TaxTMI 
TaxTMI 
2022 (3) TMI 257
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.... 1995, carried out search and seizure operations under Section 132 of the Act and thereafter, issued notice under Section 158BC of the Act. In response, petitioner filed on 11th November 1996 return of income for Block Period from 1st April 1985 to 11th November 1995 covering Assessment Years 1985- 1986 to 1996-1997 and declaring undisclosed income of Rs. 71,70,000/-. Thereafter, respondent no.3 passed block assessment order on 27th November 1996 under Section 158BC of the Act determining total income of Rs. 6,24,54,530/-. 3. Petitioner made an application to respondent no.2 under Section 245C of the Act. The application came to be admitted by respondent no.2 by an order dated 9th April 1997 passed under Section 245D(1) of the Act. A final order under Section 245D(4) of the Act was passed by respondent no.2 on 31st December 2007 determining the total income of petitioner at Rs. 1,67,82,072/- after making addition of Rs. 96,12,072/- to the income of Rs. 71,70,000/- as per block return of income filed on 20th November 1996. While passing the order under Section 245D(4) of the Act, respondent no.2 had issued directions to waive interest under Section 220(2) of the Act to the extent....
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....2 and accordingly, interest shall be applicable for a much shorter period as against the huge interest liability computed by respondent no.3 while giving effect to the order of respondent no.2; and (b) the levy of surcharge at 15% under Section 113 of the Act is not applicable since the surcharge would be applicable only for searches conducted after 1st June 2002 since the proviso to Section 113 of the Act, under which surcharge is levied, was introduced with effect from 1st June 2002 and hence, cannot be made applicable retrospectively to search conducted prior to 1st June 2002. This application has been rejected and hence, petitioner has approached this Court. 9. On the first aspect as to what period interest under Section 220(2) of the Act is applicable has been covered by a judgment of the Apex Court in Commissioner of Income Tax V/s. Damani Brothers (2003) 259 ITR 475 (SC). The Apex Court held that interest under Section 220(2) of the Act has to be charged upto the date of the order under Section 245D(1) of the Act. Paragraphs 6, 7 and 11 of the said judgment read as under : 6. It has to be noted that the Commission exercises power in respect of income which....
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.... decides to proceed with the matter, it exercises the functions of the income-tax authority and after deciding to proceed with the petition exercises dual function as the Commission and the income-tax authority. The plea is untenable for more reasons than one. Before the Commission decides to proceed with the petition, it cannot complete assessment in respect of a return which is pending before the assessing officer or even cannot act as an appellate or revisional authority. The return filed is in respect of disclosed income. Similar is the position vis--vis the appellate and the revisional authority. The petition before the Commission is in respect of undisclosed income, therefore, the situation is different till the Commission decides to proceed with the matter. That being the position, the income-tax authorities are free to proceed in the prescribed manner till the Commission decides to proceed with the petition. Emphasis was laid by the assessee on certain observations made by this Court in Commissioner of Income Tax v. Express Newspapers Ltd. (1994 (206) ITR 443). Observations to the effect that the proceedings before the Commission are not confined to the income disclosed bef....
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.... said judgment read as under : 1. The appellant purports to pose question of law referred to herein below:- "Whether on the facts and circumstances of the case and in law, the Tribunal was right in holding that the interest under Section 220(2) will be legally leviable from the date of default in payment of demand by the assessee till the date of admission of application by the assessee by settlement Commission under section 245D(1) and not till the final order of settlement commission under section 245D (4)?" xxxxxxxxxxxxxxx 8. The position as far as charging interest under Section 220 (2) is concerned is no longer res integra. It has been made clear under the decision in the case of Damani Brothers (supra) as also in the decision of the Hon'ble Supreme Court in the case of Brij Lal and Ors v. Commissioner of Income-tax reported in [2010] 328 ITR 477 (SC) which is a case relating to levy of interest under section 234B of the Income Tax Act, 1961, relied upon by the assessee, observing; "As stated, till the Settlement Commission decides to admit the case under section 245D (1) the proceedings under the normal provisions remain open. ....
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..... The Court held that the proviso to Section 113 of the Act cannot be treated as clarificatory in nature, thereby having retrospective effect. Paragraphs 27, 28, 29, 34 and 38 of the said judgment read as under : 27. Before we proceed to answer the question, it would be necessary to keep in mind the scheme of block assessment introduced in Chapter XIVB to Finance Act, 1995 w.e.f. 1st July, 1995. As already mentioned in brief by us, Chapter XIVB of the Act which deals with block assessment lays down a special procedure for search cases. The main reason for adding these provisions in the Act was to curb tax evasion and expedite as well as simplify the assessments in such search cases. Undisclosed incomes have to be related in different years in which income was earned under block assessment. This is because in such cases, the "block period" is for previous years relevant to 10/6 assessment years and also the period of the current previous year up to the date of the search, i.e., form April 1, 2000, to January 17, 2001, in this case. The essence of this new procedure, therefore, is a separate single assessment of the "undisclosed income", detected as a result of search and th....
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.... but not disclosed, therefore, in the first blush, argument of the Department that undisclosed income referred to in Chapter XIVB is also a part of total income and consequently Section 4 becomes the charging section in respect thereof as well. However, a little closer scrutiny leads us to conclude that that is not the position as per the scheme of Chapter XIVB. In the first place, income referred to in Section 5 talks of total income of any 'previous year'. As per Section 2 (34) of the Act, 'previous year' means previous year as defined in Section 3. Section 3 lays down that previous year means 'the financial year immediately preceding the assessment year'. Undisclosed income referred to in Chapter XIVB is not relateable to the previous year. On the contrary, it is for the block period which may be 6 years or 10 years, as the case may be. Consequently, as already mentioned, while analyzing the scheme of Chapter XIVB, such Chapter is a complete code in respect of assessments of 'undisclosed income'. Not only it defines what is undisclosed income, it also lays down the block period for which undisclosed income can be taxed. Further, it also lays down ....