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TMI Blog2007 (3) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... horities of the department in accordance with the provisions of Section 132 of the Income Tax Act, 1961 (henceforth referred to as the Act for the sake of brevity) in the premises of the appellants on 24.9.1998. Certain assets, cash, documents and books of accounts were seized from the premises of all the appellants. On 9.10.1998, the appellants requested Assistant Director of the Income Tax (Investigation) for inspection of the seized documents and xerox copies of some of those. Similar prayer was repeated on 3.3.1999 and 6.4.1999. On 5.7.1999, Assessing Officer directed the appellants to pay requisite copying charges for obtaining xerox copies of the seized documents. The assessee submitted copy of the challen regarding deposit of copying charges and requested for the copies of seized documents on 30.7.1999. On 11.10.1999, the Assessing Officer directed the assessee to arrange for a xerox machine for the purpose of getting the documents xeroxed. Ultimately, copies of the seized documents were furnished to the appellants on 1.11.1999. 3. In the meanwhile, on 28.2.1999, the Assessing Officer issued a notice u/s 158-BC (a) of the Act asking the assessee to file the return wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een held as not maintainable, the other grounds relating to the quantum of interest have become infructuous. The order of CIT (A) is, therefore, upheld." 8. Thus, the decision of Commissioner of Income Tax (Appeals) that remedy of appeal was not available to the assessees is upheld by the ITAT and the appellants are before us challenging the said decision. 9. Heard respective counsel. 10. We may state here itself the grounds of appeal those were pleaded by the assessees before Commissioner of Income Tax (Appeals): "The order of the AO is arbitrary, contrary to the fact and bad in law. The interest levied by the AO is just mechanical . and hence the same should be cancelled." 11. On reference to Column 9 in Form No.35 of the appeal memo, the purpose of appeal can be judged. "9. Where a return has been filed by appellant for the assessment year in connection with which the appeal is preferred, whether tax due on the income returned has been paid in full (if the answer is in the affirmative, give details of date of payment and amount paid)" Appeal preferred is against the charging of interest u/s158-BFA(1) 12. The grounds of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doing the assessment u/s 158-BC (c) about undisclosed income of an assessee. Learned Assistant Solicitor General emphasised that there is no clause, which provides an appeal against the order levying interest as empowered by Section 158-BFA (1). 15. In order to meet this challenge, learned counsel for the appellants has placed reliance upon couple of judicial pronouncements. .Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961(SC) AIR 1987 Supreme Court, 438 - Central Provinces Manganese Ore Co. Ltd. V/s C.I.T . was relied upon by Advocate Shri Gangapurwala for dual purpose. He advanced two propositions on the basis of observations of the Hon'ble Apex Court within the reported judgment. He propounded that levy of interest is a process of assessment and, therefore, if an appeal is provided against assessment, by virtue of Section 246-A of the Act, it must be said that appeal is also provided against part of assessment i.e. levy of interest. As a second line of argument, he submitted that only as against levy of interest, appeal is available, although the scope of such appeal is restricted to the denial of liability as laid down by the Hon'ble Apex Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mself to the ground that he is not liable to the levy at all." 18. We read the observations in two parts. There need be no controversy that Clause (c) of Section 246 provides an appeal against an order where the assessee denies his liability to be assessed, for any of the reasons stated in those observations. We are of a considered view that the clause underlined for the purpose of emphasis i.e. "to dispute the levy in appeal" would be required to be read as disputing the levy of interest in an appeal challenging the assessment (original assessment and not only assessment of interest) on the ground that assessee is not liable to be assessed. If the original assessment itself is challenged, in the said appeal, the assessee can certainly challenge the levy of interest. However, according to Advocate Shri Gangapurwala, the terminal part of this quotation hereinabove indicates that levy of interest only can be challenged, although to a limited extent that he is not liable to the levy at all. If the clause "to dispute levy in appeal" is read as understood by us and described hereinabove, in that case, the challenge to the levy of interest, although raised within the appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand issued pursuant to the assessment order is for the total amount of liability imposed inclusive of tax and interest. ..... ..... ...... It is, therefore, clear that levy of penal interest under sections 139 and 215 is part of the assessment. When such penal interest is levied the assessee is "assessed", meaning thereby, he is subjected to the procedure for ascertaining and imposing liability on him. If the assessee denies his liability to be assessed under the Act, he has a right of appeal to the Appellate Assistant Commissioner against the order of assessment. Where penal interest is levied under section 215 by the order of assessment, the assessee may altogether deny his liability to pay such interest on the ground that he was not liable to pay advance tax at all or that the amount of advance tax determined by the Income-tax Officer as payable ought to be reduced. In either case he denies his liability, wholly or partially, to be assessed. Similarly, where interest is levied under section 139 of the Act, the assessee may deny his liability to pay such interest on the ground that the return was not belated or that the penal provision was not attracted at all to his case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt i.e. denying a liability to be assessed for levy of interest and that too by demonstrating that the conditions for exercise of the power to levy interest did not exist. 26. In fact, both the propositions advanced by Advocate Shri Gangapurwala that levy of interest is part and parcel of assessment and that appeal against levy of interest is available, although scope of such appeal may be limited to denial of liability to be assessed, stand supported by the case law relied upon by him. However, before applying those observations to the matter at hands, we are required to take into consideration as to whether the provisions under which appellants are assessed for penal interest are peri materia with the provisions regarding which the observations in the reported judgment are recorded. 27. The cases relied upon interpret the provisions of Sections 139, 215 and 246 of the Act. The interest is chargeable u/s 215 of the Act when the advance tax self assessed by the assessee and paid is less than 75% of the advance tax as may be assessed by the Assessing Officer. Provision regarding interest, so far as Section 139 of the Act is concerned, is contained in sub-section (8) (a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) that imposition of penalty is not mandatory and the said sub-section again contains a proviso laying down the circumstances when no order imposing such penalty shall be made. Within sub-section (1) of Section 158-BFA, there is no provision empowering the Assessing Officer either to reduce the interest or to waive it or to come to a conclusion that it need not be levied. The provision is couched in the words "The assessee shall be liable to pay simple interest....." Thus, there is no option or escape from interest leviable u/s 158-BFA (1) to an assessee, who is being assessed only after raid and search u/s 132 of the Act. . For the purpose of emphasis, we may refer to Section 158-BC (a) (ii), which is pertaining to the notice period and the same reads: "(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1 st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice, a return in the prescribed form ........." The provision does not seem to keep any room enabling the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents relied upon, the appeal was unsustainable since it did not challenge the levy of interest on the ground that appellants were not liable for such levy (because they had submitted the return within prescribed period). 32. In the matter at hands, the grievance of the appellants is mainly based on the fact that they could get the copies of the documents seized only on 1.11.1999 and they had been pursuing for the same by communications dated 9.10.1998; 3.3.1999; 6.4.1999 and 5.7.1999. Unfortunately, for the appellants, admittedly they submitted the returns only in August, 2000, which is not within forty-five days since the date of supply of copies of documents. However, as described hereinabove, unfortunately for the appellants, the Assessing Officer has no discretion either to reduce or to waive the interest and reduction of interest can only be by reduction of period. The grounds as to why return was submitted late, therefore, may not present a sustainable appeal as contemplated by the observations in the reported judgments, relied upon by Advocate Shri Gangapurwala. The appellants may feel that they are pitted against a harsh legislation, but that is what it is. 33. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order imposing penalty under sub-section (2) of Section 158-BFA. But it does not provide an appeal against levying of interest u/s 158-BFA (1). In fact, we find that these Clauses (k) and (l) are also inserted in Section 246 as Clauses (d-a) and (d-b) by Act 14 of 1997 with effect from 1.1.1997 thereby making an appeal before Deputy Commissioner available, which formerly was available only before Commissioner (Appeals). The learned Members of ITAT felt that observations of the Supreme Court in the matter of Central Provinces Manganese Ore Co.Ltd. (supra) were not applicable to the cases of appellants, because no particular section of the Income-tax Act was specifically mentioned in relation to the word "assessment" and, therefore, the said word was given wide meaning by the Supreme Court so as to include the levy of interest. These observations in para 24 of the impugned judgment have a reference to the observations in para 8 of the reported judgment). On the other hand, word "assessment" as mentioned in Clause (k) of Section 246-A(1) is with reference to specific Clause (c) of Section 158-BC wherein the word "assessment' refers only to the assessment of undisclos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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