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In the case of Rajasthan State Electricity Board v. DY. Commissioner of Income Tax, the Supreme Court bench comprising of Justice Ashok Bhushan and Justice Mohan M. Shanthanagoudar noted that in the case of Commissioner of Income Tax, Gauhati v. Sati Oil Udyog Ltd. & Anr., the Hon'ble court had considered the provisions of Section 143(1-A), its object and validity. The constitutional validity of Section 143(1-A), as inserted by the Finance Act, 1993 was upheld 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.
The contention taken in the present appeal was that the 20% additional tax sought to be imposed under Section 143(1-A) is in the nature of penalty and can be levied only when the assessee had intentionally sought to file an incorrect return. It was submitted that such additional tax could only become payable in case where assessee was assessed to an income for the purpose of tax and could not apply where there was no income and/ or there was loss. Here, the assessee contended that the 100% depreciation was claimed by the assessee in the return due to a bonafide mistake.
Futher, the Court had noted the following:
"The purpose and object by which taxing statutes have been enacted cannot be lost sight."
The Bench after observing the facts and records of the above case held that there was a mechanical application of Section 143(1-A).
In conclusion, the Apex Court held that the Section 143(1-A) of the Income Tax Act, that is demand for Additional Tax 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.
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