2019 (1) TMI 299 - HC - Income Tax

Denial of waiver of interest u/s 158 BFA (1) for the Block Period 1986-87 to 1996-97 - record to substantiate the furnishing of the documents - Held that - The benefit of exclusion of time has been extended. However, interest has been held payable from April 1998 to January 1999. Though the petitioner would contend that the documents were furnished during the month of July 1998. However, neither the petitioners are able to establish that they have received the documents during July 1998 nor the respondents are able to establish their statement that the documents were furnished during March 1998. In absence of any record to substantiate the furnishing of the documents, we inclined to accept the petitioners version. Therefore, the petitioners are entitled to one months time from July, 1998 to file returns.Therefore, delay in filing returns has to be computed from August, 1998. In view of the above, both the writ petitions are partly allowed and the impugned orders are modified with following directions (i)The petitoiner shall calculare interest for the period starting from August 1998 upto 11th January 1999 on the undiclosed income in terms of Section 158 B & A of the Income Tax, Act, 1961 and pay the same within 4 weeks from the date of receipt of a copy of this order and report compliance to the respondent. (ii)Accordingly, Levy for the interest for the period prior to August, 1998 in filing returns stands set aside in the both the cases. (iii)Respondents shall thereafter close the respective files. No costs. Consequently, connected miscellaneous petition is closed.

Issues:
1. Challenge to denial of waiver of interest under Section 158 BFA (1) of the Income Tax Act, 1961 for the Block Period 1986-87 to 1996-97.
2. Dispute arising from search conducted in the residential and business premises leading to recovery of gold and documents.
3. Delay in filing returns due to unavailability of seized documents.
4. Application for waiver of interest under Section 158 BFA (1) of the Act.
5. Interpretation of provisions related to levy of interest on undisclosed income.
6. Reference to circular by Central Board of Direct Taxes for waiver conditions.
7. Comparison with relevant case laws.
8. Argument regarding delay in filing returns and entitlement for waiver of interest.
9. Assessment completion and subsequent demand for interest under Section 154 of the Act.
10. Analysis of interest payable under Section 158 BFA (1) and its application in the case.
11. Impact of delay in filing returns on interest calculation.
12. Exclusion of time period for furnishing seized documents in interest computation.
13. Decision on waiver of interest and modification of impugned orders.

Detailed Analysis:

1. The petitioners challenged the denial of waiver of interest under Section 158 BFA (1) of the Income Tax Act, 1961 for the Block Period 1986-87 to 1996-97. The dispute arose from a search operation resulting in the seizure of gold and documents from the petitioners' premises.

2. The delay in filing returns was attributed to the unavailability of seized documents, which were only furnished in July 1998. This delay led to the subsequent demand for interest under Section 154 of the Act.

3. The petitioners applied for waiver of interest under Section 158 BFA (1) of the Act, citing conditions laid down by the Central Board of Direct Taxes in a circular.

4. The interpretation of provisions related to the levy of interest on undisclosed income, as outlined in Section 158 BFA (1), was a crucial aspect of the case. The petitioners argued for waiver based on the specific conditions mentioned in the statute.

5. Reference was made to relevant case laws, including the decision of the Karnataka High Court and the Division Bench of the High Court, to support the argument for waiver of interest.

6. The court analyzed the delay in filing returns and the justification for the petitioners' request for waiver of interest. The argument centered around the circumstances leading to the delay and the entitlement of the petitioners for relief.

7. The assessment completion and subsequent demand for interest under Section 154 of the Act were key factors in determining the applicability of interest under Section 158 BFA (1).

8. The court examined the impact of the delay in filing returns on the calculation of interest, considering the specific provisions outlined in the statute.

9. The exclusion of the time period for furnishing seized documents in the computation of interest played a significant role in the court's decision on the waiver of interest.

10. Ultimately, the court decided on the waiver of interest and modified the impugned orders, directing the petitioners to calculate and pay interest for a specific period and closing the respective files.

This detailed analysis provides a comprehensive overview of the judgment, addressing each issue involved in the case thoroughly and highlighting the key legal arguments and interpretations considered by the court.

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