Non searched persons liable to pay interest on late filing of return u/s 158BC – Supreme Court

Non searched persons liable to pay interest on late filing of return u/s 158BC even in absence of a notice u/s 158BC and even for the period prior to 01.06.1999 – Supreme Court

ABCAUS Case Law Citation
ABCAUS 3643 (2023) (01) SC

Important Case Laws relied upon:
Mathuram Agrawal vs. State of Madhya Pradesh, (1999) 8 SCC 667
P.P. Umerkutty Vs. ACIT – (2005) 279 ITR 213 Kerala
Commissioner of Income Tax vs. Suresh N. Gupta – (2008) 297 ITR 322 (SC)
Commissioner of Income Tax (Central) vs. Vatika Township Private Limited – 2015 (1) SCC
Assistant Commissioner of Income Tax and Anr. vs. Hotel   Blue Moon, (2010) 3 SCC 259

In the instant case the dispute was with respect to levy of interest under Section 158BFA(1) of the Income Tax Act (the Act) in respect of assessment completed under Section 158BD of the Act for belatedly filing the return of income for the block period and also the levy of surcharge under Section 113 of the Act.

There was a search under Section 132 was conducted in the residential premises of the family members of a business group. The appellant was an individual and Director Partner in Group of Company concern.

The appellant filed return for the block period in response to notice u/s 158BD by including the undisclosed income for the block period. The Assessing Officer levied interest u/s 158BFA(1) and levied interest on the tax amount.

The ITAT allowed the appeal of the assessee by observing that Section158BFA(1) inserted w.e.f. 01.01.1997, prescribes levy   of interest and never require to pay the self ­assessment tax due along with the return of income. Interest is leviable   on undisclosed income determined with the assessment. It was observed that 140A requiring to pay self ­assessment tax along with the return of income filed under Section 158BC(a) was amended w.e.f. 01.06.1999 only.

It was further observed by the Tribunal that in the present case at the time of filing of the return relevant there was no provision to pay self ­assessment tax along with the return of income   and therefore no interest was leviable under Section 158BFA(1).

However, the High Court reversed the decision of the ITAT. The High Court observed that the amendment to Section   140A is of no consequence so far as determination of interest   under Section 158BFA(1) is concerned.  

The High Court negatived the submission on behalf of the assessee that in absence of any specific notice under Section 158BC, there shall not be any levy of interest u/s 158BFA(1).

On the issue of levy of surcharge u/s 113, the High Court relying upon the judgment of the Hon’ble Supreme Court, also held in favour of the revenue.

The High Court observed that the levy of the   surcharge under proviso to Section 113 of the Act is not res   integra as it has been decided in favour of the assessee in terms of the decision of Apex Court.

The issue left for decision were levy of the interest u/s 158BFA(1) in absence of any notice served under Section 158BC and the liability to pay the interest under said provision for the period prior to 01.06.1999.

The Hon’ble Supreme Court observed that on conjoint reading of the relevant provisions and notes on Clauses and the   memorandum explaining amendment to Section140A of the Act, it is very clear that the Legislature originally intended to   make the assessee liable to pay taxes and interest when the   return was filed under Section 139 or under Section 142 or   Section 148. By virtue of the amendment, the Legislature thus   proposed to make those assessees who are filing the return   under Section 158BC also liable to pay tax and interest under Section 140A. The memorandum explaining the provisions of the Finance Bill further makes it clear that the existing provisions of Section140A were not applicable to Chapter XIV­B   relating to assessment of the block period in search and seizure cases. It further recognizes that the admitted   tax declared in the return cannot be collected till the assessment is completed. Therefore, the Legislature intended to amend Section 140A by incorporating Section 158BC so as to make liable those persons who are filing return under Section158BC also.

The Hon’ble Supreme Court observed that in case of the person other than searched person the notice under Section 158BD would be required/sufficient and in case of late   filing   of the return under Section 158BC, the interest will be leviable under Section 158BFA. Any other interpretation would lead to Section 158BD nugatory.

It was held that the assessee – persons other than searched   persons shall be liable to pay the interest on late filing of the return under Section 158BC even in absence of a notice under Section 158BC and even for the period   prior to 01.06.1999.   

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