Commissioner of Income Tax and Another vs N. Leela Kumar

K.L. Manjunath, J.—Revenue has come up in this appeal. Challenging the legality and correctness of the order passed by the Commissioner (Appeals), Bangalore, for the block assessment period 1-4-1989 to 13-3-2000 which has been affirmed by the Tribunal, Bangalore Bench in IT(SS)A No. 154/Bang/2002 dated 22-3-2005.

Appeal was admitted to consider the following substantial questions of law:

Whether the appellate authorities were correct in holding that the interest u/s 158BFA(1) of the Act is levied to compensate the Government for withholding the taxes by the assessee and if the assessee has paid the taxes, said interest cannot be levied?

Whether the assessing officer has correctly levied interest u/s 158BFA(1) of the Act, by holding that as the assessee was bound to file the return of income within time and as the return was filed belatedly the assessee was liable to be charged with mandatory interest, as. per Section 158BFA(1) of the Act, for belated filing of the return?

Whether the Tribunal was correct in holding that no surcharge for the block assessment period 1990-91 to 13-3-2000 could believed as proviso to Section 113 of the Act came into effect from 1-6-2002 and as the search in the present case had taken place on 13-3-2000 before the proviso was introduced?

Whether the proviso to Section 113 of the Act should be read along with the Finance Act for each of the earlier assessment years for the entire block period and surcharge should be levied from the inception of Chapter XIV-B of the Act?

We have heard the learned Counsel for both the parties.

Assessee is in the status of an individual. Respondents premises was searched on 13-3-2000 u/s 132 of the Income Tax Act. Certain incriminating materials were found which disclosed that the assessee had not disclosed his income truly. Proceeding u/s 158BFA(1) of the Act was initiated for the block assessment period 1-4-1989 to 13-3-2000 pertaining the assessment years 1991-92 to 2000-01. Based on the returns filed by the assessee pursuant to the notice served on him, assessing officer passed an order levying interest u/s 158BFA(1) of the Act and also levied surcharge u/s 113 of the Act.

Being aggrieved by the order of the assessing officer dated 27-3-2002 assessee filed an appeal before the Commissioner (Appeals) which appeal came to be allowed on 24-5-2002. Aggrieved by the same, revenue filed an appeal before the Tribunal which appeal has been rejected on 22-3-2005. Being aggrieved by the concurrent findings of the authorities below, present appeal is filed.

Appeal was admitted to answer the above substantial questions of law. During the course of arguments it is brought to our notice that questions 3 and 4 are covered in favour of the revenue by virtue of the judgment of the Supreme Court in Commissioner of Income Central II Vs. Suresh N. Gupta, in Civil Appeal No. 32 of 2008. In view of the judgment of Honble Supreme Court, we have to answer questions 3 and 4 in favour of the revenue and against the assessee. Accordingly, we answer the same.

So far questions 1 and 2 are concerned, it is the case of the assessee that certain cash was seized during the course of search which was lying with the department which amount had to be adjusted towards tax payable by the assessee. After adjusting the tax, then the question of levying interest u/s 158BFA(1) would arise. Since this fact has not been considered by the assessing officer as well as the appellate authorities, we are of the view that the matter requires to be reconsidered by the assessing officer in regard to questions 1 and 2 by giving reasonable opportunity to both the parties.

In the result, appeal is allowed in part. Questions 3 and 4 are answered in favour of the revenue and against the assessee. Matter is remanded to the assessing officer for fresh consideration to consider questions 1 and 2 on merits and in accordance with law. Therefore we have not answered questions 1 and 2.