee should have been provided with reasonable opportunity of being heard before levying additional tax.

3. Arguments of both the learned counsel have been heard. Provisions of s. 143(1A) of the Act were added by Direct Tax Laws (Amendment) Act, 1989 w.e.f. 1st April, 1989. The said section was retrospectively substituted by Finance Act, 1993 w.e.f. Ist April, 1989 and the following notes on clauses while moving the Bill were given in the bill.

"Sub-cl. (i) seeks to substitute cl. (a) of sub-s. (1X of s. 143. The new cl. (a) seeks to provide that where as a result of the adjustments made under the first proviso to cl. (a) of sub-s. (1) of s. 145, the income declared by any person in the return is increased, the AO shall charge additional Income Tax at the rate of twenty per cent on the difference between the tax on the increased total income and the tax that would have been chargeable had such total income been reduced by the amount of adjustments. The additional Income Tax will be specified in the intimation to be sent under sub-cl. (i) of cl. (a) of sub-s. (1) of s. 143. In cases, where the loss declared in the return has been reduced as a result of the aforesaid adjustments or the aforesaid adjustments have the effect of converting that loss into income, the AO shall calculate a sum (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 total income of such pers