2016 (7) TMI 1542 - AT - Income Tax

Maintainability of appeal - low tax effect - monetary limit to maintain appeal - HELD THAT - We find the tax effect in the instant appeal filed by the Revenue is admittedly below 10 lakhs. Therefore in view of Circular No.21/2015 dated 10-12-2015 of CBDT raising the monetary limit for filing of appeals by the Department before the Tribunal which also applies to pending appeals filed by the Revenue the appeal filed by the Revenue is not maintainable and has to be dismissed. In view of the above the appeal filed by the Revenue is dismissed. Levy of surcharge of 10% on the tax payable - amount worked out on the basis of the assessed undisclosed income of the Respondent assessee - HELD THAT - Levy of surcharge in case of block assessments pertaining to the period prior to 01-06-2002 has been settled by the latest decision of CIT Vs. Vatika Township Pvt. Ltd. 2014 (9) TMI 576 - SUPREME COURT as held in the said decision that though provision for surcharge under the Finance Acts has been in existence since 1995 the charge of surcharge with respect to block assessments having been created for the first time by the insertion of the proviso to section 113 of the I.T. Act 1961 by the Finance Act 2002 it is clearly a substantive provision and is to be construed as prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by Parliament. Accordingly it was held that surcharge will not be applicable to block assessments pertaining to period prior to 01-06-2002. Since the block period in the instant case is admittedly for the period 01-04-1989 to 08-121999 i.e. prior to 01-06-2002 therefore surcharge is not applicable to the facts of the present case. Liability to pay any interest u/s.158BFA(1) - HELD THAT - Respectfully following the decision of MR. MUKUND KRISHNAJI PURANDARE 2012 (9) TMI 1167 - ITAT PUNE we restore the issue to the file of the AO with a direction to decide the issue of levy of interest u/s.158BFA(1) in the light of the decision of the Tribunal and in accordance with law after giving due opportunity of being heard to the assessee.

Summary

Issues:
1. Maintainability of appeal by Revenue due to tax effect below ?10 lakhs.
2. Levy of surcharge on undisclosed income.
3. Charging interest under section 158BFA(1) of the Income Tax Act, 1961.

Issue 1: Maintainability of Revenue's Appeal
The appeal by the Revenue was challenged by the assessee on the grounds that the tax effect was below ?10 lakhs, citing CBDT Circular No.21/2015. Both sides acknowledged that the tax effect was indeed below the specified limit. The ITAT Pune, following the Circular, dismissed the Revenue's appeal as not maintainable due to the monetary limit set by the CBDT.

Issue 2: Levy of Surcharge on Undisclosed Income
The assessee contested the levy of a 10% surcharge on the tax payable based on the assessed undisclosed income. The ITAT Pune referred to a Supreme Court decision in CIT Vs. Vatika Township Pvt. Ltd., which clarified that surcharge is not applicable to block assessments before 01-06-2002. As the block period in this case was prior to that date, the ITAT Pune set aside the CIT(A)'s decision and allowed the assessee's objection regarding the surcharge.

Issue 3: Charging Interest under Section 158BFA(1)
Regarding the charging of interest under section 158BFA(1) of the Income Tax Act, the ITAT Pune noted that the AO did not have the power to extend the time for filing the return of the block period. Despite the explanations provided by the assessee, the CIT(A) directed the AO to charge interest as per law. The ITAT Pune, following a similar case precedent, restored the issue of interest levy to the AO for fresh consideration in line with the Tribunal's directions and legal principles. The ITAT Pune allowed the assessee's cross objection on this ground for statistical purposes.

In conclusion, the ITAT Pune dismissed the Revenue's appeal due to the tax effect being below the specified limit, allowed the assessee's objection regarding surcharge levy based on the Supreme Court decision, and directed a reconsideration of the interest levy issue by the AO in accordance with legal principles and Tribunal directions.