Income Tax Appellate Tribunal - Mumbai
Leonie M. Almeida, Mumbai vs Assessee on 1 August, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES, 'A', MUMBAI
BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND
SHRI VIJAY PAL RAO, JUDICIAL MEMBER
IT(SS)A No. 142/Mum/2007
(Block Period: 1.04.1987-06.11.1987)
Leonie M Almeida
Ganesh Niwas,
Veer Savarkar Marg,
Mumbai-400025.
PAN: AADPA7839Q ......Appellant
Vs
ACIT -18 (2),
Mumbai. . ... Respondent
Assessee by : Shri Satish Mody
Revenue by : Shri Shravan Kumar
O R D E R
PER VIJAY P AL RAO,JM This appeal by the assessee is directed against the order dated 01.08.2007 of CIT(A)_XVIII for the block period 1.04.1987-06.11.1987.
2. The assessee has raised the following grounds :
"I. .The l earned CIT(A) has erred in confirming taxes levied by AO while giving effect to order of CIT(A) against principl e of equity and natural justice and against the provisions of the law and in violation of order passed by the Honourable settlement Commission u/s 245D(4) of the ACT
2. .The learned CIT(A) has erred in confirming levy of penalty under section 158 BFA (1) of Rs.3,40,032/- in violation of order of the settlement Commi ssion whereby the assessee has been granted immunity from penalties.;2 IT(SS)A No. 142/Mum /2007
3. The ld. CIT(A) has erred in confirming action of the AO imposing interest of Rs.69,320/- u/s 220(2) of the Act "
3. The Assessee has also raised additional grounds of appeal as under :
"On facts and circumstances of the case and in law the levy of interest under section 158 BFA(1) is bad in law as notice issued u/s 158 BC is invalid. Hence all further proceedings of Block assessment pursuant that to are invalid and void "
4. At the time of hearing the learned AR of the assessee has stated that the assessee does not want to press the additional ground and the same m ay be dismissed as not pressed.
5. The ld. DR has no objection, if the additional ground raised b y the assessee is dismissed.
6. Accordi ngly, we dismiss/reject the additional ground raised b y the assessee in limine.
7. The grounds of appeal no.1 and 2 are regarding levy of interest u/s 158 BFA (1).
7.1 There was a search in the case of the assessee on 16.11.1997. The AO issued notice under section 158BD on 18.01.2000. The assessee filed return of income f or the block 3 IT(SS)A No. 142/Mum /2007 period on 28.9.2000 disclosing the total incom e at NIL. Subsequently, the assessee filed an application to the Settl ement Commission on 11.05.2001. The Settl ement Commission passed an order under secti on 245D(1) to proceed with the application of the assessee on 16.09.2002. However, in the mean time, the AO passed the assessment order for the block period on 30.1.2002. The Settl ement Commission passed the order under section 245D(4) on 30.09.2005. The AO has passed the order giving effect to the Settl ement Commission's order on 14.12.2005. The assessee challenged the giving effect order dated 14.12.2005 before the CIT(A) against the levy of interest u/s 220(2) from the date of assessment order dated 30.1.2002 to order of the Settl ement Commission dated 30.11.2005. The CIT(A) held that the interest u/s 220(2) from the date of assessment order till the date of order passed by the Settlement Commission is not justified and accordingly directed the AO to withdraw the same vide order dated 05.07.2006. W hile giving effect to the order of the CIT(A) dated 05.07.2006, the AO passed the order dated 31.10.2006 whereby interalia levi ed the interest u/s 158BFA(1) of Rs. 3,40,032/- The AO after giving relief as per the order of the CIT(A) sustained the interest of Rs.69,320/- u/s 220(2). The assessee challenged the interest levied by the AO before the CIT(A). The CIT(A) rejected the 4 IT(SS)A No. 142/Mum /2007 ground raised by the assessee regarding the interest levied u/s 158 BFA(1) vide impugned order.
8. Before us, the learned AR of the assessee has submitted that levy of interest by the AO is against the provisions of law as well as in violation of the order passed by the Settl ement Commission u/s 245D(4) of the Act. He has further contended that the Settlement Commission has granted immunity from penalty to the assessee while passing the order dated 30.9.2005. The learned AR of the assessee has pointed out that while passing the original giving effect order by the AO on 14.12.2005, he did not levy any interest or penalty under section 158BFA(1), therefore, while passing the giving effect order of CIT(A) dated 05.07.2006, the AO cannot levy the interest under section 158BFA(1) of the Act.
9. On the other hand, the learned DR has submitted that the levy of interest u/s 158BFA(1) is mandatory in nature and therefore, the AO is bound to l evy the i nterest. He has further contended that as observed by the learned CIT(A), the Settl ement Commission granted immunity to the assessee from penalty and prosecution, therefore no immunity was granted from levy of interest which is mandatory. He has relied upon the order of the learned CIT(A).
5 IT(SS)A No. 142/Mum /2007
10. W e have considered the rival contentions and relevant record. As far as the levy of interest u/s 158 BFA(1) is concerned the same is m andatory in nature as provided by the provisions of section 158BFA(1), which is reproduced below for the sake of convenience :
"Levy of interest and penalty in certain cases.
158BFA. (1) Where the return of total income including undisclosed income for the block period, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of January, 1997, as required by a notice under clause (a) of section 158BC, is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of [one] per cent of the tax on undisclosed income, determined under clause (c) of section 158BC, for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in the notice, and--
(a)where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or
(b)where no return has been furnished, on the date of completion of assessment under clause (c) of section 158BC."
(2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC:
Provided that no order imposing penalty shall be made in respect of a person if--
(i) such person has furnished a return under clause (a) of section 158BC;6 IT(SS)A No. 142/Mum /2007
(ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable;
(iii) evidence of tax paid is furnished along with the return; and
(iv) an appeal is not filed against the assessment of that part of income which is shown in the return :
Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return and in such cases the penalty shall be imposed on that portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return.
11. Apart from the levy of interests under section 158BFA(1), the penalty may also be directed under sub-section (2) of Section 158BFA. However, t he levy of penalty is discretionary as m anifest by the Sub-section (2), wherein the words "ma y direct" is used. Since the Settlement Commission has granted the immunity to the assessee only against the levy of penalty and prosecution therefore, we find no force and substance in the contention of the learned AR that the assessee was granted immunity from levy of interest u/s 158BFA(1). The assessee time and again has contended that the interest levied u/s 158BFA(1) is a penalty and therefore in view of the order of the Settlement Commission, the sam e cannot be levied as immunity was granted. W e do not agree with the stand taken by the assessee that the interest u/s 7 IT(SS)A No. 142/Mum /2007 158BFA(1) is a penalty because there is a separate provisions for levy of penalty under sub-secti on 2 of section 158BFA. Thus, we agree with the view and findings of the learned CIT(A) that there is no immunity provided by the Settlement Commission on the issue of levy of interest which is mandatory i n nature. The CI T(A) has adjudicated the issue in paragraph 6 of his order as under :
"6. The ground of appeal concerning levy lf penalty u/s 158BFA(1) relates to demand of Rs.3,40,032/- under this head. The AR has argued that while passing the order, the Hon. Settl ement Commissi on had granted immunity from all penalties under the Act to the appellant. He had enclosed a copy of the order in this regard. I have gone through the copy of the order of the Settlement Commission. Para-II on page No.60 grants immunity from penalties and prosecution under the IT Act and other Central Act. Having gone through the written submissions of the AR, I find that the contents are misleading. The charge under the head 158BFA(1) is not penalty but is in the nature of interest. I fail to understand why AR has termed it as penalty. As far as the interest u/s 158BFA(1) is concerned, there is no immunity provided by the Hon. Settlement Commission on this issue particularly when the charges of interest is mandatory in nature and also non-penal in nat ure. Under the circumstances, I hold that the submissions of the AR are without any merit and accordingly uphold the levy under this section amounting to Rs.3,40,032/-"
12. As regards the contentions of the learned AR that when the AO did not l evy i nterest under section 158BFA(1) while giving effect to the order of the Settlement Commission, at this stage of giving effect to the order of the CIT(A), the AO cannot lev y the interest is concerned when the lev y of interest 8 IT(SS)A No. 142/Mum /2007 u/s 158BFA(1) is mandatory in nature and the AO has no discretionary power then even though the AO has not levied interest while giving effect to the order of the Settlement Commission, the same can be levied by invoking the provisions of section 154. However, non-discretionary but mandatory, mistake can be rectified as has been held by the Hon'ble Karnataka High Court in the of Addl.CIT V/s India Tin Industries (P) Ltd. reported in 166 ITR 454. Similar view was taken by the Hon. Allahabad Hi gh Court in the case of Addl. CIT V/s District Co-operative Bank reported in 119 ITR
144. W hen the AO was having jurisdiction to levy interest under the provisions of section 158BFA(1) by invoking the provisions of section 154 then there is no bar for levy of interest which is mandatory in nature under the said provisions. As it is clear from the plain reading of Section 158BFA(1), in case, where the return of total income incl uding undisclosed income for the block period in respect of search u/s 132 or books of account, other docum ents or any assets requisitioned under section 132A as requi red by a notice under clause (a) of section 158BC, is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simpl e interest at the rate prescribed of the tax on undisclosed incom e, determined under clause (c) of secti on 158BC. In the case in hand, the assessee did not disclose incom e in the return filed 9 IT(SS)A No. 142/Mum /2007 and thereafter he has filed an application u/s 245C for settlem ent of case on 11.05.2001. After an application, once the Settlement Commission passed the order for admitting the application for further process, the Settlem ent Commission has exercised its jurisdiction on the incom e disclosed by the assessee in the petition u/s 245C. The proceedings f or assessm ent or re-assessm ent of income or appeal or revision, which m ay be pending before the any income tax authority on the date on which the application u/s 245C(1) is made are separate proceedings with respect to the disclosed income till the date the commission decides to proceed with the petition which is only in respect of the undisclosed income. Thus, the date on which the application made under sectio n 245C(1) was accepted for further proceedings shall be deemed to be discloser of the undisclosed income b y the assessee as it would have been disclosed in the block return filed in response to the notice under section 158BC. Theref ore, the interest u/s 158BFA(1) will be leviable from the expiry of the time given in the notice under clause(a) 158BFA till the order passed on the application filed under section 245C(1). Since, it is not clear from the record for which period the AO has levied the interest under section 158BFA(1), we di rect that the interest under section 158BFA cannot be levied after the application filed by the assessee under section 245C was 10 IT(SS)A No. 142/Mum /2007 accepted by the Settlement Commission by passing the order u/s 245D(1). This issue is accordingl y decided.
13. Ground no.1 of assessee's appeal is disallowed.
14. Regarding the levy of interest under section 220(2) of the Act,
15. W e have heard the learned AR as well as the learned DR and considered relevant record. The learned AR of the assessee has contended that the CIT(A) while passing th e order dated 05.07.2006 directed the AO to withdraw the lev y of interest under section 220(2) in full. Therefore, the l evy of interest of Rs.69,320/- u/s 220(2) is in contravention of the order of the CIT(A).
16. On the other hand, the learned DR has submitted that the AO has given the relief to the assessee to the extent of relief granted by the CIT(A) and the interest under section 220(2) was levied only for the period which was not in dispute. He has relied upon the impugned order of the CIT(A).
17. W e have considered the rival contention and relevant record. The assessee initiall y challenged the order of the AO dated 14.12.2005 giving effect to the order of the Settlement Commission. One of the ground was against the levy of interest under section 220(2). The CIT(A) while deci ding the issue vide order dated 05.07.2006 has held that the lev y of 11 IT(SS)A No. 142/Mum /2007 interest is not justified from the date of the order of the AO till the date of order of the Settlem ent Commission. Accordingly, he directed the AO to withdraw the levy of interest f or the disputed period. W hile giving effect to the order of CIT(A), the AO withdrawn the interest under section 220(2) for the disputed period and levy the interest only after the order of Settl ement Commission. Therefore, we do not find any merit in the ground raised by the assessee. Accordingly, the sam e is rejected.
18. Ground no.2 of the assessee's appeal is rejected.
19. In the result, the appeal of the assessee is dismissed.
Pronounced in the Open Court on 27.08.2010 Sd sd (P.M.JAGTAP) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 27 th Aug 2010 SRL:11810 copy to:
1. Appellant
2. Respondent
3. CIT Concerned
4. CIT(A)XXXII
5. DR "E" Bench BY ORDER True cop y ASSTT. REGISTRAR, ITAT, MUMBAI