2018 (5) TMI 714 - HC - Income Tax

Leviability of interest u/s. 158BFA(1) - whether from what date interest under section 158BFA(1) of the Income TAx Act, 1961 is leviable? - Tribunal upholding the interest u/s. 158BFA(1) even for the period of delay in filing the return of income, caused due to delay in obtaining copies of the seized materials from the Income Tax Department, which was beyond the control of the appellant? - whether the levy of such interest for a period of 21 months was just and proper? Held that - We are convinced to take a stand in favour of the assessee for the reason that the assessee was requesting for copies of the seized documents for nearly a year and the copies of those documents were furnished to the assessee between 18.06.1999 to 22.06.1999. On a reading of statutory provision one gets an impression that no such plea is entertainable and limitation does not stop and continues to run upon issuing notice under section 158BC. We cannot ignore the principles of natural justice, which will have to be read into the provision, as the assessee without being supplied with the necessary documents, which were seized during the course of search, would not be in a position to file a proper return. Law does not compel a person to perform that which is impossible. Admittedly, the delay in not filing the return after the notice dated 20.07.1998 is not attributable to the assessee. No where, the Revenue has taken a stand that the request made by the assessee for supply of seized documents was either unreasonable or uncalled for. Later, the department has furnished the photostat copies of the seized documents. Therefore, the period during which the assessee was waiting for the copies of the documents, which were seized, has to be necessarily excluded and if this is excluded, the period between 1998 to 22.06.1999 has to be necessarily excluded. Case of Commissioner of Income Tax and another v. B.Nagendra Baliga 2014 (6) TMI 114 - KARNATAKA HIGH COURT to be followed.

Summary

Issues involved:
Levying interest under section 158BFA(1) of the Income Tax Act, 1961 for a block assessment period from 01.04.1988 to 27.03.1998.

Detailed Analysis:

1. Substantial Questions of Law: The appeal raised substantial questions of law regarding the levy of interest under section 158BFA(1) without considering legal issues and the justification for interest during a delay in filing the return due to obtaining seized materials.

2. Factual Background: A search was conducted in the petitioner's premises on 27.03.1998, leading to the issuance of notices for furnishing documents. The petitioner received copies of seized documents between 18.06.1999 to 22.06.1999 and filed the return on 04.05.2000. The Assessing Officer levied interest for 11 months from 22.06.1999 to 04.05.2000.

3. Appeals and Tribunal Orders: The petitioner's appeal before the Commissioner of Income Tax (Appeals) and the subsequent appeal before the Tribunal resulted in varied decisions regarding the period for levying interest under section 158BFA(1).

4. Contending Views: The Revenue argued for interest from the date of the initial notice in 1998, while the petitioner contended interest should start from the date of the Deputy Commissioner's notice in 1999.

5. Judicial Analysis: The Court considered the timeline of events and the petitioner's need for seized documents to file a proper return. The Court emphasized the principles of natural justice and excluded the waiting period for documents from the interest calculation.

6. Precedents and Legal Interpretation: The Court cited decisions from the High Courts of Karnataka and Delhi to support the exclusion of the waiting period from interest calculation. The Court differentiated a previous case's applicability to the present scenario.

7. Judgment: The Court partially allowed the appeal, ruling in favor of the Revenue for one substantial question of law and in favor of the petitioner for the other. The Court held the petitioner liable to pay interest for only 11 months, from 22.06.1999 to 04.05.2000, based on the exclusion of the waiting period for seized documents.