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IN THE HIGH COURT OF ALLAHABAD
Brijesh Kumar and Shobha Dikshit, JJ.
INDO-GULF FERTILIZERS AND CHEMICALS CORPORATION LTD. - Appellant
Versus
UNION OF INDIA - Respondents
Writ Petition 2378 (M/b) Of 1991
Decided On : 02/11/1992
INCOME TAX - Section 143 (1a) - Additional income-tax - Levy on losses - Not permissible - Additional income-tax can only be levied where the total income, after adjustments, exceeds the total income declared in the return - Losses cannot be termed as "income" - Circular No. 549 dated October 31, 1989, providing for levy of additional tax even in cases of loss returns, is not correct - Penalty under Section 271 (1) (c) for concealment of income or furnishing inaccurate returns can only be imposed where there is concealment of positive income - No alternative remedy available against an order passed under Section 143 (1a) of the Act - Writ petition maintainable.
Fact of the Case:
The petitioner, a company, filed its income tax return showing losses of Rs. 62 crores. Upon adjustment under Section 143 (1) (a) of the Income-tax Act, the assessing authority disallowed an investment allowance of Rs. 4 crores, resulting in a reduction of losses to Rs. 58 crores. Consequently, additional income-tax of Rs. 50 lakhs was levied under Section 143 (1a) of the Act.
Finding of the Court:
The court held that additional income-tax or penalty cannot be levied where there is no income but the return originally and after adjustment, shows losses alone. Section 271 of the Act provides for imposition of penalty for concealment of income or furnishing inaccurate returns, but such penalty can only be imposed where there is concealment of positive income. In the present case, the losses cannot be termed as "income" and therefore, no penalty can be imposed.
Issues: 1. Whether additional income-tax can be levied on losses shown in the return? 2. Whether penalty under Section 271 (1) (c) of the Act can be imposed for concealment of losses? 3. Whether an alternative remedy is available against an order passed under Section 143 (1a) of the Act?
Ratio Decidendi: 1. Additional income-tax under Section 143 (1a) of the Act can only be levied where the total income, after adjustments, exceeds the total income declared in the return. Losses cannot be termed as "income" and therefore, additional income-tax cannot be levied on losses. 2. Penalty under Section 271 (1) (c) of the Act for concealment of income or furnishing inaccurate returns can only be imposed where there is concealment of positive income. Losses cannot be termed as "income" and therefore, no penalty can be imposed for concealment of losses. 3. No alternative remedy is available against an order passed under Section 143 (1a) of the Act. The petitioner had already filed an application for rectification under Section 154 of the Act, which was rejected. An appeal is pending before the Deputy Commissioner, Income-tax, but the scope of the appeal is limited to the question of admissibility of investment allowance under Section 32a of the Act.
Final Decision: The court allowed the writ petition and set aside the order levying additional income-tax on the petitioner.
( 1 ) THE petitioner is aggrieved by order dated February 8, 1991, by which adjustments have been made in the return under Section 143 (1) (a) of the Income-tax Act (hereinafter referred to as "the act"), and additional income-tax has been levied under Section 143 (1a) of the Act. A copy of the order dated February 8, 1991, has been filed as annexure-6 to the petition.
( 2 ) IT appears that, according to the return submitted by the petitioner, losses to the tune of rupees sixty-two crores sixty-nine lakhs odd were shown for the assessment year 1990-91. On adjustment under Section 143 (1) (a) of the Act, it was found that an amount of rupees four crores odd, claimed on account of investment allowance under Section 32a of the Act was not admissible. Therefore, the assessing authority disallowed the amount claimed under Section 32a of the Act. As a result of the disallowance of the said amount, the figure of losses was brought down in the order, as "adjusted total loss for the year. . . Rs. 58,02,60,207". The amount disallowed was to the extent of Rs. 4,67,10,306. The petitioner was thus required to pay Rs. 50,44,713 as additional tax under Section 143 (1a) of the Act. A sum of Rs. 37,98,100 was prepaid, hence the balance required to be deposited was Rs. 13,46,936, according to the impugned order.
( 3 ) IT has been submitted on behalf of the petitioner that no amount of income-tax or additional income-tax is chargeable on losses. By disallowance of investment allowance, only the amount of losses has been reduced. The petitioner still remains in loss to the tune of rupees fifty-eight crores odd. It has further been elaborated by saying that a decrease or reduction in losses does not amount to income.
( 4 ) SRI S. C. Misra, learned counsel appearing on behalf of the opposite party, submits that the writ petition is not maintainable on the ground of availability of an alternative remedy. He further submits that additional income-tax charged under Section 143 (1a) of the Act is in the nature of penalty for submitting an incorrect return and it can be levied even though the return shows losses. Therefore, section 143 (1a) of the Act will be applicable in the present case. After having heard learned counsel for the parties, we are of the view that an alternative remedy would be no bar in the present case. We, however, propose to deal with that question later.
( 5 ) SRI Umesh Chandra, learned counsel, appearing for the petitioner, submits that the question of additional income-tax arises only if the returns show any income on which tax can be charged. He refers to section 143 (1a) of the Act which reads as follows :
" (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 (i) ; (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 ). . . Explanation.--For the purposes of this Sub-section, tax payable on such excess amount means,- (i) in any case where the amount of adjustments made under the first proviso to Clause (a) of sub-section (1) exceed the total income, the tax that would have been chargeable had the amount of the 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. "
( 6 ) THE language of the provision quoted above itself shows that where "the total inc
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