2004 (11) TMI 278 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the rectification order under section 154/158BC(c) of the Income-tax Act.
2. Levy of interest under section 158BFA(1) for delay in filing the block return.
3. Applicability of the principle of "Lex non cogit ad impossibilia" in the context of delayed filing due to non-availability of seized documents.
4. Distinction between "tax payable" and "sum payable" under sections 158BC(c) and 143(3) respectively.
5. Limitation period for passing the order levying interest.
6. Payment of admitted tax prior to filing the block return and its impact on interest levy.

Issue-wise Detailed Analysis:

1. Validity of the Rectification Order under Section 154/158BC(c):
The assessee contested the rectification order under section 154, arguing that there was no mistake apparent from the record in the original order under section 158BC(c). The original order did not include a specific direction to levy interest under section 158BFA(1). The Tribunal noted that section 158BC(c) requires the Assessing Officer to determine the undisclosed income and the tax payable, but does not explicitly mandate the determination of interest. The Tribunal held that rectifying an order to include interest where none was originally specified is beyond the scope of section 154, which is intended to correct manifest errors apparent from the record.

2. Levy of Interest under Section 158BFA(1):
The CIT(A) upheld the levy of interest under section 158BFA(1), equating it with the mandatory nature of interest under section 234A. The Tribunal, however, disagreed, noting that the original assessment order did not include any mention of interest under section 158BFA(1). The Tribunal emphasized that interest could not be levied for the first time through rectification proceedings under section 154, as this would constitute a new order rather than a correction of an existing one.

3. Principle of "Lex non cogit ad impossibilia":
The assessee argued that the delay in filing the block return was due to the non-availability of seized documents, which were necessary for preparing an accurate return. The Tribunal agreed, citing the principle of "Lex non cogit ad impossibilia" (the law does not compel a man to do what he cannot possibly perform). The Tribunal found that the delay was attributable to the department's failure to provide the necessary documents, and thus, the charge of interest was unjustified.

4. Distinction between "Tax Payable" and "Sum Payable":
The assessee highlighted the distinction between "tax payable" in section 158BC(c) and "sum payable" in section 143(3), arguing that the former does not include interest. The Tribunal acknowledged this distinction but concluded that the determination of tax payable under section 158BC(c) implicitly includes interest under section 158BFA, as interest is part of the tax liability. However, since no specific order for interest was made in the original assessment, it could not be introduced through rectification.

5. Limitation Period for Passing the Order Levying Interest:
The Tribunal noted that no separate time limit is prescribed for passing an order under section 158BFA(1). However, it emphasized that the order for levying interest must be made within the time limits applicable to the original assessment. Since the original order did not include a direction to levy interest, introducing it later through rectification was not permissible.

6. Payment of Admitted Tax Prior to Filing the Block Return:
The assessee had paid the entire admitted tax before the due date for filing the block return. The Tribunal referred to the Delhi High Court's decision in Dr. Pranoy Roy v. CIT, which held that no interest under section 234A could be charged if the admitted tax was paid on time, even if the return was filed late. Applying this principle, the Tribunal concluded that the non-levy of interest under section 158BFA(1) in the original order was not a mistake apparent from the record.

Conclusion:
The Tribunal canceled the rectification order under section 154, holding that the original assessment order did not contain any apparent mistake that warranted correction. The appeal was allowed in favor of the assessee.