2007 (3) TMI 199 - HC - Income Tax

Maintainability of appeal before CIT appeal aginast levy of interest u/s 158BFA for delay in filing return u/s 158BC held that levy of interest u/s 158-BFA (1) is not appealable u/s 246-A - levy of interest can be appealed only if such a challenge is together with challenge to assessment as u/s 158-BC - appeals filed by the appellants before the CIT were not maintainable as such remedy of appeal against levy of interest only is not provided by the statute appeal dismissed

Issues Involved:
1. Legality of the levy of interest under Section 158-BFA(1) of the Income Tax Act, 1961.
2. Whether an appeal against the levy of interest under Section 158-BFA(1) is maintainable under Section 246-A of the Income Tax Act, 1961.

Detailed Analysis:

Legality of the Levy of Interest under Section 158-BFA(1):
1. Search and Seizure: A search was conducted on the appellants' premises on 24.9.1998, and assets, cash, documents, and books of accounts were seized. The appellants requested copies of the seized documents multiple times and finally received them on 1.11.1999.

2. Notice and Return Filing: The Assessing Officer issued a notice under Section 158-BC(a) on 28.2.1999, asking the assessee to file the return within 16 days. The appellants claimed the time was extended till 24.2.2000, but the Assessing Officer refused to extend the time on 17.3.2000. The appellants filed their returns in August 2000.

3. Assessment Order: On 29.9.2000, the Deputy Commissioner of Income Tax passed an order under Section 158-BC(c), determining undisclosed income and levying interest under Section 158-BFA(1) due to the delay in filing the return. Penalty proceedings under Section 158-BFA(2) were also initiated.

4. Appeal to Commissioner of Income Tax (Appeals): The appellants challenged the order, but the appeals were dismissed on 11.3.2002. The Commissioner concluded that the appellants did not have a strong case on merits and that there was no provision for appeal against charging of interest.

5. Appeal to Income Tax Appellate Tribunal (ITAT): The ITAT also dismissed the appeals, holding that an appeal is not provided against the levy of interest under Section 158-BFA(1) as per Section 246-A of the Act.

Maintainability of Appeal under Section 246-A:
1. Arguments by Appellants: The appellants argued that the levy of interest is part of the assessment process and, therefore, appealable under Section 246-A. They relied on judicial precedents, including the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, which stated that levy of interest is part of the assessment process.

2. Provisions of Section 246-A: Section 246-A provides for appeals against specific orders, including assessments under Section 158-BC(c) and penalties under Section 158-BFA(2). However, it does not explicitly provide for appeals against the levy of interest under Section 158-BFA(1).

3. Judicial Precedents: The appellants' counsel cited cases that supported the view that levy of interest is part of the assessment and, therefore, appealable. However, the court noted that these cases pertained to different provisions (Sections 139 and 215) and were not directly applicable to the special procedure for assessment under Chapter XIV-B of the Act.

4. Distinction between Provisions: The court highlighted the distinction between the provisions under Chapter XIV (ordinary assessment) and Chapter XIV-B (special procedure for assessment of search cases). The latter deals with assessees charged with undisclosed income and is more stringent.

5. Absence of Discretion: Unlike Sections 139 and 215, Section 158-BFA(1) does not provide the Assessing Officer with discretion to reduce or waive the interest. The provision mandates that the assessee "shall be liable to pay simple interest."

6. Scope of Appeal: Even if the levy of interest were considered part of the assessment, the appeal would have a limited scope. The assessee could only deny liability by proving no undisclosed income or timely submission of the return. The appellants did not challenge the levy of interest on these grounds.

7. Conclusion: The court concluded that the appeals against the levy of interest under Section 158-BFA(1) were not maintainable under Section 246-A. The remedy of appeal against the levy of interest only is not provided by the statute.

Judgment:
The appeals filed by the appellants before the Commissioner (Appeals) were not maintainable as the statute does not provide a remedy of appeal against the levy of interest under Section 158-BFA(1) alone. All the appeals were dismissed.

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