K.L. SWAMY versus THE COMMISSIONER OF INCOME TAX & ANR.

Citation: [2023] 1 S.C.R. 689 · Decided: 13-01-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Case Partly allowed

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Judgment (excerpt)

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   [2023] 1 S.C.R. 689
689
K.L. SWAMY
v.
THE COMMISSIONER OF INCOME TAX & ANR.
(Civil Appeal No. 3704 of 2012)
JANUARY 13, 2023
[M. R. SHAH AND C. T. RAVIKUMAR, JJ.]
Income Tax Act, 1961: ss. 158BC, 158BD, 158 BFA(1) – Block
assessment – Undisclosed income of any other person – Levy of
interest – Assessee belatedly filed return for block period in response
to notice u/s. 158BD by including undisclosed income – Absence of
any notice u/s. 158BC – Liability for period prior to 01.06.1999 –
Levy of interest u/s. 158BFA(1) by the assessing officer –
Sustainability of – Held: Persons other than searched persons’ liable
to pay interest on late filing of the return u/s.158BC even in the
absence of notice u/s. 158BC and even for the period prior to June
1999 –Chapter XIV-B prescribes a special procedure for
computation of income for the block period in search and seizure
cases – It is a complete code in itself providing for self-contained
machinery for assessment of undisclosed income for the block period
– s.158BD would be applicable in case of any person other than a
person with respect to whom search was made – Thus, in case of the
person other than searched person the notice u/s. 158BD would be
required and in case of late filing of the return u/s. 158BC, the
interest would be leviable u/s. 158BFA – Any other interpretation
would lead to s.158BD nugatory – By inserting the words “under
Section 158BC” in s. 158BD, the Parliament intended to clarify
that the assessment for the block period in case of the persons other
than searched persons would also be as per the procedure u/s.
158BC – In the instant case, the persons searched were issued notice
u/s. 158BC and in case of the appellant-director of the Company,
who is the “other person”, the notice u/s. 158BD was issued – It
cannot be said that the in absence of any notice u/s. 158BC served
upon the persons other than searched persons for the period prior
to the amendment in s. 158BD vide Finance Act, 2002, there would
not be any liability to pay interest u/s. 158BFA.
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SUPREME COURT REPORTS
[2023] 1 S.C.R.
s.113 proviso – Surcharge – Levy of – Held: Assessee not
liable to pay the surcharge under proviso to s.113 – Order passed
by the High Court and the assessment order qua the surcharge under
proviso to s. 113 quashed and set aside.
Partly allowing the appeals, the Court
HELD: 1. As regards, the levy of the surcharge under
proviso to Section 113 of the Income Tax Act is held in favour of
the assessee and against the revenue. The assessee is not liable
to pay the surcharge under proviso to Section 113 of the Income
Tax Act. To that extent the impugned judgment and order passed
by the High Court and the assessment order qua the surcharge
under proviso to Section 113 of the Income Tax Act is quashed
and set aside.[Para 9.2][710-C-D]
2.1 Chapter XIV-B which deals with block assessment lays
down a special procedure for searched cases. The main reason
for adding the said provisions in the Act was to curb tax evasion
and expedite as well as simplify the assessment in such searched
cases. The essence of the new procedure under Chapter XIV-B
is a separate single assessment of the “undisclosed income”,
detected as a result of search and this separate assessment has
to be in addition to the normal assessment covering the said
period. Therefore, a separate return covering the years of the
block period is a pre-requisite for making block assessment.
Chapter XIV-B is a complete code in itself providing for
self-contained machinery for assessment of undisclosed income
for the block period of 10 years or 6 years as the case may be.
[Para 10][710-F-H]
2.2 With respect to assessment of undisclosed income for
the block period including the filing of the return etc., the normal
assessment proceedings including under Section 140 of the
Income Tax Act shall not be applicable. Therefore, the submission
on behalf of the assessee that interest under Section 158BFA for
the period prior to 01.06.1999 in view of insertion of the words
“Section 158BC” in Section 140A w.e.f. 01.06.1999, shall not be
chargeable, cannot be accepted. It is the case on behalf of the
assessee that the interest only follows the principal and in this
case the principal being the tax payable, there was no liability to
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pay the tax along with the return prior to 01.06.1999 which came
to be introduced by insertion of the words “Section 158BC” in
Section 140A and therefore t

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