By TIOL News Service

CHENNAI, AUG 09, 2016: THE issue is - Whether interest u/s 158BFA is leviable where as a result of the search, cash and jewellery was seized and the assessee belatedly filed the tax returns. YES is the answer.

Facts of the case

A search under Section 132 was conducted at the residential and business premises of the Assessee during which cash forming part of Fixed Deposit Certificates and jewellery were seized. In response to the notice issued under section 158BC to file the Block Return within 16 days, the assesee filed the return admitting undisclosed income. In the course of the Block Assessment Proceedings, the assessee admitted further undisclosed income. Assessing authority determined the tax liability which included Surcharage @ 17% and Interest u/s.158BFA for the period from 22.6.2001 to 08.1.2002. Challenging the levy of surcharge and interest, the Assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who held that the levy of interest under Section 158BFA is not justified. Assessee preferred an Appeal questioning the levy of surcharge whereas the revenue has filed an Appeal questioning the waiver of interest. ITAT allowed the appeal filed by the Assessee holding that levy of surcharge was not in accordance with law whereas the remanded the appeal filed by the revenue to the Commissioner (Appeals) to decide the issue of interest de novo.

Having heard the parties, the Court held that,

++ the language in the provision under Section 158 BFA is clear that after the expiry of the period specified in such notice or if it is not furnished, the assessee shall be liable to pay simple interest of the tax on the undisclosed income determined under clause (c) of Section 158BC for every month or part of a month comprised for the period commencing on the date immediately following the expiry of the time specified in the notice. As a result of the search conducted on 10.1.2001, cash amount by forming part of fixed deposit certificates and jewelleries were seized and enquiry was conducted by the department. The assessing officer determined the undisclosed income, after the assessee belatedly filed the tax returns. The delay in filing the return is not disputed in the instant case;

++ in the case of Commissioner of Income Tax v. J.P. Narayanaswamy held by the High Court of Karnataka reported in [2014] 41 Taxmann.com 52 (Karnataka), it was held that the levy of interest is as per statutory provision under section 158BFA(1) and does not link to the date of payment of tax in case of delay in filing of the return after receiving notice under section 158BC and only linked to the delay in filing the return. The provision under section 158BFA(1) is mandatory under the statute;

++ hence, the substantial question of law framed in the instant appeal is answered against the Assessee.

(See 2016-TIOL-1670-HC-MAD-IT)