In a significant ruling, a two-judge bench of the Supreme Court has held that the persons other than the searched persons shall be liable to pay interest for late filing of income tax return under section 158BC of the Income Tax Act, 1961.
Justice M R Shah and Justice C T Ravi Kumar was considering an appeal by the assessee, K.L. Swamy alongwith others. The appellant is an individual and Director Partner in Khoday Group of Company concerns. A search under Section 132 was conducted in the residential premises of the family members of Khoday Group and the warrant was issued in the name of M/s. Khoday India Limited. The appellant was served with the notice under Section 158BD to file the return of income for the block period of 01.04.1986 to 13.02.1997. The appellant filed return for the block period in response to notice under Section 158BD by including the undisclosed income of Rs.45,00,000/ for the block period. The Assessing Officer levied interest under Section 158BFA(1) for the period from 18.01.1998 to 19.01.1999 at the rate of 2% per month for 13 months and levied interest of Rs.7,12,296/ on the tax amount of Rs.27,49,600/.
On appeal, the High Court confirmed the demand and ruled in favour of the assessee.
Partially allowing the appeal, the Apex Court held that the respective assessees are not liable to pay the surcharge under proviso to Section 113 of the Income Tax Act.
“The impugned judgment and order passed by the High Court is required to be modified to the aforesaid extent,” the Supreme Court said.
“So far as the liability to pay the interest under Section 158BFA of the Income Tax Act for late filing of the return under Section 158BC of the Income Tax Act, in absence of any notice under Section 158BC upon the assessee – persons other than searched persons, the said question is held in favour of the revenue and against the assessee. The impugned judgment and order passed by the High Court is hereby confirmed and it is observed and held that the assessee – persons other than searched persons shall be liable to pay the interest on late filing of the return under Section 158BC even in absence of a notice under Section 158BC of the Income Tax Act and even for the period prior to 01.06.1999. To that extent, the impugned judgment and order passed by the High Court is hereby confirmed. Present appeals are accordingly disposed of in terms of the above. There shall be no orders as to costs,” the Apex Court observed.
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