Case Law Details
Brief Facts:
1. Search was carried out in assesse’s premises by the Income Tax Authorities. The assessee approached the settlement commission and it passed an order u/s 245D(4) read with section 158BC of the Income Tax Act, 1961 for the block period 1996-97 to 2002-03.
2. Accordingly, the A.O. determined income and raised demand, which was duly paid by the assessee. Subsequently, a noticeu/s 154 was issued to the assessee proposing to charge interest u/s 234B of the Act.
3. The assessee submitted that there was no mistake apparent from record and interest u/s 234B was not leviable by the virtue of Section 158BF.
4. The A.O., however, referred to Apex Court judgment in case of CIT vs. Hindustan Bulk Carriers and charged interest.
5. The assessee preferred an appeal to CIT(A) and it was held that the interest could not be levied in block assessment by placing reference to section 158BF of the Act. Apex Court judgment in case of CIT vs. Hindustan Bulk Carriers was not applicable in assessee’s case as it was not the case of block assessment.
6. The appeal is directed against CIT(A) order, at the instance of Revenue.
Revenue Contention
“The Ld. CIT (Appeal) has erred in deleting the charging of interest u/s 234B of the Income-tax Act, 1961 ignoring the fact that the Hon’ble Settlement Commission while passing order u/s 245D (4) had ordered that the interest chargeable u/s 234B will be charged upto the date of order u/s 245D (1).” The Settlement Commission has specifically directed to levy interest u/s 234B of the Act up to the date oforder passed u/s 245D(1) of the Act, therefore, the CIT (A) was notjustified in deleting the levy of interest u/s 234B of the Act.
Assessee Contention
It was submitted that there was no mistake apparent from the record within the meaning of section 154 of the Act and also contended that interest u/s 234B is not chargeable in respect of income determined in the block assessment. The attention was specifically drawn to the provisions of section 158BF of the Act.
Court Order
1. The assessment was completed under Chapter XIV-B of the Act u/s 158BC/245D(4). By virtue of the special provisions of section 158BF of the Act, no interest u/s 234B of the Act is chargeable on the amount of undisclosed income.
2. The relevant extract of Section 158BF is as under:
“No interest under the provisions of section 234A, 234B or 234C or penalty under the provisions of clause (c) of sub-section (1) of Section 271 or section 271A or section 271B shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessments.”
3. When charging of interest u/s 234B of the Act is not permissible in the cases of block assessment under Chapter XIV-B of the Act, by virtue of section 158BF, the Assessing Officer had wrongly charged interest u/s 234B of the Act.
4. The non-levy of interest in the original order cannot be said to be mistake apparent from record warranting rectification u/s 154 of the Act. Therefore, the CIT (A) is justified in quashing the order passed by the Assessing Officer u/s 154 of the Act. It is ordered accordingly.
5. The appeal filed by Revenue is dismissed.
Comment:
1. In case of taxation of undisclosed income, section 113 of the Income Tax Act, 1961 comes into play.
2. Section 113 of the Act states that “The total undisclosed income of the block period, determined under section 158BC, shall be chargeable to tax at the rate of sixty per cent:
Provided that the tax chargeable under this section shall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under section 132 or the requisition is made under section 132A.”
3. On perusal of the aforementioned provision, it becomes quite clear that in such a case where undisclosed income is already charged to tax at a heavy rate of 60 percent, the provisions like section 158BF relating to non-levy of interest and certain penalties in certain cases is justified.
Analysed by CA Amit Handa
Sir,
whether this judgement applicable for the assessments completed u/s 153A rws 143(3)?