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2025 (1) TMI 1353 - HC - Income TaxUndisclosed income from Shilpgram Scheme - allocating the sum between the assessee and Shivganga Reality Pvt. Ltd. at the rate of 70% and 30% for sustaining the addition to the extent of 70% in the case of assessee - HELD THAT - We decline to answer the question being a question of fact confirming the order passed by the Tribunal. Charging of interest u/s. 158BFA (1) - Tribunal holding that the respondent assessee cannot be held responsible for the period during which it did not have the seized material to compile the return the interest under Section 158BFA (1) of the Income Tax Act 1961 cannot be charged for late filing of the return as the assessee was prevented from filing the loss return without getting the seized material - HELD THAT - We are of the opinion that there is no infirmity in the impugned order of the Tribunal holding that the interest should not have been charged interest under Section 158BFA (1) of the Act for the period till the assessee was not provided with the photo copies of the seized materials. The question No. 2 is accordingly answered in favour of the assessee.
ISSUES PRESENTED and CONSIDERED
The primary issues considered in this judgment were: A. Whether the Appellate Tribunal correctly appreciated the facts on record to restrict the addition to Rs. 8,82,787/- as against the addition of Rs. 4,82,938/- worked out by the Assessing Officer in respect of undisclosed income from the Shilpgram Scheme. B. Whether the Appellate Tribunal was right in law and on facts in reversing the order passed by the CIT (A) and thereby directing the Assessing Officer not to charge interest under Section 158BFA(1) of the Income Tax Act, 1961, when the delay was solely attributable to the assessee. ISSUE-WISE DETAILED ANALYSIS Issue A: Restriction of Addition for Undisclosed Income Relevant Legal Framework and Precedents: The legal framework involved the computation of undisclosed income under Section 158BB of the Income Tax Act, based on material found and seized during the course of a search. The Tribunal relied on precedents where factual findings were upheld by appellate authorities. Court's Interpretation and Reasoning: The Court noted that the Tribunal had considered the allocation of income between the respondent and Shivganga Reality Pvt. Ltd. The Tribunal upheld the CIT (Appeals) decision to allocate the sum between the respondent and Shivganga Reality Pvt. Ltd. at a ratio of 70% and 30%, respectively. Key Evidence and Findings: The Tribunal considered the affidavits of farmers confirming the selling price of the land, the seized documents, and the cost of land as worked out from Annexure A/12. The CIT(A) had enhanced the sale consideration, which was not disputed by the assessee. Application of Law to Facts: The Tribunal applied Section 158BB, emphasizing that undisclosed income must be computed based on seized material. The Tribunal found no illegality in the CIT(A)'s order, which allowed deductions based on the cost of land confirmed by affidavits. Treatment of Competing Arguments: The Tribunal dismissed the Revenue's ground, finding that the cost of land should be based on the seized document. The Tribunal also partly allowed the assessee's ground, reducing the addition to Rs. 10,00,000/-. Conclusions: The Tribunal concluded that the assessee's share of profit should be 70%, reducing the addition to Rs. 8,82,787/-. The Court respected the Tribunal's factual findings and dismissed the Revenue's ground. Issue B: Charging of Interest under Section 158BFA(1) Relevant Legal Framework and Precedents: Section 158BFA(1) of the Income Tax Act mandates charging interest for delayed returns. The Tribunal considered precedents where interest was not charged due to delays not attributable to the assessee. Court's Interpretation and Reasoning: The Tribunal held that the assessee could not be blamed for the delay in filing the return when the seized material was not provided. The Tribunal directed the AO not to charge interest for the period during which the assessee was not given the seized material. Key Evidence and Findings: The Tribunal found that the assessee was prevented from filing the return due to the lack of access to seized materials. The Tribunal's view was supported by decisions from other cases where similar circumstances existed. Application of Law to Facts: The Tribunal applied the principle that interest should not be charged for periods when the assessee was unable to file returns due to circumstances beyond their control. Treatment of Competing Arguments: The Tribunal considered the Revenue's argument for charging interest but found it unreasonable given the circumstances. The Tribunal's decision was based on fairness and supported by legal precedents. Conclusions: The Tribunal concluded that interest should not be charged for the period until the assessee received the seized materials. The Court agreed with the Tribunal's findings and answered the question in favor of the assessee. SIGNIFICANT HOLDINGS The Court upheld the Tribunal's findings on both issues, emphasizing the factual nature of the findings and the lack of legal infirmity. The Court's significant holdings include: - The allocation of income between the assessee and Shivganga Reality Pvt. Ltd. at a ratio of 70% and 30% was upheld, resulting in a reduced addition of Rs. 8,82,787/-. - Interest under Section 158BFA(1) should not be charged for periods when the assessee was not provided with the seized materials, aligning with precedents that support fairness in procedural delays. The appeal was dismissed due to the lack of merit, confirming the Tribunal's order and the factual findings therein.
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