2016 (7) TMI 1214 - HC - Income Tax

High Court affirms interest levy as mandatory for delayed filing under Section 158BFA(1)

The High Court upheld the Tribunal's decision, ruling that the levy of interest under Section 158BFA(1) for delayed filing of the return is mandatory. The ... 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. Issues Involved:1. Levy of surcharge under Section 158BFA of the Income Tax Act.2. Levy of interest under Section 158BFA of the Income Tax Act.Detailed Analysis:1. Levy of Surcharge:The appellant contested the levy of surcharge imposed by the Assessing Officer. The Commissioner of Income Tax (Appeals) upheld the surcharge, which led the appellant to appeal to the Income Tax Appellate Tribunal. The Tribunal ruled in favor of the appellant, stating that the levy of surcharge was not in accordance with law. The Tribunal's decision on this issue was not further contested, and thus, the surcharge was not imposed.2. Levy of Interest:Background:A search under Section 132 of the Income Tax Act was conducted at the appellant's premises, resulting in the seizure of cash, fixed deposit certificates, and jewelry. The appellant filed a block return admitting undisclosed income. The Assessing Officer determined the tax liability, including interest under Section 158BFA for the delay in filing the return.Appellant’s Argument:The appellant argued that the seized cash should be equated to tax payment, and thus, the delay in filing the return should not attract interest. The appellant contended that the seized cash, which was already with the department, should have been adjusted against the tax liability, compensating for the delay in filing the return.Commissioner of Income Tax (Appeals) Decision:The Commissioner of Income Tax (Appeals) ruled in favor of the appellant regarding the waiver of interest, stating that the appellant was deprived of the use of the seized cash, which was with the revenue.Revenue’s Appeal:The revenue appealed against the waiver of interest, arguing that interest under Section 158BFA(1) is mandatory if the return is filed after the due date. The revenue emphasized that the adjustment of the seized amount against the tax liability can only occur after the filing of the return, and the appellant did not request such an adjustment within the stipulated time.Tribunal’s Decision:The Tribunal reversed the Commissioner’s decision, stating that the seized amount cannot be equated with tax payment and that the levy of interest is mandatory as per the statute. The Tribunal remanded the issue to the Commissioner (Appeals) to decide on the levy of interest for the period of 30 days, allowing the appellant an opportunity to be heard.High Court’s Analysis:The High Court upheld the Tribunal’s decision, emphasizing that the statutory provision under Section 158BFA(1) mandates the levy of interest for delayed filing of the return. The Court noted that the appellant did not approach the concerned authority for the adjustment of the seized cash within the required period. The Court also referred to the Supreme Court’s decision in New Punjab and Shivaraj v. Patil, which clarified that the Board does not have the power to waive interest under Section 158BFA(1). The Court rejected the appellant's reliance on the Delhi High Court’s decision in Prannoy Roy, stating that it was not applicable to the present case.Conclusion:The High Court dismissed the appeal, confirming that the levy of interest under Section 158BFA(1) is mandatory and cannot be adjusted against the seized amount without a specific provision. The substantial questions of law were answered against the appellant, and the appeal was dismissed with no order as to costs.