The Apex Court has observed that Section 143 (1A) of Income Tax Act, 1961 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 the 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 discharged by it by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.9133-9134 OF 2003
COMMISSIONER OF INCOME TAX,
GAUHATI & ORS. ...APPELLANTS
VERSUS
M/S. SATI OIL UDYOG LTD. & ANR. ...RESPONDENTS
Dated; March 24, 2015.
1. The question which arises for consideration in the present
appeals is the constitutional validity of the retrospective amendment
to Section 143(1A) of the Income Tax Act, 1961. Both the Single Judge
and the Division Bench of the Gauhati High Court have held that the
retrospective effect given to the amendment would be arbitrary and
unreasonable inasmuch as the provision, being a penal provision, would
operate harshly on assessees who have made a loss instead of a profit,
the difference between the loss showed in the return filed by the
assessee and the loss assessed to income tax having to bear an
additional income tax at the rate of 20%.
2. It may be mentioned at the outset that the same provision in its
retrospective operation has been upheld by the Kerala, Madhya Pradesh,
Rajasthan, Karnataka and Madras High Courts. (Kerala State Coir Corpn
Ltd. v. Union of India, (1994) 210 ITR 121 (Ker); Sanctus Drugs
Pharmaceuticals Pvt. Ltd. v. Union of India, (1997) 225 ITR 252 (MP);
DCIT v. Rajasthan State Electricity Board, (2008) 299 ITR 253 (Raj);
Bidar Sahakari Sakkare Karkhane Niyamat v Union of India, (1999) 237
ITR 445 (Kar); Aluminium Industries Ltd. v. DCIT (Asst), (1998) 234
ITR 165 (Ker); Sukra Diamond Tools Pvt. Ltd. v. DCIT, (1998) 229 ITR
682 (Mad)).
3. The facts necessary to decide these appeals are as follows.
The respondent-herein in its annual return for assessment years
1989-1990 and 1991-1992 showed a loss of Rs.1,94,13,440/- and
Rs.1,80,22,480/- respectively. By an assessment order dated
14.12.1992, the Assessing Officer levied an additional tax under
Section 143 (1A) of Rs.5,62,490/- and Rs.8,09,290/- respectively for
the two assessment years in question calculated in the manner provided
in the Section.
4. Being aggrieved by the order dated 14.12.1992, the respondent
filed two separate writ petitions to declare the provisions of Section
143 (1A) as ultra vires and consequentially prayed for the quashing of
the order dated 14.12.1992. The learned Single Judge who heard the
two petitions upheld Section 143 (1A) as amended in 1993 prospectively
but held that insofar as it operated with effect from 1989 on losses
made by companies, the section is arbitrary and unreasonable and
would, therefore, have to be struck down. The Division Bench agreed
with the Single Judge and dismissed the two writ appeals before it.
5. Shri Neeraj Kaul, learned Additional Solicitor General of India
appearing on behalf of the appellants stated that the amendment made
to Section 143 (1A) with retrospective effect was merely clarificatory
and that even without such amendment, the same position would obtain
qua losses as would obtain qua profits inasmuch as the expression
"income" would comprehend both profits as well as losses. He cited a
number of judgments before us which we will refer to presently. On
being questioned by the Bench about the true construction of Section
143 (1A), he very fairly submitted that since the object of Section
143(1A) is to prevent tax evasion, the said Section would have to be
read in the light of the aforesaid object. Despite being served, no
one appears for the respondents.
Section 143 (1A) as it stood in 1989 is as follows:-
"(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, -
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 (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).
(b) Where as a result of an order under (sub-section (3) of
this section or) section 154 or section 250 or section 254 or
section 260 or section 262 or section 263 or section 264, the
amount on which additional income-tax is payable under clause
(a) has been increased or reduced, s the case may be, the
additional income-tax shall be increased or reduced accordingly,
and, -
(i) in a case where the additional income-tax is increased,
the Assessing Officer shall serve on the assessee a notice of
demand under Section 156;
(ii) in a case where the additional income-tax is reduced, the
excess amount paid, if any, shall be refunded.
Explanation. - For the purposes of this sub-section, "tax
payable on such excess amount" means:-
i) in any case where the amount of adjustments made under the first
proviso to clause (a) of sub-section (1) exceed the total
income, the tax that would have been chargeable had the amount
of the adjustments been the total income;
ii) in any other case, the difference between the tax on the total
income and the tax that would have been chargeable had such
total income been reduced by the amount of adjustments."
6. By the Finance Act of 1993, Section 143 (1A)(a) was substituted
with retrospective effect from 1.4.1989 as follows:-
"(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
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 of tax payable under sub-section (1)
by an additional 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 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 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 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 may be."
7. The Memorandum explaining the provisions of the Finance Bill
which introduced the said retrospective amendment is as under:
"The provisions of section 143(1A) of the Income-tax Act 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 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 (1A) of the Income-tax Act, as these
are worded, are not applicable in loss cases.
The Bill, therefore, seeks to amend section 143(1A) of the Income-tax
Act to provide that where as a result of the 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 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
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 1st April, 1989 and
will, accordingly, apply in relation to the assessment year 1989-
90 and subsequent years."
8. On a cursory reading of the provision, it is clear that the
object of Section 143(1A) is the prevention of evasion of tax. By the
introduction of this provision, persons who have filed returns in
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.
9. A plain reading of the provision as it originally stood refers
to "the total income".
10. Mr. Kaul, learned Additional Solicitor General is right in
referring to the definition of "income" in Section 2(24) of the Income
Tax Act, 1995 and drawing our attention to the fact that the said
definition is an inclusive one. Further, it is settled law at least
since 1975 that the word "income" would include within it both profits
as well as losses. This is clear from Commissioner of Income Tax
Central, Delhi v. Harprasad & Company Pvt. Ltd., (1975) 3 SCC 868,
paragraph 17 of which lays down the law as follows:
"17. From the charging provisions of the Act, it is discernible
that the words "income" or "profits and gains" should be
understood as including losses also, so that, in one sense
"profits and gains" represent "plus income" whereas losses
represent "minus income" [CIT v. Karamchand Prem Chand, (1960) 3
SCR 727 : 40 ITR 106 (SC) : CIT v. Elphinstone Spinning and
Weaving Mills, (1960) 3 SCR 953 : 40 ITR 143 (SC)] . In other
words, loss is negative profit. Both positive and negative
profits are of a revenue character. Both must enter into
computation, wherever it becomes material, in the same mode of
the taxable income of the assessee. Although Section 6
classifies income under six heads, the main charging provision
is Section 3 which levies income tax, as only one tax, on the
"total income" of the assessee as defined in Section 2(15). An
income in order to come within the purview of that definition
must satisfy two conditions: Firstly, it must comprise the
"total amount of income, profits and gains referred to in
Section 4(1)". Secondly, it must be "computed in the manner laid
down in the Act". If either of these conditions fails, the
income will not be a part of the "total income" that can be
brought to charge."
11. This judgment has subsequently been followed in several
judgments. The fairly recent judgment of this Court in CIT Joint
Commissioner of Income Tax, Surat v. Saheli Leasing & Industries Ltd.,
(2010) 6 SCC 384 referred to the aforesaid judgment and held as
follows:-
"23. In the aforesaid decision in Gold Coin case [(2008) 9 SCC
622 : (2008) 304 ITR 308] , the expression "income" in the
statute appearing in Section 2(24) of the Act has been clarified
to mean that it is an inclusive definition and includes losses,
that is, negative profit. This has been held so on the strength
of earlier judgments of this Court in CIT v. Harprasad and Co.
(P) Ltd. [(1975) 3 SCC 868 : 1975 SCC (Tax) 158 : (1975) 99 ITR
118] and followed in Reliance Jute and Industries
Ltd. v. CIT [(1980) 1 SCC 139 : 1980 SCC (Tax) 67 : (1979) 120
ITR 921] . After an elaborate and detailed discussion, this
Court held with reference to the charging provisions of the
statute that the expression "income" should be understood to
include losses. The expression "profits and gains" refers to
positive income whereas "losses" represents negative profit or
in other words minus income. Considering this aspect of the
matter in greater detail, Gold Coin [(2008) 9 SCC 622: (2008)
304 ITR 308] overruled the view expressed by the two learned
Judges in Virtual Soft Systems [(2007) 9 SCC 665 : (2007) 289
ITR 83] .
24. Relevant ITR paras 11 and 12 of Gold Coin [(2008) 9 SCC 622
: (2008) 304 ITR 308] dealing with income and losses are
reproduced hereinbelow: (SCC p. 628, paras 15-16)
"15. When the word 'income' is read to include losses as held
in Harprasad case [(1975) 3 SCC 868 : 1975 SCC (Tax) 158 :
(1975) 99 ITR 118] it becomes crystal clear that even in a case
where on account of addition of concealed income the returned
loss stands reduced and even if the final assessed income is a
loss, still penalty was leviable thereon even during the period
1-4-1976 to 1-4-2003. Even in the Circular dated 24-7-1976,
referred to above, the position was clarified by the Central
Board of Direct Taxes (in short 'CBDT'). It is stated that in a
case where on setting of the concealed income against any loss
incurred by the assessee under any other head of income or
brought forward from earlier years, the total income is reduced
to a figure lower than the concealed income or even to a minus
figure the penalty would be imposable because in such a case
'the tax sought to be evaded' will be tax chargeable on
concealed income as if it is 'total income'.
16. The law is well settled that the applicable provision
would be the law as it existed on the date of the filing of the
return. It is of relevance to note that when any loss is
returned in any return it need not necessarily be the loss of
the previous year concerned. It may also include carried-forward
loss which is required to be set up against future income under
Section 72 of the Act. Therefore, the applicable law on the date
of filing of the return cannot be confined only to the losses of
the previous accounting years."
25. The necessary consequence thereof would be that even if
the assessee has disclosed nil income and on verification of the
record, it is found that certain income has been concealed or
has wrongly been shown, in that case, penalty can still be
levied. The aforesaid position is no more res integra and
according to us, it stands answered in favour of the Revenue and
against the assessee."
12. Apart from the above, there is another indication contained in
Section 143 1(a) as it stood in 1989. The said Section reads as
under:
"(1)(a) Where a return has been made under section 139, 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 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
(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 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 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 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 an intimation shall be sent to the
assessee whether or not any adjustment has been made under the
first proviso and notwithstanding that no tax or interest is due
from him:
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 the income was first assessable."
13. Even on a reading of Section 143 1(a) which is referred to in
Section 143 (1A), a loss is envisaged as being declared in a return
made under Section 139. It is clear, therefore, that the
retrospective amendment made in 1993 would only be clarificatory of
the position that existed in 1989 itself.
14. It was pointed out to us that the reason for the retrospective
amendment made in 1993 was the judgments of the Delhi High Court in
Modi Cement Limited v. Union of India, (1992) 193 ITR 91 and JK
Synthetics Limited v. Asstt. Commissioner of Income-Tax, (1993) 2000
ITR 594, and the Allahabad High Court held in Indo Gulf Fertilizers &
Chemicals Corpn. Ltd. v. Union of India, (1992) 195 ITR 485, which
held that losses were not within the contemplation of Section 143(1A)
prior to its amendment.
15. The J.K. Synthetics judgment of the Delhi High Court was
expressly upset by this Court in (2003) 10 SCC 623. By the time this
Court delivered its judgment, the retrospective amendment to Section
143 (1A) had already been made, and this Court, therefore, set aside
the Delhi High Court judgment.
16. Shri Kaul also cited before us the judgment of Shiv Dutt Rai
Fateh Chand v. Union of India, (1983) 3 SCC 529. In this judgment,
the validity of the retrospective amendment of Section 9(2A) of the
Central Sales Tax Act was in question. This Court held that the
imposition of penalty by a tax authority is a civil liability, though
penal in character. For that reason alone, retrospective imposition
of a penalty would not be hit by Article 20(1) of the Constitution
which concerns itself with penalties that are levied by criminal
statutes. In paragraph 34, the retrospective imposition of a penalty
under Section 9(2A) was upheld in the following terms:
"34. In the instant case, the facts are one shade better. There
is no dispute in this case about the validity of the tax payable
under the Act during the period between January 1, 1957 and the
date of commencement of the Amending Act. It has to be presumed
that all the tax has been collected by the dealers from their
customers. There is also no dispute that the law required the
dealers to pay the tax within the specified time. The dealers
had also the knowledge of the provisions relating to penalties
in the general sales tax laws of their respective States. It was
only owing to the deficiency in the Act pointed out by this
court in Khemka case [AIR 1955 SC 765 : (1955) 2 SCR 483 :
(1955) 6 STC 627] the penalties became not payable. In this
situation, where the dealers have utilised the money which
should have been paid to the Government and have committed
default in performing their duty, if Parliament calls upon them
to pay penalties in accordance with the law as amended with
retrospective effect it cannot be said that there has been any
unreasonable restriction imposed on the rights guaranteed under
Article 19(1)(f) and (g) of the Constitution, even though the
period of retrospectivity is nearly 19 years. It is also
pertinent to refer here to sub-section (3) of Section 9 of the
Amending Act which provides that the provisions contained in sub-
section (2) thereof would not prevent a person from questioning
the imposition or collection of any penalty or any proceeding,
act or thing in connection therewith or for claiming any refund
in accordance with the Act as amended by the Amending Act read
with sub-section (1) of Section 9 of the Amending Act.
Explanation to sub-section (3) of Section 9 of the Amending Act
also provides for exclusion of the period between February 27,
1975 i.e. the date on which the judgment in Khemka case [AIR
1955 SC 765 : (1955) 2 SCR 483 : (1955) 6 STC 627] was delivered
up to the date of the commencement of the Amending Act in
computing the period of limitation for questioning any order
levying penalty. In those proceedings the authorities concerned
are sure to consider all aspects of the case before passing
orders levying penalties. The contention that the impugned
provision is violative of Article 19(1)(f) and (g) of the
Constitution has, therefore, to be rejected."
17. In the present case as well, all assessees were put on notice
in 1989 itself that the expression "income" contained in Section 143
(1A) would be wide enough to include losses also. That being the
case, on facts here there is in fact no retrospective imposition of
additional tax - such tax was imposable on losses as well from 1989
itself.
18. We have already stated in our judgment that the object of
Section 143 (1A) is the prevention of tax evasion. Read literally,
both honest asessees and tax evaders are caught within its net. An
interesting example of such a case is contained in Commissioner of
Income Tax, Bhopal v. Hindustan Electro Graphites, Indore, (2000) 3
SCC 595. On facts, the assessee had filed its return of income in
which it showed that it had received a certain sum by way of cash
compensatory support. Under the law as was then in force, the said
amount was not taxable and, therefore, not included in the return.
Subsequently, such cash assistance was made taxable retrospectively.
Section 143 (1A) was pressed into service by the Department, and this
Court ultimately held as follows:-
"12. The case before us does not represent even a bona fide
mistake. In fact it is not a case where under some mistaken
belief the assessee did not disclose the cash compensatory
support received by it which he could offer to tax. It is true
that income by way of cash compensatory support became taxable
retrospectively with effect from 1-4-1967 but that was by
amendment of Section 28 by the Finance Act of 1990 which
amendment could not have been known before the Finance Act came
into force. Levy of additional tax bears all the characteristics
of penalty. Additional tax was levied as the assessee did not in
his return show the income by way of cash compensatory support.
The Assessing Officer on that account levied additional income
tax. No additional tax would have been leviable on the cash
compensatory support if the Finance Act, 1990 had not so
provided even though retrospectively. The assessee could not
have suffered additional tax but for the Finance Act, 1990.
After he had filed his return of income, which was correct as
per law on the date of filing of the return, it was thereafter
that the cash compensatory support also came within the sway of
Section 28. When additional tax has the imprint of penalty the
Revenue cannot be heard saying that levy of additional tax is
automatic under Section 143(1-A) 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(1-A) could be invoked to levy the
additional tax. The following observations by the Constitution
Bench of this Court in Pannalal Binjraj v. Union of
India [(1957) 31 ITR 565 : AIR 1957 SC 397] are apt:
'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'."
19. This case was cited before this Court in the J.K. Synthetics
judgment which we have already dealt with, reported in (2003) 10 SCC
623. This Court first held that the judgment in Hindustan Electro
Graphites had no application to the facts contained in the J.K.
Synthetics case and then added that they had reservations about the
correctness of the judgment in Hindustan Electro Graphites Limited
principally because the assessee in that case had not challenged the
provisions of Section 143 (1A).
20. In the present case, the question that arises before us is also
as to whether bonafide assessees are caught within the net of Section
143 (1A). We hasten to add that unlike in J.K. Synthetics case,
Section 143 (1A) 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 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, (1982) 1 SCR 629. The Court in that case was
concerned with the correct construction of Section 52 (2) of the
Income Tax Act:
"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 capital assets
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."
21. On a strictly literal interpretation of Section 52 (2), the
moment the fair market value of a capital asset by an assessee exceeds
the full value of the consideration declared by the assessee, in an
amount of not less than 15% of the value declared, the full value for
the consideration for such capital asset shall be taken to be the fair
market value. A strictly literal reading would take into the tax net
persons who have entered into bonafide transactions where the full
value of the consideration for the transfer is correctly declared by
the assessee. In such a situation, this Court held:-
"We must therefore eschew literalness in the interpretation of
Section 52 Sub-section (2) and try to arrive at an
interpretation which avoids this absurdity and mischief and
makes the provision rational and sensible, unless of course, our
hands are tied and we cannot find any escape from the tyranny of
the literal interpretation. It is now a well settled rule of
construction that where the plain literal interpretation of a
statutory provision produces a manifestly absurd and unjust
result which could never have been intended by the legislature,
the court may modify the language used by the legislature or
even 'do some violence' to it, so as to achieve the obvious
intention of the legislature and produce a rational
construction, Vide: Luke v. Inland Revenue Commissioner [1963]
AC 557. The Court may also in such a case read into the
statutory provision a condition which, though not expressed, is
implicit as constituting the basic assumption underlying the
statutory provision. We think that, having regard to this well
recognised rule of interpretation, a fair and reasonable
construction of Section 52 sub-section (2) would be to read into
it a condition that it would apply only where the consideration
for the transfer is under-stated or in other words, the assessee
has actually received a larger consideration for the transfer
than what is declared in the instrument of transfer and it would
have no application in case of a bonafide transaction where the
full value of the consideration for the transfer is correctly
declared by the assessee."
The Court further went on to hold:-
"Thus it is not enough to attract the applicability of Sub-
section (2) that the fair market value of the capital asset
transferred by the assessee as on the date of the transfer
exceeds the full value of the consideration declared in respect
of the transfer by not less than 15% of the value so declared,
but it is furthermore necessary that the full value of the
consideration in respect of the transfer is under-stated or in
other words, shown at a lesser figure than that actually
received by the assessee. Sub-section (2) has no application in
case of an honest and bonafide transaction where the
consideration in respect of the transfer has been correctly
declared or disclosed by the assessee, even if the condition of
15% difference between the fair market value of the capital
asset as on the date of the transfer and the full value of the
consideration declared by the assessee is satisfied. If
therefore the Revenue seeks to bring a case within sub-section
(2), it must show not only that the fair market value of the
capital asset as on the date of the transfer exceeds the full
value of the consideration declared by the assessee by not less
than 15% of the value so declared, but also that the
consideration has been under-stated and the assessee has
actually received more than what is declared by him. There are
two distinct conditions which have to be satisfied before sub-
section (2) can be invoked by the Revenue and the burden of
showing that these two conditions are satisfied rests on the
Revenue. It is for the Revenue to show that each of these two
conditions is satisfied and the Revenue cannot claim to have
discharged this burden which lies upon it, by merely
establishing that the fair market value of the capital asset as
on the date of the transfer exceeds by 15% or more the full
value of the consideration declared in respect of the transfer
and the first condition is therefore satisfied. The Revenue must
go further and prove that the second condition is also
satisfied. Merely by showing that the first condition is
satisfied, the Revenue cannot ask the Court to presume that the
second condition too is fulfilled, because even in a case where
the first condition of 15% difference is satisfied, the
transaction may be a perfectly honest and bonafide transaction
and there may be no under-statement of the consideration. The
fulfilment of the second condition has therefore to be
established independently of the first condition and merely
because the first condition is satisfied, no inference can
necessarily follow that the second condition is also fulfilled.
Each condition has got to be viewed and established
independently before sub-section (2) can be invoked and the
burden of doing so is clearly on the Revenue. It is a well
settled rule of law that the onus of establishing that the
conditions of taxability are fulfilled is always on the Revenue
and the second condition being as much a condition of taxability
as the first, the burden lies on the Revenue to show that there
is understatement of the consideration and the second condition
is fulfilled. Moreover, to throw the burden of showing that
there is no understatement of the consideration, on the assessee
would be to cast an almost impossible burden upon him to
establish the negative, namely, that he did not receive any
consideration beyond that declared by him."
Finally, the Court held:
"We must therefore hold that Sub-section (2) of Section 52 can
be invoked only where the consideration for the transfer has
been understated by the assessee or in other words, the
consideration actually received by the assessee is more than
what is declared or disclosed by him and the burden of proving
such under-statement or concealment is on the Revenue. This
burden may be discharged by the Revenue by establishing facts
and circumstances from which a reasonable inference can be drawn
that the assessee has not correctly declared or disclosed the
consideration received by him and there is understatement of
concealment of the consideration in respect of the transfer. Sub-
section (2) has no application in case of an honest and bonafide
transaction where the consideration received by the assessee has
been correctly declared or disclosed by him, and there is no
concealment or suppression of the consideration."
22. Taking a cue from the Varghese case, we therefore, hold that
Section 143 (1A) 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 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 payable by it. Subject to the aforesaid construction of
Section 143 (1A), we uphold the retrospective clarificatory amendment
of the said Section and allow the appeals. The judgments of the
Division Bench of the Gauhati High Court are set aside. There will be
no order as to costs.
...........................................J.
(A.K. Sikri)
............................................J.
(R.F. Nariman)
New Delhi,
March 24, 2015.
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