ORDER
Cherian, A.M.
This appeal has been filed by the assessee Sri Shanmuga Textiles P. Ltd., Udumalpet against the order of the Commissioner (Appeals), Coimbatore in the income-tax assessment for the assessment year 1991-92. The only ground raised by the assessee in this appeal is that the Commissioner (Appeals) erred in confirming the levy of additional tax under section 143 (1A) of the Income Tax Act, 1961 in the order of rectification under section 154 passed by the assessing officer.
2. For the assessment year 1991-92 the assessee filed the return admitting a loss of Rs. 3,14,053. The assessing officer processed the return under section 143(1)(a) and issued the intimation on 23-3-1992. Later a notice under section 154 was issued on the assessee proposing to rectify the intimation pointing out that the loss as computed was not correct and that there had been claim of excess loss. The assessing officer passed the order of rectification on 3-8-1993 reducing the loss to Rs. 1,49,543 as against the loss of Rs. 3,14,053 accepted in the intimation under section 143(1)(a).
Considering the reduction of the loss, the assessing officer levied additional tax of Rs. 17,027 under section 143(1A).
3. The assessee took up the matter in appeal before the Commissioner (Appeals) contending that the assessing officer was not correct in levying additional tax when in the return of income by a bona fide mistake only the loss was shown at Rs. 3,14,053. There was the further contention that there could be no levy of additional tax when in the intimation issued by the assessing officer there was no addition by way of prima facie adjustment. The Commissioner (Appeals) did not accept the assessees contention and he upheld the levy of additional tax in view of the amendment of section 143(1A) with retrospective effect, making it clear that even in a case of reduction of loss there could be the levy. Aggrieved with the order of the Commissioner (Appeals), the assessee has filed this appeal before the Tribunal.
4. We have heard the assessees counsel Sri T.N. Seetharaman, Advocate and the Departmental Representative Sri G.S.D. Babu. Sri Seetharaman submitted that in the return of income filed by the assessee it was by a mistake that the loss was shown at Rs. 3,14,053 as against the correct loss of Rs. 1,49,543 and that it was a bona fide mistake of the assessee which could not be made the basis for levy of additional tax under section 143(1A). The learned counsel further stated that though after the amendment of section 143(1A) with retrospective effect, there could be levy of additional tax even in a case of reduction of loss resulting from prima facie adjustment. In the present case the assessing officer did not make any adjustment while processing the return. Intimation was issued under section 143(1)(a) on 23-3-1992 accepting the loss of Rs. 3,14,053 as admitted by the assessee. Sri Seetharaman submitted that the fact that the assessing officer also by mistake accepted the loss of Rs. 3,14,053 as computed by the assessee, would go to show that on both sides there was a bona fide mistake in the sense that instead of adjusting the depreciation allowance against the profit of the year both were added, with the result that there was a wrong claim of loss by way of depreciation allowance to the extent of Rs. 3,14,053. Relying on the decision of the Supreme Court in CIT v. Hindustan Electro Graphites Ltd. (2000) (243 ITR 48), Sri Seetharaman submitted that levy of additional tax under section 143(1A) was in the nature of a penalty and so it could not be automatic. He strongly contended that if additional tax could be levied in a case of bona fide mistake, it would be punishing the assessee for no fault of his. Arguing on the above lines the learned counsel made an earnest plea before us for deleting the additional tax levied on the assessee.
5. Per contra, Sri G.S.D. Babu, the Departmental Representative supported the order of the Commissioner (Appeals) and submitted that, in view of the fact that there was the reduction of the loss as a result of the order of rectification additional tax under section 143(1A) was rightly levied. The learned Departmental Representative further stated that though while processing the return under section 143(1)(a) the assessing officer did not make any adjustment and accepted the loss of Rs. 3,14,053 as returned by the assessee, there was a case for making the adjustment and correcting the arithmetical mistake in the computation of loss. Drawing our attention to the proviso (1) to section 143(1)(a), the learned Departmental Representative pointed out that while processing the return the assessing officer could have corrected any arithmetical errors in the return submitted by the assessee. But the loss of Rs. 3,14,053 as returned by the assessee was accepted wrongly without noticing the mistake in the computation. The assessing officer had the jurisdiction to rectify the mistake after issuing a notice under section 154(1)(b). It was the contention of the learned Departmental Representative that if the loss was reduced as a result of the prima facie adjustment, in the intimation issued under section 143(1)(a) there could be the levy of additional tax and so while rectifying the mistake subsequently the assessing officer could levy additional tax when the loss was reduced to Rs. 1,49,543. He also referred to various decisions in support of the plea that in a case of reduction of loss there could be levy of additional tax under section 143(1A). The learned Departmental Representative thus urged us to uphold the order of the Commissioner (Appeals) confirming the additional tax of Rs. 17,027 levied in this case.
6. The assessee filed the return declaring a loss of Rs. 3,14,053. In the statement accompanying the return the computation of the loss was shown as under :
Rs.
Loss as per the profit and loss account
(-) 3,61,648
Less : Inadmissibles as per statement
(+) 4,43,903
Balance
(+) 82,255
Less : Depreciation allowable
(-) 2,31,798
Loss to be carried forward :
(-) 3,14,543
It can be seen from the above that instead of adjusting the depreciation allowance of Rs. 2,31,798 against the profit of Rs. 82,255 the assessee added the two figures and thus wrongly computed the loss at Rs. 3,14,053. Though there was a clear mistake in the computation, that was not noticed by the assessing officer while processing the return under section 143(1)(a). It was later only that the assessing officer noticed the mistake and then he rectified the same by the order passed on 3-8-1993 and reduced the loss to Rs. 1,49,543. With the reduction of the loss the assessing officer also levied additional tax of Rs. 17,027 under section 143(1A).
7. Section 143(1A) has been amended by the Finance Act, 1993 with retrospective effect from 1-4-1989 making it clear that in a case of reduction of loss resulting from the prima facie adjustment additional tax could be levied on a sum equal to 20 per cent of the tax that would have been chargeable on the amount of the adjustments as if it had been the total income. It was the contention of the learned Departmental Representative that if the adjustment was made by rectifying the intimation then, by the order of rectification also additional tax could be levied under section 143(1A). In the case of Sukra Diamond Tolls (P) Ltd. v. Dy. CIT (1998) 229 ITR 682 relied on by the learned Departmental Representative the Madras High Court held that a plain reading of section 143(1A)(a) of the Act showed that where even a loss was reduced penalty was incurred and the same be calculated in the manner provided in the said section. In that case the court observed that the Notes on Clauses of the Finance Bill 1993 which amended section 143(1A) make it clear that the intention was to impose a penalty for filing an improper return. Therefore, it was not correct to say that under section 143(1A) the authorities were levying income-tax on the loss suffered by the assessee. The High Court found that the default was committed by the assessee in showing a higher loss for the assessment year in question knowing fully well that certain amounts were not eligible for credit under section 43B of the Act. It was for that particular default, the assessee incurred penalty or punishment. What becomes clear from the decision of the jurisdictional High Court is that levy of additional tax is in the nature of a penalty or punishment for a default committed by the assessee. A default is not the same thing as an inadvertent or a bona fide mistake. In the present case the statement furnished alongwith the return of income clearly showed the computation as to how the loss was arrived at Rs. 3,14,053. If instead of adjusting depreciation against the profit, the figures were added and thereby the loss was enhanced, is it correct to consider it as a default attracting a penalty or a punishment rather than a bona fide mistake? We do not think so. We are inclined to agree with the learned counsel for the assessee that it was by a bona fide mistake that depreciation of Rs. 2,31,798 was added instead of adjusting against the profit of Rs. 82,255. The fact that the mistake escaped the notice of the assessing officer while he processed the return only shows that such mistakes are not unusual.
8. In the case of Hindustan Electro Graphites Ltd. (supra) the Supreme Court observed that the levy of additional tax under section 143 (1A) was not automatic as it had the imprint of penalty. In that case the Apex Court observed : “When additional tax has the imprint of penalty, the revenue cannot be heard to say that the levy of additional tax is automatic under section 143(1A) of the Act. If additional tax could be levied in such circumstances, it will be punishing the assessee for no fault of his. That cannot ever be the legislative intent. It shocks the very conscience if in the circumstances section 143(1A) could be invoked to levy the additional tax. The following observations by the Constitution Bench of the Supreme Court in Pannalal Binjraj v. Union of India (1957) 31 ITR 565 (SC) are apt (page 597) :
“A humane and considerate administration of the relevant provisions of the Income Tax Act would go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the revenue with administering the provisions of the Act with an evil eye and unequal hand.”
9. In the light of the decision of the jurisdictional High Court and the Apex Court referred to above, we are of the view that in a case of a bona fide mistake in the computation of the income/loss declared in the return filed by the assessee it would not be correct to levy the additional tax under section 143(1A), which has the imprint of penalty. We accordingly hold that the assessing officer was not justified in levying additional tax of Rs. 17,027 in the circumstances of this case. We thus reverse the order of the Commissioner (Appeals) and delete the additional tax levied on the assessee for the assessment year 1991-92.
10. In the result this appeal by the assessee is allowed.
