2012 (11) TMI 846 - HC - Income Tax

Whether Explanation 1(iv) to Section 158BE is retrospective in nature the period taken to approach the Settlement Commission and its rejection is to be excluded - Held that - given the fact that the scope of Explanation is clarificatory in nature all that the insertion of the Explanation under the Finance Act 2002 does is to bring in is what was contemplated under Section 245HA since omitted with effect from 1.6.2002 under the Finance Act 2002. In other words what was provided for under Section 245HA is now brought in by way of Explanation 1(iv) under the Finance Act 2002 which by deleting 245HA substitutes Exp. 1 to 158 BE . Explanation, clause (iv) in Section 158BE is retrospective - if a statute deals merely with the matters of procedure and does not affect the rights of parties, the new procedure would prima facie apply to all pending as well as future actions Regarding the levy of interest under Section 158 BFA Held that - Contention of the assessee that the delay in furnishing the block return was due to non-supply of the copies of the seized materials to it by the Income Tax Authorities was devoid of merits as the assessee has not brought any positive evidence on record to show that it was in need of vital information without which it was not in a position to complete its block return - In the absence of any materials placed before the Tribunal, the said contention was rejected

Issues Involved:
1. Limitation period for block assessment under Section 158BC.
2. Retrospective nature of Explanation 1(iv) to Section 158BE.
3. Retrospective application of surcharge under Section 113.
4. Interest levied under Section 158BFA(1) due to delay in supply of seized materials.

Detailed Analysis:

1. Limitation Period for Block Assessment under Section 158BC:
The primary issue was whether the block assessment made under Section 158BC was barred by limitation. The Tribunal upheld the block assessment by excluding the period taken to approach the Settlement Commission and its subsequent rejection. The court noted that the search and seizure operations were conducted on various dates between 24.08.2000 and 23.10.2000. The assessees filed petitions before the Settlement Commission on 31.05.2001, which were rejected on 11.06.2002. The assessment orders were passed on 26.09.2003. The Tribunal held that the period during which the applications were pending before the Settlement Commission should be excluded in computing the time limit for passing assessment orders under the block assessment procedure.

2. Retrospective Nature of Explanation 1(iv) to Section 158BE:
The assessees argued that Explanation 1(iv) to Section 158BE, inserted by the Finance Act 2002 with effect from 01.06.2002, should be considered prospective and not applicable to applications made before that date. However, the Tribunal and the court held that the Explanation was retrospective in nature. The court emphasized that the Explanation covers applications pending before the Settlement Commission as of the date of its introduction. The court clarified that the clause "where an application made before the Settlement Commission is rejected by it" includes applications already pending and rejected, thus applying to the assessees' case.

3. Retrospective Application of Surcharge under Section 113:
The court referred to its earlier decision in T.C.(A) Nos. 246, 247, and 248 of 2008, where it had held against the assessees regarding the retrospective application of surcharge under Section 113. Following the Apex Court's decision in Commissioner of Income Tax Vs. Rajiv Bhatara, the court reiterated that the Finance Act 2001 was applicable to searches initiated in 2000, thereby affirming the retrospective nature of the surcharge under Section 113.

4. Interest Levied under Section 158BFA(1) Due to Delay in Supply of Seized Materials:
The assessees contended that the delay in furnishing the block return was due to the non-supply of seized materials by the Income Tax Authorities. However, the Tribunal found no merit in this argument, as the assessees failed to provide any positive evidence showing that the lack of vital information prevented them from completing their block return. The court upheld the Tribunal's decision, stating that the issue was a pure question of fact with no further materials presented to warrant interference.

Conclusion:
The High Court dismissed the tax case appeals, confirming the Tribunal's order. The court held that the block assessment was not barred by limitation, Explanation 1(iv) to Section 158BE was retrospective, the surcharge under Section 113 was applicable retrospectively, and the interest levied under Section 158BFA(1) was justified. The appeals were dismissed with no costs.

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