TaxTMI 
TaxTMI 
2007 (3) TMI 199
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....gation) for inspection of the seized documents and xerox copies of some of those. Similar prayer was repeated on 3.3.1999 and 6.4.1999. On 5.7.1999, Assessing Officer directed the appellants to pay requisite copying charges for obtaining xerox copies of the seized documents. The assessee submitted copy of the challen regarding deposit of copying charges and requested for the copies of seized documents on 30.7.1999. On 11.10.1999, the Assessing Officer directed the assessee to arrange for a xerox machine for the purpose of getting the documents xeroxed. Ultimately, copies of the seized documents were furnished to the appellants on 1.11.1999. 3. In the meanwhile, on 28.2.1999, the Assessing Officer issued a notice u/s 158-BC (a) of the Act asking the assessee to file the return within 16 days from the date of notice. It is the claim of the appellants that taking into consideration the time required for furnishing the copies, the Assessing Officer had extended the time for the purpose of filing the return and the time was extended till 24.2.2000 (In fact, on referring to the documents, it appears that it was only on 17.3.2000, the Assessing Officer refused t....
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....respective counsel. 10. We may state here itself the grounds of appeal those were pleaded by the assessees before Commissioner of Income Tax (Appeals): "The order of the AO is arbitrary, contrary to the fact and bad in law. The interest levied by the AO is just mechanical .......... and hence the same should be cancelled." 11. On reference to Column 9 in Form No.35 of the appeal memo, the purpose of appeal can be judged. "9. Where a return has been filed by appellant for the assessment year in connection with which the appeal is preferred, whether tax due on the income returned has been paid in full (if the answer is in the affirmative, give details of date of payment and amount paid)" Appeal preferred is against the charging of interest u/s158-BFA(1) 12. The grounds of appeal are specificall reproduced because the only issue under consideration, for its adjudication, may require a reference as to the nature of challenge raised by the assessee in the appeal before CIT (Appeals). 13. Section 246-A is the provision relevant providing a remedy of appeals against orders. Advocate Shri Gangapurwala for all the assessees has placed reliance upon clauses (k) ....
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....ments. .Central Provinces Manganese Ore Co. Ltd. v. CIT[1986] 160 ITR 961(SC) AIR 1987 Supreme Court, 438 - Central Provinces Manganese Ore Co. Ltd. V/s C.I.T. was relied upon by Advocate Shri Gangapurwala for dual purpose. He advanced two propositions on the basis of observations of the Hon'ble Apex Court within the reported judgment. He propounded that levy of interest is a process of assessment and, therefore, if an appeal is provided against assessment, by virtue of Section 246-A of the Act, it must be said that appeal is also provided against part of assessment i.e. levy of interest. As a second line of argument, he submitted that only as against levy of interest, appeal is available, although the scope of such appeal is restricted to the denial of liability as laid down by the Hon'ble Apex Court. 16. In para 8 of the said judgment, the Hon'ble Apex Court observed thus (page 965): "At the very outset, it is necessary to consider the nature of the levy of interest under sub-s.(8) of S.139 and under S.215. It is not correct to refer to the levy of such interest as a penalty. The expression "penal interest" has acquired usage, but is in fact an inaccurate descripti....
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....ined for the purpose of emphasis i.e. "to dispute the levy in appeal" would be required to be read as disputing the levy of interest in an appeal challenging the assessment (original assessment and not only assessment of interest) on the ground that assessee is not liable to be assessed. If the original assessment itself is challenged, in the said appeal, the assessee can certainly challenge the levy of interest. However, according to Advocate Shri Gangapurwala, the terminal part of this quotation hereinabove indicates that levy of interest only can be challenged, although to a limited extent that he is not liable to the levy at all. If the clause "to dispute levy in appeal" is read as understood by us and described hereinabove, in that case, the challenge to the levy of interest, although raised within the appeal against entire assessment would be limited. But it is the submission of Advocate Shri Gangapurwala that by virtue of the portions underlined for the purpose of emphasis in the two quotations hereinabove, enables the assessee to prefer an appeal challenging the levy of interest, without challenging the assessment, although to a limited extent i.e. he is not liable to....
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....edure for ascertaining and imposing liability on him. If the assessee denies his liability to be assessed under the Act, he has a right of appeal to the Appellate Assistant Commissioner against the order of assessment. Where penal interest is levied under section 215 by the order of assessment, the assessee may altogether deny his liability to pay such interest on the ground that he was not liable to pay advance tax at all or that the amount of advance tax determined by the Income-tax Officer as payable ought to be reduced. In either case he denies his liability, wholly or partially, to be assessed. Similarly, where interest is levied under section 139 of the Act, the assessee may deny his liability to pay such interest on the ground that the return was not belated or that the penal provision was not attracted at all to his case. In such a case also he denies his liability to be assessed to interest." (emphasis added) 22. After considering the decision of Gujarat High Court in the matter of Bhikhoobhai N. Shah V/s Commissioner of Income-tax, Gujarat V - (1978) 114 ITR, 197, which is also relied upon by Advocate Shri Gangapurwala, the Supreme Court concluded its observations thus....
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....though scope of such appeal may be limited to denial of liability to be assessed, stand supported by the case law relied upon by him. However, before applying those observations to the matter at hands, we are required to take into consideration as to whether the provisions under which appellants are assessed for penal interest are peri materia with the provisions regarding which the observations in the reported judgment are recorded. 27. The cases relied upon interpret the provisions of Sections 139, 215 and 246 of the Act. The interest is chargeable u/s 215 of the Act when the advance tax self assessed by the assessee and paid is less than 75% of the advance tax as may be assessed by the Assessing Officer. Provision regarding interest, so far as Section 139 of the Act is concerned, is contained in sub-section (8) (a) of the said provision. The interest is levied u/s 139 (8) (a) for default in filing return on or before specified date. Hence, it must be said that Section 139 (8) (a) is more closer to Section 158-BFA. This is because the interest leviable under both these provisions is on account of default on the part of assessee to submit the return before specified date ....
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....need not be levied. The provision is couched in the words "The assessee shall be liable to pay simple interest....." Thus, there is no option or escape from interest leviable u/s 158-BFA (1) to an assessee, who is being assessed only after raid and search u/s 132 of the Act. . For the purpose of emphasis, we may refer to Section 158-BC (a) (ii), which is pertaining to the notice period and the same reads: "(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1^st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice, a return in the prescribed form ........." The provision does not seem to keep any room enabling the Assessing Officer to grant time extension beyond forty-five days. 30. The learned Commissioner of Income-tax (Appeals), therefore, appears to be justified in recording observations in para 9 that the language of Section 158-BC (a) (ii) does not indicate that the Assessing Officer had any discretion to grant time extension. For the reasons discussed he....
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....f the documents seized only on 1.11.1999 and they had been pursuing for the same by communications dated 9.10.1998; 3.3.1999; 6.4.1999 and 5.7.1999. Unfortunately, for the appellants, admittedly they submitted the returns only in August, 2000, which is not within forty-five days since the date of supply of copies of documents. However, as described hereinabove, unfortunately for the appellants, the Assessing Officer has no discretion either to reduce or to waive the interest and reduction of interest can only be by reduction of period. The grounds as to why return was submitted late, therefore, may not present a sustainable appeal as contemplated by the observations in the reported judgments, relied upon by Advocate Shri Gangapurwala. The appellants may feel that they are pitted against a harsh legislation, but that is what it is. 33. In the matter at hands, the search u/s 132 was effected on 24.9.1998. Notice u/s 158-BC(a) was issued on 20.9.1999 granting 16 days time. Time extension, if any, granted by the Assessing Officer would be illegal if it was beyond forty-five days, because the statute does not permit him to grant a period exceeding forty-five days for directing ....
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....ssioner available, which formerly was available only before Commissioner (Appeals). The learned Members of ITAT felt that observations of the Supreme Court in the matter of Central ProvincesManganeseOre Co.Ltd. (supra) were not applicable to the cases of appellants, because no particular section of the Income-tax Act was specifically mentioned in relation to the word "assessment" and, therefore, the said word was given wide meaning by the Supreme Court so as to include the levy of interest. These observations in para 24 of the impugned judgment have a reference to the observations in para 8 of the reported judgment). On the other hand, word "assessment" as mentioned in Clause (k) of Section 246-A(1) is with reference to specific Clause (c) of Section 158-BC wherein the word "assessment' refers only to the assessment of undisclosed income and determination of tax payable therein. 36. Here we intend to come back to the issue, which we left incomplete in para 8. We have taken into consideration other distinguishing features as between Section 139 and Section 158-BFA in the said para and the crucial distinction, which makes the observations of the Supreme Court unavailable to the....