SATI OIL UDYOG LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN these two writ petitions under Article 226 of the Constitution, the petitioners have challenged the constitutional vires of Section 143(1A) of the INcome-tax Act, 1961.

(2.) THE facts in Civil Rule No. 2072 of 1993 are that petitioner No. 1 is a limited company registered under the Companies Act, 1956, and is an assessee under the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and petitioner No 2 is the director and shareholder of petitioner No. 1 company. For the previous period July 1, 1987 to March 31, 1989, petitioner No. 1 (hereinafter referred to as "assessee"), filed a return on December 27, 1989, showing a total loss of Rs. 1,94,13,440 which included the loss of current year of Rs. 79,36,126 and unabsorbed loss of the previous year of Rs. 1,14,77,316. THE Deputy - Commissioner of Income-tax, Assessment, Special Range-I, Guwahati (hereinafter referred to as the "Assessing Officer"), thereafter sent an intimation dated February 14, 1990, accepting the said return showing a total loss of Rs. 1,94,13,440 and stating therein that a net amount of Rs. 6,035 was refundable to the assessee. THEreafter, the assessee was served with a notice dated October 20, 1992, under Section 154/155 of the Act informing the assessee that the said intimation was required to be amended as there was a mistake apparent from the record in allowing depreciation under Section 32 of the Act. By the said notice, the assessee was given an opportunity to be heard and was also asked to send written reply to the said notice. THE assessee then sent a written reply dated November 25, 1992 and also submitted at the hearing that there was a mistake in claiming depreciation on plant and machinery which has not been put to use during the period under assessment and that the depreciation amount of Rs. 49,78,255 claimed in the return be restricted to Rs. 1,08,267, but since even after such correction of the depreciation amount, the assessee still suffered loss during the period under assessment and no income-tax as such was payable by the assessee, additional tax should not be levied in view of the decision of the Delhi High Court in the case of Modi Cement Ltd. v. Union of India, 1992 193 ITR 91 and by other courts in other cases. In this order dated December 14, 1992, the Assessing Officer while reducing the depreciation claimed by the assessee to the extent of Rs. 48,69,988, rejected the contention of the assessee that additional tax should not be levied observing that no condition as such has been laid down in Section 143(1A) of the Act that additional tax is leviable only when income-tax is payable by the assessee on the total income after adjustment. Aggrieved, the petitioners have moved this court for declaring Section 143(1A) of the Act as ultra vires, illegal, unconstitutional and void, and for quashing the said order dated December 14, 1992, passed by the Assessing Officer demanding an additional tax of Rs. 5,62,480 under Section 143(1A) of the Act.

(3.) THEREAFTER, the Delhi High Court held in Modi Cement Ltd. v. Union of India, 1992 193 ITR 91 and J. K, Synthetics Ltd. v. Asst. CIT, 1993 200 ITR 584 and the Allahabad High Court held in Indo-Gulf Fertilizers and Chemicals Corporation Ltd. v. Union of India, 1992 195 ITR 485 that the said Sub-section (1A) of Section 143 of the Act did not apply where after the adjustments made by the Assessing Officer, the assessee had a loss and did not have income liable to tax under the Act. THEREAFTER, by the Finance Act, 1993, the said Clause (a) of Sub-section (1A) of Section 143 of the Act was substituted with effect from April 1, 1989, as under :