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2016 (7) TMI 1214 - MADRAS HIGH COURT

2016 (7) TMI 1214 - MADRAS HIGH COURT - [2016] 387 ITR 375 - Levy of interest under Section 158BFA - Block assessment - Held that:- We are unable to accept the contention of the appellant that levy of interest can be adjusted from the seized amount which was lying in the P.D.Account in the absence of any provision to grant such claim. - Decided against the assessee. - Tax Case (Appeal) No. 600 of 2007 - Dated:- 26-7-2016 - S. Manikumar And D. Krishnakumar, JJ. For the Appellant : Mr. A. S. Sri R .....

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on 16.4.2001. During the search operation, cash of ₹ 2,51,75,309/- forming part of Fixed Deposit Certificates worth ₹ 5,98,75,340/- and 3031.5gms of jewellery were seized. In response to the notice dated 1.6.2001 issued under section 158BC of the Act to file the Block Return within 16 days, the assesee filed the return on 8.1.2002 admitting total undisclosed income of ₹ 1,41,50,975/-. In the course of the Block Assessment Proceedings, the assessee admitted further undisclosed .....

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ppeals ) - II, Coimbatore / the first appellate authority after considering the submissions of the parties concerned came to the conclusion that the levy of interest under Section 158BFA of the Income Tax Act is not justified and accordingly, it was held by order dated 26.2.2003 in ITA No.189-C/2002-03. 4. Aggrieved against the order of the Commissioner of Income tax, the appellant/assessee preferred an Appeal in IT (SS) A No.68 (Mds)/2003 questioning the levy of surcharge whereas the revenue ha .....

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)/2003 to the Commissioner (Appeals)/appellate authority to decide the issue of interest de novo after providing adequate opportunity to the assessee of being heard. It is against this order, the present appeal in Tax Case (Appeal) No.600 of 2013 has been preferred by the assessee/appellant, before this Court. 5. Heard Mr.A.S.Sriraman, learned counsel for the appellant and Mr.T.R.Senthilkumar, learned Standing Counsel for the respondent and perused the available materials. 6. A search under Sect .....

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ed income of ₹ 1,41,50,975/-. The year-wise particulars of undisclosed income for the block period is as under:- Previous year Assessment year Total Income including Undisclosed Income Income returned assessed (Rs.) Date of filing of the return 1990-91 1991-92 5,67,125 5,67,125 31.12.1991 1991-92 1992-93 6,18,743 6,18,743 28.12.1992 1992-93 1993-94 4,47,430 4,47,430 29.10.1993 1993-94 1994-95 4,44,677 4,44,677 30.01.1995 1994-95 1995-96 4,98,784 4,98,784 11.01.1996 1995-96 1996-97 5,59,714 .....

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, as admitted Rs.33,98,532/- Normal income for the AY 2000-2001, as admitted Rs.11,35,557/- Income offered on adhoc basis as admitted Rs.30,00,000/- Additional interest on deposits as admitted ₹ 3,95,632/- Additional Towards unexplained jewellery ₹ 4,00,000/- Total Undisclosed Income Rs.1,50,63,679/- Tax payable thereon ₹ 90,38,207/- Add : Surcharge @ 17% ₹ 15,36,495 /- ₹ 1,05,74,702/- Add: Interest u/s 158BFA ₹ 14,80,458/- Rs.1,20,55,160/- Less : PD A/c adjus .....

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econd issue relates to the levy of interest under section 158BFA of the Act was decided in favour of the assessee. It is stated that the issue of levy of interest is made to compensate the revenue for the delay in remittance of the tax. The appellant was deprived of use of the cash seized of ₹ 2.51 Crores. The revenue was having possession of the above said amount. Therefore, the appellant was required to pay the tax of ₹ 1,04,84,093 is not justified under Section 158 BFA. 9. Against .....

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FA(1) is clearly exigible on the facts and circumstances of the case. The block return of income was filed on 8.1.2002 after the expiry of the due date for filing the return of income. (ii) The learned Commissioner of Income Tax (Appeals) ought to have appreciated that as per provisions of Sec.158BFA(1), the charging of interest is mandatory if the return of income is furnished after the expiry of the due date and the assessee is liable for interest @ 1<% for every month or part of the month .....

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and held that there was no request made to adjust the tax dues against the seized amount and albeit the amount remains with the Government, the right of the amount remains with the assessee. Therefore, the seized amount cannot be equated with tax payment. Adjustment is possible only after the filing of the return. Therefore, the levy of interest is clearly attracted as per the prescription of statute. By recording the above said reasons, the order passed by the appellate authority, namely, the C .....

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e this Court by the assessee. The instant appeal was admitted and the following substantial questions of law were framed:- 1. Whether the Tribunal is correct in confirming the order of the respondent/assessing officer in imposing interest under section 158BFA (1) of the Act even though there was no loss of revenue on account of the belated filing of block return in view of seizure of cash in the search conducted by the department? 2. Whether the Tribunal is correct in concluding that the levy of .....

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arge of adjusting the same against tax payable. Therefore, the belated filing of the income tax return with delay of 7 months was duly compensated by the assessee/appellant, cash effected at the time of search. Therefore, the findings of the Tribunal was erroneous and is liable to be set aside. The appellant also prays for the alternative prayer to frame a new issue to remand the entire issue to the file of the respondent in order to consider the correctness of the circumstances especially the a .....

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e Act were completely overlooked and the appellant was not approaching the concerned authority for the adjustment of the seized cash for the tax leviable within 120 days could be fatal to the plea for waiving the interest under section 158 BFA(1) of the Act. He also relied on the decision in the case of Commissioner of Income Tax vs. J.P.Narayanaswamy reported in [2014] 41 Taxmann.com 52 (Karnataka) wherein it was held that the adjustment of liability as determined under Clause (c) of Section 15 .....

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any interest. Thus, the seized cash, during the course of such, remains the same, without earning interest when Commissioner deposits the same in the P.D.Account. 15. The provisions of Section 158BFA(1) of the Act is usefully extracted hereunder:- Section 158BFA. (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 th .....

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here the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return? or (b) where no return has been furnished, on the date of completion of assessment under clause (c) of section 158BC. 16. Statutory provision of section 158 BFA of the Act states that the assessee is liable to pay simple interest on the undisclosed income where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return or where no retu .....

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ediately following the expiry of the time specified in the notice. As a result of the search conducted on 10.1.2001, cash amount by forming part of fixed deposit certificates and jewelleries were seized and enquiry was conducted by the department. The assessing officer determined the undisclosed income , after the assessee belatedly filed the tax returns. The delay in filing the return is not disputed in the instant case. 17. With regard to the contention of the revenue in the instant appeal tha .....

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le under section 158BFA(1) is concerned. The order passed by the High Court dismissing the writ petition confirming the order passed by the Director General did not suffer from any serious illegality which warranted interference by the Supreme Court in exercise of jurisdiction under Article 136 of the Constitution. Therefore, the contention of the revenue that the appellant has to approach the Board to waive the levy of interest cannot be sustained in the light of the decision rendered by the Ho .....

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Paragraph 17 as under: 17. The adjustment of liability as determined under Clause (c) follows determination of tax liability and therefore is not in any way providing for reducing tax liability before quantification of the tax liability. Application in terms of Section 132B is thereafter. It is for this reason we cannot accept the contention of learned counsel for the Assesseee that before levying of interest the amount should have been adjusted from out of the tax liability amount as available .....

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, whereas the instant case relates to the interpretation under section 158BFA(1) of the Income Tax Act. Therefore, the aforesaid decision will not be applicable to the facts of the present case. 20 It has been pointed out by the learned standing counsel for the respondent that under that sub-rule 12 (iii) of Rule 112 of the Income Tax Rules, provides the Commissioner of Income Tax to deposit seized cash into the Personal Deposit Account in any State Bank of India or authorised Bank. Such Persona .....

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ly as applicable only to taxing provisions such as surcharge provisions or a provision imposing penalty, any liberal construction of the statute cannot be permissible under law. It is well settled that in the matter of interpretation of tax statues, courts should not be justified in interpreting some other expressions, which the legislation thought to omit. Causes omissus cannot be supplied by Court except in the case of clear necessity and when reason for it is found in the four corners of the .....

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