A division bench of the Bombay High Court in Mahavir Manakchand Bhansali v. CIT held that Interest cannot be charged for the period of delay in supplying copies of accounts and relevant record and statements by the Revenue to the assessee while determining demand while completing block assessment.
The search proceedings conducted by the department resulted in seizure of Rs. 25 lakhs from the assessee. After the seizure, the department issued a notice requiring the assessee to file returns for the years 1990 to 2000. Assessee sought for copies of some of the documents relied upon by the department against him. However, the same were allowed to the assessee only after one year. The department said that assessee is liable to pay interest for the period of delay in supplying copies of accounts and relevant record and statements.
As per section 158-BFA(1) of the Income Tax Act, 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 Income Tax Act, the assessee is liable to pay simple interest on the tax determined under Section 158BC(c) of the Act on the undisclosed income. It was observed by the bench that this simple interest is charged at one percent for every month commencing from the period of the expiry of the time to file a return as specified in Section 158BC notice till the date of filing of the return.
The department was of the view that the charging of interest under Section 158-BFA(1) of the Income Tax Act is mandatory and there is no discretion available with the Assessing Officer not to charge interest. On second appeal, the Tribunal observed that charging of interest was compensatory in nature and the returns were acceptable even in the absence of the documents.
It was also observed that the section does not provide for any discretion to waive and/or reduce the interest imposable on account of the late filing of the return of income.
The bench observed that when the Parliament makes a law, it proceeds on the basis that the Executive i.e. the State will act fairly and not cause unjustified burden upon the subject. “The provisions of Section 158BFA(1) of the Act proceeds on the above premise and it was expected of the State to grant copies of the documents seized and/or inspection of the record as expeditiously as possible, so as to enable the appellant to file his return of income. This particularly so, as to delay in filing of return, leads to levy of interest. This not having been done, as was expected under the Statute, the subject cannot be made to pay for the negligence of the Officers of the State.”
Accordingly, it directed the Assessing Officer to re-compute the interest for the delay in filing the return of income after excluding the period from the date the inspection was asked for i.e. 24.05.2001 till the inspection was given i.e. 03.01.2002.
Read the full text of the Judgment below.
