M/S DOABA CO-OP SUGAR MILLS N. vs. CIT JALANDHAR

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ITR/109/1998HC Punjab & HaryanaPHHC01037892199809 November 2006Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE RAJESH BINDAL3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that additional tax under Section 143(1A) can be levied when the loss declared by an assessee is reduced by reason of adjustments made under Section 143(1)(a). The Court relied on its own earlier decision in I.T.A. No. 2 of 2001, The Haryana Cooperative Sugar Mills Limited, Rohtak v. Commissioner of Income Tax, Rohtak, which in turn referred to the Supreme Court's judgment in Assistant C.I.T. Versus J.K. Synthetics. The Supreme Court had held that if an assessee's declared loss is reduced by adjustments under Section 143(1)(a), Section 143(1A) would apply, even if the amendment to Section 28 was retrospective. The Court distinguished the case of C.I.T. Versus Hindustan Electro Graphites Ltd., stating it was not applicable because the issue here was about the reduction of loss, not a retrospective amendment rendering a correct return incorrect. The question referred is answered against the assessee and in favour of the Revenue. The reference is disposed of accordingly.

What were the facts?

The assessee, M/s Doaba Co-op. Sugar Mills, Nawanshahr, filed a return for assessment year 1989-90 showing a total loss of Rs. 3,49,52,710/-. The Assessing Officer, through an intimation under Section 143(1)(a) of the Income-tax Act, 1961, restricted the loss to Rs. 1,37,45,830/- by making adjustments of Rs. 2,12,06,883/- under Section 43B for taxes, bonus, and sales-tax. Consequently, an additional tax of Rs. 17,80,534/- was levied under Section 143(1A). Following a rectification application under Section 154, the additional tax was reduced to Rs. 24,001/-. The Commissioner of Income-tax (Appeals) ruled in favour of the assessee, but the Revenue appealed to the Tribunal. The Tribunal's order dated March 6, 1998, in I.T.A. No. 358(ASR)/1991, is the subject of the present reference.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and the provisions of law, additional tax under Section 143(1A) of the Income-tax Act, 1961, can be levied where there is no positive income, but only a loss, even after adjustment under Section 143(1)(a) of the Act? Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the initial success before the CIT(A) suggests the assessee argued against the levy of additional tax. Revenue's Contention: The Revenue argued before the Tribunal that the CIT(A) had erred by relying on a judgment concerning penalty under Section 271(1)(c), which was irrelevant. The Revenue contended that the additional tax under Section 143(1A) is applicable when the declared loss is reduced due to adjustments made under Section 143(1)(a).

Which sections of the Income-tax Act were involved?

Section 143(1A),Section 143(1)(a),Section 43B,Section 154,Section 271(1)(c),Section 28

AI-generated summary — verify with the full judgment below

I.T.R. No. 109 of 1998 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R.No. 109 of 1998 Date of decision: 9.11.2006 M/s Doaba Co-op. Sugar Mills, Nawanshahr Applicant through

Mr. M. R. Sharma, Advocate v. The Commissioner of Income-tax, Jalandhar Respondent through Dr. N. L. Sharda, Advocate CORAM: Hon'ble Mr.Justice Ajay Kumar Mittal Hon'ble Mr.Justice Rajesh Bindal

1.

Whether Reporters of local papers may be allowed to see the judgment ?

2.

To be referred to the Reporters or not ?

3.

Whether the judgment should be reported in the Digest? Rajesh Bindal, J. Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for short, `the Tribunal'), arising out of its order dated 6.3.1998, in I.T.A. No. 358(ASR)/1991, in respect of assessment year 1989-90: “Whether, on the facts and the circumstances of the case and the provisions of law, additional tax under section 143(1A) of the Income-tax Act, 1961 can be levied where there is no positive income. But only loss even after adjustment under Section 143(1)(a) of the Income-tax Act, 1961 ?” The facts, as noticed by the Tribunal in the statement of the case, are that the assessee filed return for the assessment year 1989-90 at a total loss of Rs. 3,49,52,710/-. The Assessing Officer prepared intimation under Section 143(1)(a) of the Income-tax Act, 1961 (for short, `the Act') by which the total loss of Rs. 3,49,52,710/- was restricted to Rs. 1,37,45,830/- after invoking the provisions of Section 43B of the Act and making adjustment of Rs. 2,12,06,883/- on account of I.T.R. No. 109 of 1998 [2] taxes payable, bonus, sales-tax etc. and also concluded that the amount of Rs. 17,80,534/- was payable by the assessee as additional tax purportedly to be under Section 143(1A) of the Act. Thereafter, the assessee moved an application under Section 154 of the Act for rectification of mistake in calculation of the amount adjustable under Section 43B of the Act and the same having been accepted, the amount of additional tax was reduced to Rs. 24,001/-. In appeal before the Commissioner of Income-tax (Appeals) [for short, `the CIT (A)'], the assessee succeeded. However, before the Tribunal, the Revenue had been able to make out a case that the CIT(A) had dealt with the issue on a totally wrong premise by relying upon a judgment of this Court in Commissioner of Income-Tax v. Prithipal Singh and Co., (1990) 183 ITR 69, which had no relevance with the point in issue, as the same pertained to penalty under Section 271(1)(c) of the Act.

We find that an identical issue has been gone into by this Court in I.T.A. No.2 of 2001 -The Haryana Cooperative Sugar Mills Limited, Rohtak v. Commissioner of Income Tax, Rohtak and another, decided on 7.2.2005, wherein it was held as under: “In Assistant C.I.T. Versus J.K.Synthetics (supra), their Lordships of the Supreme Court, while reversing two judgments of Delhi High Court in Modi Cement Ltd. Versus Union of India (supra) and J. K. Synthetics Versus Assistant C.I.T. (supra), held that where loss declared by an assessee had been reduced by reason of adjustments made under sub-section (1)(a), the provisions of sub-section (1A) would apply and being a retrospective amendment, additional tax could be legitimately levied on the assessee. The three-Judges Bench distinguished the earlier judgment of two- Judges Bench in C.I.T. Versus Hindustan Electro Graphites Ltd. (supra) by making the following observations: “This was a case in which the return that the assessee had filed was correct by reason of the law as it stood when the return was filed. A retrospective amendment of Section 28 of the Act rendered that return incorrect. An adjustment in the return was made under sub-section (1) of Section 143 and, therefore, the I.T.R. No. 109 of 1998 [3] provisions of sub-section (1A) were sought to be invoked. This was challenged and the High Court upheld the challenge, as did this Court. It took the view that the additional penalty under sub-section (1A) bore the imprint of a penalty and no penalty could be levied because the return filed by the assessee was correct when it was filed. This judgment has no application to the facts of the present case for the reason that it is no body's case that a retrospective amendment has rendered a correct return filed by the assessee incorrect. The question here is only whether a loss which is reduced by reason of the application of the provisions of sub- section (1)(a) falls within the ambit of sub-section (1A). We should add that we have reservations about the correctness of the judgment in Hindustan Electro Graphite Ltd.'s case (2000) 243 ITR 48(SC) principally because the assessee in that case had not challenged the provisions of sub-section (1A). The appeal is allowed. The order under appeal is set aside.”

For the reasons stated in The Haryana Cooperative Sugar Mill Limited's case (supra), the question referred is answered against the assessee and in favour of the Revenue. The reference is disposed of in the manner indicated above. ( Rajesh Bindal ) Judge (Ajay Kumar Mittal) Judge 9.11.2006 mk

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