RAJASTHAN STATE ELECTRICITY BOARDversusTHE DY. COMMISSIONER OF INCOME TAX (ASSESSMENT) & ANR.

                         [2020] 4 S.C.R. 995                            995


     RAJASTHAN STATE ELECTRICITY BOARD JAIPUR                           A
                                    v.
                THE DY. COMMISSIONER OF
             INCOME TAX (ASSESSMENT) & ANR.
                  (Civil Appeal No. 8590 of 2010)                       B
                         MARCH 19, 2020
               [ASHOK BHUSHAN AND
           MOHAN M. SHANTANAGOUDAR, JJ.]
      Income Tax Act, 1961:                                             C
       ss. 32(2) and 143 (I-A) – Additional tax – Levy of – Propriety
– Assessee claiming 100% depreciation – As per amended s. 32(2)
since the depreciation was restricted only upto 75%, Assessing
Officer restricted the depreciation to 75% – Additional tax u/s.
143(I-A) imposed – Assessee’s application for rectification of          D
demand was rejected – Revision Petition against the demand of
additional tax was also dismissed – In Writ Petition filed by the
assessee, levy of additional tax was quashed by Single Judge of
High court – In special appeal, Division Bench upheld the levy –
Appeal to Supreme Court – Held: Object of s. 143(I-A) was
prevention of evasion of tax and can be invoked only when found         E
that lesser amount stated in the return is a result of an attempt to
evade tax lawfully by the assessee – Depreciation was restricted
to 75% after amendment of the Act by Taxation Laws (Amendment)
Act, 1991 – The return in the present case was filed by the assessee
prior to the date when the Amendment Act of 1991 came into              F
operation – 100% depreciation was claimed by the assessee due
to bonafide mistake – Burden of proving assessee’s attempt to evade
tax, is on the Revenue – In the present case Revenue failed to
discharge such burden – Therefore, in the facts of the present case,
provisions of s. 143 (I-A) are not applicable and hence demand
of additional tax set aside.                                            G

      Interpretation of Statutes:
      Interpretation of Taxing Statute – Held: While interpreting a
taxing statute, the purpose and object for which the statute have
been enacted cannot be lost sight.                                      H
                                995
996           SUPREME COURT REPORTS                    [2020] 4 S.C.R.


A          Allowing the appeal, the Court
            HELD: 1. Sub-section (1-A) of s. 143 of Income Tax
      Act, 1961 was amended by the Finance Act, 1993 with effect
      from 1-4-1989, which was the date upon which sub-section (1-
      A) had been introduced into the Act. The amendments brought
B     by Finance Act, 1993 with retrospective effect i.e. from
      01.04.1989 are fully attracted with regard to assessment in
      question i.e. for assessment year 1991-92. The substituted sub-
      section (1-A) makes it clear that where the loss declared by an
      assessee had been reduced by reason of adjustments made
      under sub-section(1)(a), the provisions of sub-section (1-A)
C     would apply. [Paras 12 & 13] [1002-E; 1003-E-F]
            2. Object of Section 143(1-A) was the prevention of
      evasion of tax. The memorandum explaining the provisions of
      the Finance Bill was also to persuade to the assessee to file
      Income Tax Return carefully to avoid mistakes. Section 143(1-
D     A) can only be invoked where it is found on facts that the lesser
      amount stated in the return filed by the assessee is a result of
      an attempt to evade tax lawfully by the assessee. [Paras 16 &
      19] [1005-D; 1007-B]
           Commissioner of Income Tax, Gauhati v. Sati Oil
E          Udyog Limited and Another (2015) 7 SCC 304 : [2015]
           2 SCR 1099 ; K.P. Varghese v. ITO, (1981) 4 SCC
           173 : [1982] 1 SCR 629 – relied on.
            3. By Taxation Laws (Amendment) Act, 1991 in Section
      32 third proviso was inserted. Prior to insertion of the above
F     proviso the depreciation was not restricted to 75% of the amount
      calculated at the percentage on the written down value of such
      assets. The return was filed by the assessee on 31.12.1991, prior
      to which date the Taxation Laws (Amendment) Act, 1991 had
      come into operation. It was due to bonafide mistake and
G     oversight that the assessee claimed 100% depreciation instead
      of 75%. The 100% depreciation of Rs. 333,77,70,317/- was
      claimed on written down value of assets, 25% depreciation was,
      thus, disallowed restricting it to 75% and after reducing
      25% of the depreciation loss remained to the extent of
      Rs. (-)3,43,94,90,393/-. Even as per reduction of 25%
H
RAJASTHAN STATE ELECTRICITY BOARD JAIPUR v. DY. COMMR.               997
            OF INCOME TAX (ASSESSMENT)

depreciation, the return of loss income of the assessee              A
remained. In claiming 100% depreciation the assessee claims
that there was no intention to evade tax and the said claim
was only a bonafide mistake. [Paras 14 & 15] [1003-G-H; 1004-
B-D]
       4. In the present case, even after dis-allowing 25% of the    B
depreciation, the assessee in the return remained in loss and
the 100% depreciation was claimed by the assessee in the return
due to a bonafide mistake. By Taxation Laws (Amendment) Act,
1991, the depreciation in the case of Company was restricted
to 75% which due to oversight was missed by the assessee while       C
filing the return. The Commissioner of Income Tax by deciding
the revision petition has also not made any observation to the
effact that 100% depreciation claimed by the assessee was with
intend to evade payment of tax lawfully payable by the assessee,
rather the Commissioner in his order dated 31.03.1992 has
observed that whenever adjustment is made, additional tax has        D
to be charged @ 20% of the tax payable on such excess amount.
[Para 21] [1007-D-E]
      5. It is true that while interpreting a Tax Legislature the
consequences and hardship are not looked into but the purpose
and object by which taxing statutes have been enacted cannot         E
be lost sight. The burden of proving that the assessee has
attempted to evade tax is on the Revenue which may be
discharged by the Revenue by establishing facts and
circumstances from which a reasonable inference can be drawn
that the assessee has, in fact, attempted to evade tax lawfully      F
payable by it. In the present case, not even whisper, that claim
of 100% depreciation by the assessee, 25% of which was
disallowed was with intend to evade tax. The Court cannot
mechanically apply the provisions of Section 143(1-A) in the facts
of the present case. [Para 22] [1007-F-H; 1008-A]
                                                                     G
                      Case Law Reference
[2015] 2 SCR 1099                relied on           Para 17
[1982] 1 SCR 629                 relied on           Para 18
                                                                     H
998            SUPREME COURT REPORTS                         [2020] 4 S.C.R.


A           CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8590
      of 2010
            From the Judgment and Order dated 13.11.2007 of the High
      Court of Judicature for Rajasthan at Jaipur Bench, Jaipur in D. B. Civil
      Special Appeal (Writ) No. 837/1993.
B          Arijit Prasad, Sr. Adv., Rohit K. Singh, Mirza Kayesh Begg,
      Ms. Anshruta Maheshwari, Advs. for the Appellant.
            Rupesh Kumar, Mrs. Gargi Khanna, Shreyash Bhardwaj,
      Mrs. Anil Katiyar, Advs. for the Respondents.

C           The Judgment of the Court was delivered by
            ASHOK BHUSHAN, J.
            1. This appeal has been filed by the assessee challenging the
      Division Bench judgment dated 13.11.2007 of the High Court of
      Judicature for Rajasthan at Jaipur Bench, Jaipur by which D.B. Civil
D     Special Appeal (Writ) No.837 of 1993 filed by the Revenue has
      been allowed upholding the demand of additional tax under Section
      143(1-A) of the Income Tax Act, 1961.
            2. Brief facts necessary to be noted for deciding this appeal are:
             The assessee is a Government Company as defined under
E
      Section 617 of the Companies Act, 1956. The assessee filed return on
      30.12.1991 for the assessment year 1991-92 showing a loss amounting
      to Rs. (-)427,39,32,972/-. Due to a bonafide mistake the assessee
      claimed 100% depreciation of Rs. 333,77,70,317/- on written down value
      of assets instead of 75% depreciation. Under the unamended Section
F     32(2) of the Income Tax Act, 1961 the assessee was entitled to claim
      100% depreciation. However, after the amendment the depreciation
      could only be 75%. The assessee supported the returns with provisional
      revenue account, balance sheet as on 31.03.1991, details of gross fixed
      assets, computation chart and depreciation chart. No tax was payable
      on the said return by the assessee. No notice under Section 143(2) of
G
      the Income Tax Act, 1961 was received by the assessee.
            3. An intimation under Section 143(1)(a) of the Income Tax Act,
      1961 dated 12.02.1992 was issued by the Assessing Officer disallowing
      25% of the depreciation, restricting the depreciation to 75%. Additional
      tax under Section 143(1-A) of the Income Tax Act, 1961 amounting to
H     Rs.8,63,64,827/- was demanded. The assessee filed an application under
RAJASTHAN STATE ELECTRICITY BOARD JAIPUR v. DY. COMMR.                        999
   OF INCOME TAX (ASSESSMENT) [ASHOK BHUSHAN, J.]

Section 154 of the Income Tax Act, 1961 dated 18.02.1992 praying for          A
rectification of the demand. The assessee also filed a petition under
Section 264 of the Income Tax Act, 1961 against the demand of
additional tax. In the petition it was stated that even after allowing only
75% of depreciation the income of the assessee remained to be in loss
to Rs.3,43,94,90,393/-. The assessee prayed for quashing the demand
                                                                              B
of additional tax. The application filed under Section 154 of the Income
Tax Act, 1961 was rejected by the Assessing Officer on 28.02.1992.
The revision petition under Section 264 of the Income Tax Act, 1961
came to be dismissed by the Commissioner of Income Tax by order
dated 31.03.1992. The Commissioner of Income Tax rejected the
revision petition by giving following reasoning:                              C
      “A plain reading of the provisions of Section 143(1-A) shows that
      whenever adjustment is made, additional tax has to be charged
      @ 20% of the tax payable on such ‘excess amount’. The ‘excess
      amount’ refers to the increase in the income and by implication
      the reduction in loss where even after the addition there is            D
      negative income. The explanation to Section 143(1-A)(b) provides
      that the tax payable on such excess means the tax that would
      have been chargeable on the amount of adjustment to the
      total income. Where the adjustment exceeds the income
      determined. Clearly, therefore, in this case the additional tax had
      to be charged on the basis of the tax chargeable on the sum of          E
      Rs. 83,44,42,579/- added by the Assessing Officer.”
       4. Aggrieved by the order of the Commissioner of Income Tax
challenging the demand of additional tax which was reduced to amount
of Rs.7,67,68,717/- Writ Petition No.2267 of 1992 was filed by the
assessee in the High Court of Judicature for Rajasthan, Bench at Jaipur.      F
Learned Single Judge vide judgment dated 19.01.1993 allowed the writ
petition quashing the levy of additional tax under Section 143(1-A). The
Revenue aggrieved by the judgment of the learned Single Judge filed a
Special Appeal which has been allowed by the Division Bench of the
High Court vide its judgment dated 13.11.2007 upholding the demand            G
of additional tax. The assessee aggrieved by the judgment of the Division
Bench has come up in this appeal.
       5. We have heard Shri Arijit Prasad, learned senior counsel
appearing for the appellant and Shri Rupesh Kumar, learned counsel
for the respondents.                                                          H
1000             SUPREME COURT REPORTS                            [2020] 4 S.C.R.


 A            6. Shri Arijit Prasad referring to Circular No.549 dated
       30.10.1989 of Central Board of Direct Taxes submits that 20%
       additional tax sought to be imposed under Section 143(1-A) of 1961
       Act is in the nature of penalty and can be levied only when the assessee
       had intentionally sought to file an incorrect return. It is submitted that
       such additional tax could only become payable in case where assessee
 B
       was assessed to an income for the purpose of tax and could not apply
       where there was no income or there was loss. The intent of the
       Legislature in enacting provision of Section 143(1-A) was to ensure
       that the assessee also declares his loss in the return correctly and where
       the assessee deliberately or intentionally filed false returns, he was liable
 C     to pay additional Income Tax. It is submitted that unabsorbed losses
       and unabsorbed depreciation were to be carried forward to future years
       to be set off against profits and it did not in any manner affect business
       loss. He submits that business loss suffered by the assessee had not
       reduced because of the bonafide mistake committed by the appellant
       in calculating the depreciation. The assessee was in loss and continued
 D
       to be in loss. Reduction in depreciation from 100% to 75% did not
       amount to reduction in loss and additional tax under Section 143(1-A)
       of the Income Tax Act, 1961 was only to prevent evasion of tax. He
       submits that when additional tax had clear and specific imprint of
       penalty, the Revenue could not be heard to say that the levy of additional
 E     tax is automatic under Section 143(1-A) of the Act. If additional tax
       could be levied in such circumstances, it would be punishing the assessee
       for no fault of his and that too without giving him a hearing.
             7. Learned counsel for the Revenue submits that provision of
       Section 143(1-A) demonstrates that it is not penal in nature. It is the
 F     device to check evasion of tax. It is submitted that challenge to vires
       of Section 143(1-A) has been repelled by different High Courts and
       this Court. Section 143(1-A) has been inserted in the Income Tax Act
       so that the assessee may not be able to evade tax by resorting to the
       method of showing loss first and then reducing the loss. Learned
       counsel submits that the Division Bench of the High Court has rightly
 G
       allowed the appeal of the Revenue upholding the demand of additional
       tax.
              8. We have considered the submissions of the learned counsel
       for the parties and perused the records.
 H            9. Only question to be answered in this appeal is as to whether
RAJASTHAN STATE ELECTRICITY BOARD JAIPUR v. DY. COMMR. 1001
   OF INCOME TAX (ASSESSMENT) [ASHOK BHUSHAN, J.]

the demand of additional tax under the provisions of Section 143(1-A)         A
in the facts of the present case was justified or not.
     10. Before we enter into the rival submissions of the learned
counsel for the parties, it is relevant to have a look on the statutory
scheme under Section 143 and 143(1-A). Section 143(1)(a) reads thus:
      “143. (1)(a) Where a return has been made under Section 139,            B
      or in response to a notice under sub-section (1) of Section 142,—
           (i) if any tax or interest is found due on the basis of such
               return, after adjustment of any tax deducted at source,
               any advance tax paid and any amount paid otherwise
               by way of tax or interest, then, without prejudice to the      C
               provisions of sub-section (2), an intimation shall be sent
               to the assessee specifying the sum so payable, and such
               intimation shall be deemed to be a notice of demand
               issued under Section 156 and all the provisions of this
               Act shall apply accordingly; and                               D
           (ii) if any refund is due on the basis of such return, it shall
                be granted to the assessee:
               Provided that in computing the tax or interest payable
               by, or refundable to, the assessee, the following
               adjustments shall be made in the income or loss declared       E
               in the return, namely—
               (i) any arithmetical errors in the return, accounts or
                   documents accompanying it shall be rectified;
               (ii) any loss carried forward, deduction, allowance or         F
                    relief, which, on the basis of the information
                    available in such return, accounts or documents, is
                    prima facie admissible but which is not claimed in
                    the return, shall be allowed;
              (iii) any loss carried forward, deduction, allowance or
                                                                              G
                    relief claimed in the return, which, on the basis of
                    the information available in such return, accounts or
                    documents, is prima facie inadmissible, shall be
                    disallowed:
      Provided further that where adjustments are made under the first
      proviso, an intimation shall be sent to the assessee, notwithstanding   H
1002            SUPREME COURT REPORTS                         [2020] 4 S.C.R.


 A           that no tax or interest is found due from him after making the
             said adjustments:
             Provided also that an intimation under this clause shall not be
             sent after the expiry of two years from the end of the assessment
             year in which income was first assessable.”
 B           11. Sub-section (1-A), as it originally read, was thus:
             “143. (1-A)(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,—
 C
                  (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
 D                    (a) of sub-section (1);
                 (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).”
 E
             12. Sub-section (1-A) was amended by the Finance Act, 1993
       with effect from 1-4-1989, which was the date upon which sub-section
       (1-A) had been introduced into the Act. The substituted sub-section
       (1-A) read thus:

 F           “143. (1-A)(a) Where as a result of the adjustments made under
             the first proviso to clause (a) of sub-section (1),—
                  (i) the income declared by any person in the return is
                      increased; or
                 (ii) the loss declared by such person in the return is reduced
 G                    or is converted into income,
                      the Assessing Officer shall,—
                     (A) in a case where the increase in income under sub-
                         clause (i) of this clause has increased the total
                         income of such person, further increase the amount
 H
RAJASTHAN STATE ELECTRICITY BOARD JAIPUR v. DY. COMMR. 1003
   OF INCOME TAX (ASSESSMENT) [ASHOK BHUSHAN, J.]

                   of tax payable under sub-section (1) by an additional    A
                   income tax calculated at the rate of twenty per cent
                   on the difference between the tax on the total
                   income so increased and the tax that would have
                   been chargeable had such total income been
                   reduced by the amount of adjustments and specify
                                                                            B
                   the additional income tax in the intimation to be sent
                   under sub-clause (i) of clause (a) of sub-section (1);
               (B) in a case where the loss so declared is reduced
                   under sub-clause (ii) of this clause or the aforesaid
                   adjustments have the effect of converting that loss
                   into income, calculate a sum (hereinafter referred       C
                   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 person and specify the additional
                   income tax so calculated in the intimation to be sent    D
                   under sub-clause (i) of clause (a) of sub-section (1)
               (C) 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 (A) or sub-clause (B), as the case      E
                   may be.”
       13. The amendments brought by Finance Act, 1993 with
retrospective effect i.e. from 01.04.1989 are fully attracted with regard
to assessment in question i.e. for assessment year 1991-92. The
substituted sub-section (1-A) makes it clear that where the loss declared
by an assessee had been reduced by reason of adjustments made under         F
sub-section(1)(a), the provisions of sub-section (1-A) would apply. As
noted above the Commissioner of Income Tax while rejecting the
revision petition of the petitioner has taken the view that whenever
adjustment is made, additional tax would be charged @ 20% of the
tax payable on such excess amount. The excess amount refers to the          G
increase in the income and by implication the reduction in loss where
even after the addition there is negative income. Whether there should
be levy of additional tax in all circumstances and cases where loss is
reduced, is the question to be answered in the present case.
      14. By Taxation Laws (Amendment) Act, 1991 in Section 32              H
1004            SUPREME COURT REPORTS                         [2020] 4 S.C.R.


 A     third proviso was inserted to the following effect:
             “Provided also that, in respect of the previous year relevant to
             the assessment year on the 1st day of April, 1991, the deduction
             in relation to any block of assets under this clause shall, in the
             case of a company, be restricted to seventy-five per cent of the
 B           amount calculated at the percentage, on the written down value
             of such assets, prescribed under this Act immediately before the
             commencement of the Taxation Laws (Amendment) Act, 1991.”
              15. Prior to insertion of the above proviso the depreciation was
       not restricted to 75% of the amount calculated at the percentage on
 C     the written down value of such assets. The return was filed by the
       assessee on 31.12.1991, prior to which date the Taxation Laws
       (Amendment) Act, 1991 had come into operation. It was due to bonafide
       mistake and oversight that the assessee claimed 100% depreciation
       instead of 75%. The 100% depreciation of Rs.333,77,70,317/- was
       claimed on written down value of assets, 25% depreciation was, thus,
 D     disallowed restricting it to 75% and after reducing 25% of the
       depreciation loss remained to the extent of Rs.(-)3,43,94,90,393/-. Even
       as per reduction of 25% depreciation the return of loss income of the
       assessee remained. In claiming 100% depreciation the assessee claims
       that there was no intention to evade tax and the said claim was only a
 E     bonafide mistake. As noted above by the Finance Act, 1993 Section
       143(1-A) was substituted with retrospective effect from 01.04.1989.
       The memorandum explaining the provisions of the Finance Bill with
       retrospective effect was to the following effect:
             “The provisions of Section 143(1-A) of the Income Tax Act
 F           provide for levy of twenty per cent additional income tax where
             the total income, as a result of the adjustments made under the
             first proviso to Section 143(1)(a), exceeds the total income
             declared in the return. These provisions seek to cover cases of
             returned income as well as returned loss. Besides its deterrent
             effect, the purpose of the levy of the additional income tax is to
 G           persuade all the assesses to file their returns of income carefully
             to avoid mistakes.
             In two recent judicial pronouncements, it has been held that the
             provisions of Section 143(1-A) of the Income Tax Act, as these
             are worded, are not applicable in loss cases.
 H           The Bill, therefore, seeks to amend Section 143(1-A) of the
RAJASTHAN STATE ELECTRICITY BOARD JAIPUR v. DY. COMMR. 1005
   OF INCOME TAX (ASSESSMENT) [ASHOK BHUSHAN, J.]

      Income Tax Act to provide that where as a result of the                  A
      adjustments made under the first proviso to Section 143(1)(a),
      the income declared by any person in the return is increased,
      the assessing officer 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
                                                                               B
      chargeable had such total income been reduced by the amount
      of adjustments. 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 Bill seeks to provide that the assessing officer shall
      calculate a sum (referred to as additional income tax) equal to          C
      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 person.
      The proposed amendment will take effect from 1-4-1989 and will,
      accordingly, apply in relation to Assessment Year 1989-1990 and          D
      subsequent years.”
      16. Learned counsel for the Revenue has rightly submitted that
object of Section 143(1-A) was the prevention of evasion of tax. The
memorandum explaining the provisions of the Finance Bill as noted
above was also to persuade to the assessee to file Income Tax Return           E
carefully to avoid mistakes.
      17. This Court in Commissioner of Income Tax, Gauhati vs.
Sati Oil Udyog Limited and another, (2015) 7 SCC 304, had
occasion to consider elaborately the provisions of Section 143(1-A), its
object and validity. There was a challenge to the retrospectivity of the       F
provisions of Section 143(1-A) as introduced by Finance Act, 1993. The
Gauhati High Court had held that retrospective effect given to the
amendment would be arbitrary and unreasonable. The appeal was filed
by the Revenue in this Court in which appeal, this Court had occasion
to examine the constitutional validity of the provisions. This Court in
the above judgment held that object of Section 143(1-A) was the                G
prevention of evasion of tax. In paragraph 9 of the judgment following
has been laid down:
      “9. On a cursory reading of the provision, it is clear that the object
      of Section 143(1-A) is the prevention of evasion of tax. By the
      introduction of this provision, persons who have filed returns in        H
1006            SUPREME COURT REPORTS                         [2020] 4 S.C.R.


 A           which they have sought to evade the tax properly payable by
             them is meant to have a deterrent effect and a hefty amount of
             20% as additional income tax is payable on the difference
             between what is declared in the return and what is assessed to
             tax.”
 B           18. Relying on earlier judgment of this Court in K.P. Varghese
       v. ITO, (1981) 4 SCC 173, this Court in the above case held that
       provisions of Section 143(1-A) should be made to apply only to tax
       evaders. In paragraphs 21 and 25 following was laid down:
             “21. In the present case, the question that arises before us is
 C           also as to whether bona fide assessees are caught within the net
             of Section 143(1-A). We hasten to add that unlike in J.K.
             Synthetics case, Section 143(1-A) has in fact been challenged
             on constitutional grounds before the High Court on the facts of
             the present case. This being the case, we feel that since the
             provision has the deterrent effect of preventing tax evasion, it
 D           should be made to apply only to tax evaders. In support of this
             proposition, we refer to the judgment in K.P. Varghese v. ITO.
             The Court in that case was concerned with the correct
             construction of Section 52(2) of the Income Tax Act: (K.P.
             Varghese case, SCC p. 179, para 4 : SCR p. 639)
 E              “52. (2) Without prejudice to the provisions of sub-section (1),
                if in the opinion of the Income Tax Officer the fair market
                value of a capital asset transferred by an assessee as on the
                date of the transfer exceeds the full value of the consideration
                declared by the assessee in respect of the transfer of such
 F              capital asset by an amount of not less than fifteen per cent
                of the value declared, the full value of the consideration for
                such capital asset shall, with the previous approval of the
                Inspecting Assistant Commissioner, be taken to be its fair
                market value on the date of its transfer.”

 G           25. Taking a cue from Varghese case, we therefore, hold that
             Section 143(1-A) can only be invoked where it is found on facts
             that the lesser amount stated in the return filed by the assessee
             is a result of an attempt to evade tax lawfully payable by the
             assessee. The burden of proving that the assessee has so
             attempted to evade tax is on the Revenue which may be
 H           discharged by the Revenue by establishing facts and
RAJASTHAN STATE ELECTRICITY BOARD JAIPUR v. DY. COMMR. 1007
   OF INCOME TAX (ASSESSMENT) [ASHOK BHUSHAN, J.]

      circumstances from which a reasonable inference can be drawn           A
      that the assessee has, in fact, attempted to evade tax lawfully
      payable by it. Subject to the aforesaid construction of Section
      143(1-A), we uphold the retrospective clarificatory amendment
      of the said section and allow the appeals. The judgments of the
      Division Bench2 of the Gauhati High Court are set aside. There
                                                                             B
      will be no order as to costs.”
       19. This Court in the above case upheld the constitutional validity
of Section 143(1-A) (as inserted by the Finance Act, 1993) subject to
holding that Section 143(1-A) can only be invoked where it is found on
facts that the lesser amount stated in the return filed by the assessee
is a result of an attempt to evade tax lawfully by the assessee.             C

      20. Applying the ratio of the above judgment in the present case,
we need to find out as to whether 100% depreciation as mentioned in
return filed by the assessee was a result of an attempt to evade tax
lawfully payable by the assessee.
                                                                             D
       21. We have seen from the facts, as noted above, that even after
dis-allowing 25% of the depreciation, the assessee in the return
remained in loss and the 100% depreciation was claimed by the
assessee in the return due to a bonafide mistake. By Taxation Laws
(Amendment) Act, 1991, the depreciation in the case of Company was
restricted to 75% which due to oversight was missed by the assessee          E
while filing the return. The Commissioner of Income Tax by deciding
the revision petition has also not made any observation to the effact
that 100% depreciation claimed by the assessee was with intend to
evade payment of tax lawfully payable by the assessee, rather the
Commissioner in his order dated 31.03.1992 has observed that                 F
whenever adjustment is made, additional tax has to be charged @ 20%
of the tax payable on such excess amount.
       22. It is true that while interpreting a Tax Legislature the
consequences and hardship are not looked into but the purpose and
object by which taxing statutes have been enacted cannot be lost             G
sight. This Court while considering the very same provision i.e. Section
143(1-A), its object and purpose and while upholding the provision held
that the burden of proving that the assessee has attempted to evade
tax is on the Revenue which may be discharged by the Revenue by
establishing facts and circumstances from which a reasonable inference
can be drawn that the assessee has, in fact, attempted to evade tax          H
1008             SUPREME COURT REPORTS                         [2020] 4 S.C.R.


 A     lawfully payable by it. In the present case, not even whisper, that claim
       of 100% depreciation by the assessee, 25% of which was disallowed
       was with intend to evade tax. We cannot mechanically apply the
       provisions of Section 143(1-A) in the facts of the present case and in
       view of the categorical pronouncement by this Court in Commissioner
       of Income Tax, Gauhati vs. Sati Oil Udyog Limited and another
 B
       (supra), where it is held that Section 143(1-A) can only be invoked
       when the lesser amount stated in the return filed by the assessee is a
       result of an attempt to evade tax lawfully payable by the assessee. In
       view of the above, we hold that mechanical application of Section
       143(1-A) in the facts of the present case was uncalled for.
 C           23. In the result, we allow the appeal, set aside the judgment of
       the Division Bench of the High Court as well as demand of additional
       tax dated 12.02.1992 as amended on 28.02.1992.


       Kalpana K. Tripathy                                        Appeal allowed.
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