Mahavir Manakchand Bhansali v. The Commissioner of Income-tax Central Circle, Nagpur
[Citation -2017-LL-0629-2]

Citation 2017-LL-0629-2
Appellant Name Mahavir Manakchand Bhansali
Respondent Name The Commissioner of Income-tax Central Circle, Nagpur
Court HIGH COURT OF BOMBAY AT NAGPUR
Relevant Act Income-tax
Date of Order 29/06/2017
Judgment View Judgment
Keyword Tags assessment for block period • compensatory interest • waiver of interest • search and seizure • undisclosed income • levy of interest • seized cash
Bot Summary: On 29.08.2002 the Assessing Officer completed the assessment for the block period 01.04.1990 to 04.08.2000 under Section 158BC read with Section 143(3) of the Act determining the total undisclosed income at Rs.15,00,000/- The tax thereon was determined at Rs.9,90,000/- and interest payable for the delayed filing of the return of income under Section 158BFA(1) was Rs.1,23,750/-. In the present facts, the impugned order holds that the delay in filing the return of income could not be attributed to the revenue for the reason that the return was filed on 26.02.2002 on an estimated basis disclosing undisclosed income at Rs.15,00,000/- I.e. The period from 26.05.2001 to 03.01.2002 is excludable while computing interest; The finding of the Tribunal that as the appellant had filed the return of income on estimate basis even before receiving copies of the documents as sought for, would indicate that there was no requirement of obtaining the documents before filing the return of income. Section 158-BFA(1) of the Act clearly provides that where the return of undisclosed income for the block period consequent to a search is not furnished within the time specified in the notice issued under Section 158BC of the Act, the assessee is liable to pay simple interest on the tax determined under Section 158BC(c) of the Act on the undisclosed income. The notice dated 17.04.2001 under Section 158BC of the Act called upon the appellant to file his return of income for undisclosed income for the subject block period on or before 26.05.2001. The impugned order disbelieves the aforesaid explanation for the delay offered by the appellant on the ground that the same is not acceptable as the return of income has been filed even though the copies of the documents and account books and statements which were seized, were never furnished to the appellant, till the date he filed his return of income. From the facts stated in both the cases, it does not come out that the delay in filing the return of income was on account of the revenue in not furnishing copies and/or not giving inspection of the seized documents to the assessee, which would form the basis for filing the return of income of undisclosed income.


IN HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR INCOME TAX APPEAL No.42 OF 2007 Shri Mahavir Manakchand Bhansali, Aged about 47 years, Businessman Dealing in gold and silver jewellery, articles etc. at Pratap Chowk, Sarafa Bazar, Amravati, Tah. & Dist. Amravati, State of Maharashtra .. APPELLANT .. Versus .. Commissioner of Income Tax Central Circle, Nagpur Aaykar Bhawan, Telankhedi Road, Nagpur, Tah. & Dist. Nagpur, State of Maharashtra, .. RESPONDENT Mr. C.J. Thakar Advocate for Appellant. Mr. Bhushan N. Mohta, Advocate for Respondent. . CORAM : M.S. Sanklecha & Manish Pitale, JJ. RESERVED ON : 16th JUNE, 2017. PRONOUNCED ON : 29th JUNE, 2017. JUDGMENT (per M.S. Sanklecha, J.) 1. This appeal under Section 260A of Income Tax Act, 1961 (Act) impeaches order dated 16.06.2016 passed by Income Tax Appellate Tribunal, Nagpur (Tribunal). ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 2 ITL42 07.odt impugned order relates to assessment for block period 01.04.1990 to 04.08.2000. 2. This appeal was admitted on 23.10.2007 on following substantial question of law:- "Was Tribunal justified in law in confirming charging of interest for period of delay attributable to revenue in supplying copies of accounts and relevant record and statements?" 3. Briefly, facts leading to this appeal are as follows:- (a) On 04.08.2000 there were search and seizure operations under Section 132 of Act at premises of appellant. During course of search, books of account, documents and cash of Rs.25,00,000/- were seized. At that time statements of assessee and his various family members were also recorded. (b) On 17.04.2001 notice was issued (served on 27.04.2001) to appellant under Section 158-BC of Act. above notice dated 17.04.2001 called upon appellant to file his return for undisclosed income of ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 3 ITL42 07.odt block period i.e. 01.04.1990 to 04.08.2000 on or before 26.05.2001. (c) On 09.05.2001 appellant sought copies of statement recorded during search as well as xerox copies of entire seized documents as recorded in panchanama. However, as same was not furnished, appellant by another letter dated 24.05.2001, once again requested xerox copies of documents seized and statements recorded so as to enable him to file his return of income. appellant also sought inspection of record as early as possible to enable him to prepare his return of income. (d) Inspite of aforesaid request, no copies of documents seized and/or statements recorded were furnished to appellant. However, on 03.01.2002 partial inspection of documents seized, i.e. account books, record and statements was given to appellant. (e) Thereafter on 26.02.2002 appellant filed his return of income in status of individual. In return as filed, appellant declared income of Rs.15,00,000/- ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 4 ITL42 07.odt (Rs.14,99,850/-) on estimate basis determining tax payable at Rs.9,00,000/-. In return of income, appellant had appended note that tax payable of Rs.9,00,000/- may be adjusted out of seized cash. Moreover it was also pointed out that inspection was granted only on 03.01.2002 resulting in delay in filing return of income. (f) On 29.08.2002 Assessing Officer completed assessment for block period 01.04.1990 to 04.08.2000 under Section 158BC read with Section 143(3) of Act determining total undisclosed income at Rs.15,00,000/- tax thereon was determined at Rs.9,90,000/- and interest payable for delayed filing of return of income under Section 158BFA(1) was Rs.1,23,750/-. demand was adjusted against seized cash. (g) Being aggrieved with order dated 29.08.2002 of Assessing Officer to extent it charged interest at Rs.1,23,750/-, appellant filed appeal to Commissioner of Income Tax (Appeals) (CIT(A)). order dated 29.08.2002 of CIT(A) does record fact that ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 5 ITL42 07.odt total demand payable by appellant and his brother was approximately Rs.17,34,000/- and amount lying with department was Rs.25,00,000/-. Nevertheless by order dated 29.08.2002 CIT(A) dismissed appellant- assessee's appeal. This on ground that in terms of Sections 158BFA(1) of Act, there is no discretion with authorities to waive interest payable. (h) Being aggrieved, Appellant-Assessee carried issue of payment of interest in appeal to Tribunal. By impugned order dated 16.06.2006, Tribunal held that charging of interest was compensatory in nature. However, in present facts, impugned order holds that delay in filing return of income could not be attributed to revenue for reason that return was filed on 26.02.2002 on estimated basis disclosing undisclosed income at Rs.15,00,000/- I.e. before copies of documents seized were made available to appellant. This indicated capacity to file return even in absence of seized records. Therefore, explanation offered was not found acceptable. Further impugned order holds that charging of interest under Section 158-BFA(1) of Act is mandatory and there is no discretion available ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 6 ITL42 07.odt with Assessing Officer not to charge interest. Thus, impugned order dated 16.06.2006 dismissed appeal of appellant-assessee. 4. Being aggrieved, appellant-assessee is in appeal before us. 5. Before dealing with rival submissions, we may usefully reproduce Section 158-BFA (1) of Act as in force during relevant time:- "158BFA(1) - Where return of total income including undisclosed income for 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 1st day of January, 1997, as required by notice under clause(a) of section 158BC, is furnished after expiry of period specified in such notice, or is not furnished, assessee shall be liable to pay simple interest at rate of one percent of tax on undisclosed income, determined under clause (c) of Section 158BC, for every month or part of month comprised in period commencing on day immediately following expiry of time specified in notice, and- (a) Where return is furnished after expiry of time aforesaid, ending on date of furnishing return; or (b) Where no return has been furnished on date of completion of assessment under clause (c) of section 158BC". ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 7 ITL42 07.odt 6. Mr. Thakar, learned counsel appearing for appellant, in support of appeal submits as under:- (a) interest under Section 158BFA of Act is charged for delay in filing return of income consequent to notice under Section 158BC of Act. In this case, delay in filing of return was entirely attributable to Revenue, inasmuch as it failed to supply copies of seized record and account books, which were necessary for purposes of preparing return of income. Further inspection of record was also granted only on 03.01.2002. Therefore, period from 26.05.2001 to 03.01.2002 is excludable while computing interest; (b) finding of Tribunal that as appellant had filed return of income on estimate basis even before receiving copies of documents as sought for, would indicate that there was no requirement of obtaining documents before filing return of income. This finding of Tribunal is perverse, as return of income was filed only after grant of inspection on 03.01.2002. Consequently interest payable from period ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 8 ITL42 07.odt 26.05.2001 (when return had to be filed) till 03.01.2002 (when filed) ought to be excluded. (c) In any case amount of Rs.25,00,000/- had been seized by Revenue and was in their possession from date of search i.e. 04.08.2000. tax determined upon appellant and his brother collectively was less than Rs.25,00,000/-, which were seized. Consequently as there was no delayed payment of tax, occasion to charge interest would not arise, considering fact that impugned order of Tribunal itself holds that interest under Section 158- BFA of Act is compensatory in nature. 7. As against above, Mr. Mohta, learned counsel appearing for Revenue submits in support of impugned order as under:- A. requirement to pay interest under Section 158- BFA of Act is mandatory. There is no discretion available with Assessing Officer to waive interest; B. amount of Rs.25,00,000/- which was seized ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 9 ITL42 07.odt cannot be adjusted against tax determined for purposes of non levy of interest. This is so as tax was determined only on passing of Assessment order and prior thereto seized amount is with Revenue only in trust. In above view, it was submitted that appeal may be dismissed. 8. We have considered rival submissions. Section 158-BFA(1) of Act clearly provides that where return of undisclosed income for block period consequent to search is not furnished within time specified in notice issued under Section 158BC of Act, assessee is liable to pay simple interest on tax determined under Section 158BC(c) of Act on undisclosed income. This simple interest is charged at one percent for every month commencing from period of expiry of time to file return as specified in Section 158BC notice till date of filing of return. 9. Thus, tax on undisclosed income is determined only on assessment order being passed under Section 158BC(c) of Act. Therefore, any amount which may have been seized prior thereto, cannot be adjusted against ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 10 ITL42 07.odt demand to be ascertained on subsequent date. submission on behalf of appellant-assessee, is that impugned order holds that Section 158BFA(1) of Act is compensatory in nature. Therefore, where amounts determined as tax subsequently was already with Revenue, no loss was caused to it. Therefore, Revenue cannot seek compensatory interest under Section 158BFA(1) of Act. This submission overlooks fact, that prior to determination of tax payable on undisclosed income, amount seized does not belong to Revenue. right to adjust seized cash can only be post determination of tax payable. This has been so held by Madras High Court in Ashok Kumar Sethi Vs DCIT, 387 ITR 375, with which we respectfully agree. Thus submission that there was no delay in paying tax on undisclosed income as amount of Rs.25,00,000/- has already been seized by Revenue, cannot be sustained. Moreover in facts of present case offer to adjust amount of Rs.25,00,000/- which had been seized with tax which would be ultimately determined, was only made along with filing of return. Therefore, for delay post filing of return, it could be argued that no interest is payable, but prior thereto there is not even offer made to adjust amount. Section ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 11 ITL42 07.odt 158BFA(1) of Act seeks to recover interest only till date of filing of return of income after expiry of period stipulated in Section 158BC notice. Therefore, no occasion to examine levy of interest post filing of return arises. 10. It was next contended that delay in filing return of income is completely attributable to revenue for non-furnishing of copies of documents and not giving inspection of documents seized, within reasonable time after making demand. notice dated 17.04.2001 under Section 158BC of Act called upon appellant to file his return of income for undisclosed income for subject block period on or before 26.05.2001. On 09.05.2001 and on 24.05.2001, appellant requested revenue to furnish him copies of entire seized documents as recorded in panchanama including statements made at time of search. Further inspection of seized record was also sought so as to enable appellant to file his return of income. In spite of aforesaid request, no copies of documents seized and/or statements recorded were furnished to appellant. However, on 03.01.2002 inspection of seized documents was given to appellant. Immediately thereafter on 26.02.2002 appellant filed his return of income. It is ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 12 ITL42 07.odt accepted position as recorded in impugned order that return of income was on estimated basis. It was in aforesaid circumstances that appellant submits that no interest should be charged under Section 158BFA(1) of Act, as delay in filing return was entirely due to respondent. However, impugned order disbelieves aforesaid explanation for delay offered by appellant on ground that same is not acceptable as return of income has been filed even though copies of documents and account books and statements which were seized, were never furnished to appellant, till date he filed his return of income. However, this finding to our mind, overlooks fact that return was filed after inspection was given to appellant-assessee on 03.01.2002. Therefore, it is on basis of inspection given to appellant that return of income was filed. Thus even though no document was furnished, inspection given was sufficient compliance of requisition made by appellant, as he had occasion to examine his record which was seized by revenue and file his return of income. In these circumstances, finding arrived at by impugned order that reason for delay in filing return of income made out by appellant was not believable, cannot be sustained. delay is certainly ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 13 ITL42 07.odt attributable to late giving of inspection of seized documents on part of revenue. 11. This now takes us to final issue viz. is it open under provisions of Section 158-BFA(1) of Act to Assessing Officer to waive interest imposable thereunder even in absence of any discretion provided to waive interest under Section 158-BFA(1) of Act. There can be no dispute that bare reading of section does not provide for any discretion to waive and/or reduce interest imposable on account of late filing of return of income. It is settled position in law that fiscal statute has to be strictly interpreted, particularly when there is no ambiguity in statute. normal rule of interpreting fiscal statute is literal rule of interpretation. However, when Parliament makes law, it proceeds on basis that Executive i.e. State will act fairly and not cause unjustified burden upon subject. provisions of Section 158BFA(1) of Act proceeds on above premise and it was expected of State to grant copies of documents seized and/or inspection of record as expeditiously as possible, so as to enable appellant to file his return of income. This particularly so, as to delay in filing of return, leads to levy of ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 14 ITL42 07.odt interest. This not having been done, as was expected under Statute, subject cannot be made to pay for negligence of Officers of State. Therefore, in case like this where strict construction may result in injustice, equitable construction may be preferred. As observed by Apex Court in CIT .vs. J.H. Gotla- (1985) 4 SCC 343 :- "Where plain literal interpretation of statutory provision produces manifestly unjust result which could never have been intended by Legislature, Court might modify language used by Legislature so as to achieve intention of Legislature......................................................... .......................................... Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if construction results in equity rather than in injustice, then such construction should be preferred to literal construction." Therefore, where law and equity can both be reconciled to achieve justice , then same should be attempted and achieved For after all they are not enemies. 12. In fact Mr. Thakar, learned counsel for appellant placed reliance upon decision of Delhi High Court in Commissioner of Income-tax .vs. Mesco Airlines Ltd. - (2010) 327 ITR 554 (Delhi) and decision of Karnataka High Court in Commissioner of Income Tax and another ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 15 ITL42 07.odt .vs. B. Nagendra Baliga- (2014) 363 ITR 0410 (Karn), where both Courts have taken view that where there is delay in filing return of income which is attributable to revenue in not having supplied documents sought for, then period attributable to that delay ought to be excluded. In both aforesaid cases, Assessing Officer had delayed to furnish necessary documents seized during course of search and sought for by assessee. This resulted in delay in filing return of income. only distinction which exists in facts of above two cases with that which arises before us, is that return of income in both cases were filed on revenue supplying assessee with copies of seized documents. In this case return has been filed even before seized documents were supplied. However, this distinction is of no consequence as basis for filing return of income was inspection of documents given to appellant on 03.01.2002. Therefore, period between 26.02.2001 till 03.01.2002 has to be excluded for purposes of computing period on which interest can be levied under Section 158BFA(1) of Act. However, Mr. Mohta, learned counsel appearing for revenue sought to rely upon decision of Karnataka High Court in Commissioner of Income Tax .vs. K.L. Srihari ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 16 ITL42 07.odt (2011)335 ITR 215 (Karnataka) and Commissioner of Income-tax Central Circle .vs. B. Suresh Baliga (2014) 364 ITR 560 (Karnataka). In both aforesaid decisions, Karnataka High Court has taken view that provisions of Section 158BFA(1) of Act are mandatory in nature and interest would have to be levied in terms thereof irrespective of reason for delay. In both aforesaid cases, reason for delay was not attributable to revenue as in case before us. From facts stated in both cases, it does not come out that delay in filing return of income was on account of revenue in not furnishing copies and/or not giving inspection of seized documents to assessee, which would form basis for filing return of income of undisclosed income. Therefore, aforesaid two decisions relied upon by Revenue are completely distinguishable on facts, as delay in those cases was not held to be attributable to revenue, for purposes of waiving of interest. 13. In above view, decision of Delhi High Court in Mesco Airlines Ltd. (supra) and of Karnataka High Court in B. Nagendra Baliga (supra) appeals to us in present facts. We wish to make it clear that after ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 17 ITL42 07.odt introduction of Section 158BFA of Act in Section 119(2)(a) of Act, waiver of interest, if any, would have to be in terms and/or in accord with directions laid down by Central Board of Direct Taxes (C.B.D.T.). At relevant time when assessment orders were passed under Act, Section 158BFA of Act was not part of Section 119(2)(a) of Act which empowered C.B.D.T. to set guidelines for waiver of interest. Therefore, from date Section 158BFA of Act has been incorporated in Section 119(2)(a) of Act i.e. with effect from 01.06.2002, proper remedy would be to apply circulars/instructions issued by Board relaxing circumstances in which interest payable under said section could be relaxed. However, in present case we are concerned for period prior to June 2002, as return of income was filed on 26.02.2002. At that time Section 158BFA of Act was not part of Section 119(2)(a) of Act. Therefore, no occasion for C.B.D.T. to give instructions to liberalise rigour of Section 158BFA of Act in respect of interest could arise. 14. In these circumstances question of law posed for our consideration is answered in negative i.e. in favour of appellant-assessee and against revenue. Although ::: Uploaded on - 30/06/2017 ::: Downloaded on - 01/07/2017 09:45:37 ::: 18 ITL42 07.odt question as admitted questions justifiability of Tribunal in charging interest for delay attributable in not supplying copies of accounts and relevant record and statements, words "copies of account and relevant record and statements" would also include within it, giving inspection of accounts and relevant record and statements. Therefore, interest for delay in filing return of income in this case has to be computed after excluding period from date inspection was asked for i.e. 24.05.2001 till inspection was given i.e. 03.01.2002. Assessing Officer to work out exact demand for interest in above terms. 15. Appeal allowed in above terms. No order as to costs. (Manish Pitale, J. ) (M.S. Sanklecha, J.) halwai/p.s. Mahavir Manakchand Bhansali v. Commissioner of Income-tax Central Circle, Nagpur
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