Summary
After a 1997 search of the Khoday Group, related persons who were not themselves searched received notices under Section 158BD to file block-period returns, which they filed late. The Supreme Court upheld interest under Section 158BFA(1) for the late filing. For persons other than those searched, a Section 158BD notice suffices without any notice under Section 158BC. The 2002 insertion of 'under Section 158BC' in Section 158BD was only clarificatory. Chapter XIV-B is a complete code, so interest for late filing is chargeable independently of Section 140A, including for periods before 01.06.1999. But following Vatika Township, which overruled Suresh N. Gupta, surcharge under the proviso to Section 113 was not leviable, and the appeals succeeded on that point.
Issues
- Whether interest under Section 158BFA(1) is leviable for late filing of a block return by a person other than the searched person who received a notice under Section 158BD but not under Section 158BC, including for the period before 01.06.1999.
- Whether surcharge under the proviso to Section 113 applied to these block assessments.
Provisions considered
- Sections 158BC, 158BD and 158BFA(1), Income Tax Act, 1961A Section 158BD notice is sufficient for a person other than the searched person, and interest for late filing of the block return is chargeable; the 2002 insertion of 'under Section 158BC' in Section 158BD is clarificatory, as the Notes on Clauses show. (¶¶ 10.4, 10.5, 10.6, 10.7)
- Section 140A, Income Tax Act, 1961The 1999 inclusion of Section 158BC in Section 140A created a separate obligation to pay self-assessment tax; interest under Section 158BFA operates independently for late filing. (¶¶ 10.1, 10.2, 10.3)
- Section 113, proviso, Income Tax Act, 1961Following the Constitution Bench in CIT v. Vatika Township (2015) 1 SCC 1, the proviso levying surcharge on block assessments is prospective. (¶¶ 9, 9.1, 9.2)
Held
- Surcharge under the proviso to Section 113 is not payable by the assessees, since Vatika Township held the proviso prospective and overruled Suresh N. Gupta, on which the High Court relied; the Revenue conceded the point. (¶¶ 7.11, 9, 9.1, 9.2)
- Chapter XIV-B is a complete code for block assessment, so the argument that interest could not run before 01.06.1999 because Section 140A then imposed no duty to pay tax with the return fails; interest under Section 158BFA(1) is leviable on a standalone basis for late filing and ceases when the return is filed. (¶¶ 10, 10.1, 10.3)
- Section 158BC applies to searched persons and Section 158BD to others, for whom the Section 158BD notice is sufficient; reading the 2002 amendment otherwise would render Section 158BD nugatory, so persons other than searched persons are liable to interest for late filing even without a Section 158BC notice. (¶¶ 10.4, 10.5, 10.6, 10.7, 11)
Result
Civil Appeal No. 3074 of 2012 and connected Civil Appeal Nos. 3705-3709 of 2012 partly allowed; the Karnataka High Court's judgments modified to hold the assessees not liable to surcharge under the proviso to Section 113, and confirmed on liability to interest under Section 158BFA(1); no costs.