TMI Blog2009 (7) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... ove we are of the opinion that the Tribunal is clearly in error in directing the deletion of the interest part on the tax amount as ultimately determined but for the period during which there is a delay in filing the return - Decided in the favour of the revenue if it is possible to examine the question on legal principle judicial norms and propriety and the provisions of Article 141 of the Constitution do not allow us the liberty or freedom for this and accordingly this question has to be necessarily answered in favour of the Revenue and against the assessee - whether any further directions are required to be issued on perusal of the record, for the present, these appeals are allowed - 277 AND 281OF 2004 - - - Dated:- 30-7-2009 - D.V. SHYLENDRA KUMAR AND ARAVIND KUMAR, JJ. M.V. Seshachala for the Appellant. Ashok A. Kulkarni and K.R. Prasad for the Respondent. JUDGMENT D.V. Shylendra Kumar, J.: ‑ These two appeals are by the Revenue under section 260A of the IT Act, 1961 (for short, 'the Act') against two orders dated 15-12-2003 passed by the Tribunal, Bangalore in IT(SS)A No. 23/Bang./1999 and IT(SS)A No. 22/Bang./1999 respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment period involved in the case of individual assessee relates to block period 1987-88 to 1997-98, assessed to tax invoking the provisions of section 158BD of the Act and insofar as the assessee in IT Appeal No. 281 of 2004 is concerned, it is a company, which is also assessed to tax following issue of notice under section 158BCof the Act. 3. The assessments and the action preceded to it were triggered pursuant to a search conducted on 13th Feb., 1997 at the premises of the company-assessee, wherein the officials of the IT Department found a large amount of undisclosed income and considerable discrepancies in the books of account of the company. 4. The AO, found in the personal custody of the individual assessee, a director of the assessee-company, several documents evidencing purchase of immovable properties, particularly an extent of 424 acres of land at Manvarthakaval/Talagatpura Village and the source of this investment had not been properly explained and at any rate some part of the purchase price having been paid in cash, which had not been properly accounted, etc. 5. While the assessee had indicated that there was an undisclosed income to the tune of ₹ 19 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile return of the undisclosed income as detected offering the amount to tax; that a return is required to be filed within 15 days from the date of receipt of the notice under section 158BC of the Act; that in the case of the assessee-company the notice under section 158BD had been issued on 28th Nov., 1997 but the assessee had filed the return only on 22nd Feb., 1999 and therefore the assessee is liable to pay interest on the tax liability as determined under the assessment order for the period between 22nd Feb., 1999 and 15 days after 28th Nov., 1997. 11. It is submitted in the case of the individual also there is likewise delay in filing of the return in the sense the individual assessee had also not filed the return within 15 days from the date of receipt of the notice. Though the notice was characterized as notice under section 158BD of the Act the procedure for computation of tax liability even in terms of section 158BD of the Act is only as provided for under section 158BC of the Act in the very chapter namely Chapter XIV-B and is no way different from a notice issued under section 158BC of the Act. 12. It is also the submission of Sri Seshachala in this regard that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple enunciated in Suresh N. Gupta's case (supra) and the question raised by the Revenue on this aspect has to be answered in favour of the Revenue and in the negative. 16. Insofar as the question of deduction of claim by the individual assessee under the provisions of section 36(1)(iii) of the Act is concerned, the return filed for the purposes of block assessment during the period from 1986-87 to 1996-97, submission of Sri Seshachala is that the question of claiming a deduction which is a deduction in the nature of expenditure incurred in connection with the business and for earning profits, the question of allowing deduction arises only when the profits under the head 'business and gains' are taken and insofar as the assessee is concerned as income referable to assessee's share on being a partner in a partnership firm came to be totally exempted from the purview of tax in terms of the provisions of section 10(2A) of the Act; even with effect from the assessment year 1993-94 onwards there is absolutely no need for action to compute the interest and profit attributable to the partnership firm for the previous year relevant for the block assessment period and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest paid on the borrowing for investment in the firm by way of capital contribution, claim towards interest alone is not covered by the statutory provisions. 19. It is pointed out that nowhere assessee had claimed at any point of time earlier, this investment had been taken back from the firm and had been invested in the so-called moneylending business and on which premise the assessee had claimed deduction in the return filed for the purposes of block assessment and for the first time. It is pointed out that it was not a situation where either the assessee had allowed the factual foundation for claiming deduction as an expenditure incurred in the course of business of moneylending as the assessee had not any time earlier claimed any investment having been made in the moneylending business for earning interest from this activity but also, that the assessee did not claim any part of the deduction as attributable to the moneylending and some part attributable in the investment in partnership. It is pointed out that all along assessee had claimed the entire investment to be for partnership for which purpose he had borrowed and paying interest and claimed as deductible expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On such premise Sri Kulkarni would submit so far as the scheme of block assessment in terms of Chapter XIV-B is concerned, there is no provision or situation warranting payment of any advance tax as in the normal course of assessment and also the possibility of payment of tax along with the return is not mandatory for the period relevant to the block assessment period; that in fact it had become so only after 1st June, 1999 by the amendment effected by the Finance Act of 1999 w.e.f. 1st June, 1999 that when there is not even a requirement of payment of tax on self-assessment for the block period when the return is filed and even in the contemplation of the scheme under Chapter XIV, when there is no requirement of payment of tax before the AO actually determines the tax liability, and calls upon the assessee to make payment of the tax within a stipulated time and thereupon only that too in case of default by the assessee by not paying within the permitted period can it be said that there is a loss to the Revenue. In the present case such being not the case, it cannot levy interest on the assessee and therefore levy of interest both on the individual assessee and assessee-company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assessee there is absolutely no scope or justification to levy of interest, even under the statutory provision of section 158BFA(1). 26. However, insofar as the question of the tax liability in the case of assessee-company including surcharge on the tax @ 60 per cent of the assessed income is concerned, though Sri Kulkarni would not dispute that in Suresh N. Gupta's case (supra) the Supreme Court did take the view that even in respect of the block assessment under Chapter XIV-B of the Act, the word tax has to be understood as inclusive of surcharge as provided in the Finance Act, submission is that in a subsequent decision, another Bench of the Supreme Court has doubted the correctness and the reasoning as indicated in Suresh N. Gupta's case (supra) and matter had been ordered to be referred to a Larger Bench as was done in the case of CIT v. Vatika Township (P.) Ltd. [2009] 314 ITR 338/178 Taxman 322 (SC) passed in petitions for grant of Special Leave to Appeal (Civil) No. 16862 of 2008 directed against the judgment of Delhi High Court dt. 17th April, 2007 rendered in IT Appeal No. 375 of 2007 and a Larger Bench having not opined so far, answer to the question, be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed for this business and had been invested in this business and for which assessee was paying interest to the person who had lent money to him for this purpose, there is no question of assessee claiming so in the return filed under section 158BC of the Act. The assessee himself has not claimed so either before the first appellate authority or even before the Tribunal. But strangely enough the Tribunal itself takes upon the question of examining this aspect only on the basis of the stand of the assessee, that expenditure claimed is attributable to the interest paid in moneylending business and to compound the unwarranted finding has called in aid the judgment of the Supreme Court in Maharashtra Sugar Mills Ltd.'s case (supra) which is not at all applicable to the facts of the case. 33. It is not as though the expenditure incurred was such that it was not possible for apportionment of the expenditure to the different business activities carried on by the assessee and as to in respect of which business what amount of interest had been paid. There was no such ambiguity in the present demand and the claim was for entire expenditure attributable inclusive of the investment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the income as assessed for the block period is to be made liable is provided for under section 113 of the Act itself unlike in other situations, where rate of tax is relegated to the Finance Act of each year. 36. This provision as it now occurs in section 113 of the Act, is also by way of an amendment inserted by Finance Act of 1995 w.e.f. 1st July, 1995. 37. With this background we notice the provisions of section 158BFA of the Act which reads as under : 158BFA. Levy of interest and penalty in certain cases.-(1) Where the return of total income including undisclosed income for the block period, in respect of search initiated under section 132 or books of account other documents or any assets requisitioned under section 132A on or after the 1st day of January, 1997 as required by a notice under clause (a) of section 158BC, is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest @ (one per cent) of the tax on undisclosed income, determined under clause (c) of section 158BC, for every month or part of a month comprised in the period commencing on the day immediately following the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either being unconstitutional or on any other ground. But in the present case levy of interest is fully enabled under the statute itself and it is not as though it is otherwise. 44. We have examined the submissions made by Sri Kulkarni on all aspects and in all shades of the arguments but still are unable to agree with the proposition that the levy of interest under section 158BFA(1) is in any way linked to the provisions of section 140A of the Act. For foisting interest in terms of section 158BFA(1) one has to look into only the very provision and the quantification being linked to the period during the default in filing of return, that period alone is to be taken into consideration particularly as the levy of interest ceases the very moment the return is filed and the interest being only for the delayed period of filing return and does not link it to the payment of taxes per se but links it to the delay in filing a return. 45. It is no doubt true that for quantification of the income/interest, it is linked to the final payment of tax as determined for the block period and at a given percentage every month. But the levy of interest itself ceases once a return is filed in tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the earlier provisions of section 158BD which even otherwise envisages within itself the provisions and applicability of sections 158BD [sic-158BC] and 158BFA(1). 48. In the wake of our understanding of the provisions of sections 158BFA(1) and 158BD as indicated above we are of the opinion that the Tribunal is clearly in error in directing the deletion of the interest part on the tax amount as ultimately determined but for the period during which there is a delay in filing the return. Questions are accordingly answered in favour of the Revenue and against the assessee in the negative. 49. So far as the other question of tax liability including the surcharge in the case of the assessee-company is concerned, we are of the view that the judgment of the Supreme Court rendered in Suresh N. Gupta's case (supra) being subsequent to the judgment of our High Court in the case of Hotel Naufal (supra), the Supreme Court having categorically opined that surcharge has to be necessarily computed and added ultimately to the tax liability determined in terms of section 158BC of the Act also, we are afraid that it is not open for this Bench to enter into, debate or discussion r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Answer 1. Whether, the Tribunal was correct in holding that no surcharge for the block period 1st April, 1990 to 10th Nov., 2000 i.e. , assessment years 1991 92 to 2001-02 could be levied as proviso to section 113 of the Act came into effect from 1st June, 2002 and as the search in the present case had taken place on 10th Nov., 2000 before the proviso was introduced ? In the negative, in favour of the Revenue and against the assessee i.e. , the Tribunal is wrong in holding that the tax chargeable under section 113 of the Act cannot be increased by adding the surcharge leviable for the assessment year relevant to the previous year, in which search was initiated as per section 132 of the Act. 2. Whether the proviso to section 113 of the Act should be read along with the Finance Act for each of the earlier assessment years for the entire block period and surcharge should be levied from the inception of Chapter XIV- B of the Act ? In the positive, in favour of the Revenue and against the assessee, applying the law as declared by Supreme Court in the case of Suresh N. G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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