Case Law (SC) -- The assessee – persons other than searched persons shall be liable to pay the interest on late filing of the return u/s 158BC even in absence of a notice u/s 158BC of the Income Tax Act and even for the period prior to 01.06.1999.

 "At this stage, it is required to be noted that as observed by this Court in the case of Vatika Township Private Limited (supra), Chapter XIV­B prescribes a special procedure for computation of income for the block period in search and seizure cases. Section 158BD shall be applicable in case of any person other than a person with respect to whom search was made. As observed Chapter XIV­B is a complete code in itself providing for self­-contained machinery for assessment of undisclosed income for the block period. Therefore, in case of the person other than searched person the notice under Section 158BD would be required/sufficient and in case of late filing of the return under Section 158BC, the interest will   be   leviable   under   Section   158BFA.  Any other interpretation would lead to Section 158BD nugatory. It can be seen that by inserting the words “under Section 158BC” in Section 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 under Section 158BC of the Income Tax Act. At this stage, it is required to be noted that in the present case as such M/s. Khoday India Limited, and M/s. Khoday Breweries Limited – the   persons   searched   were   issued   notice   under   Section 158BC and in case of K.L. Swamy, who is the “other person”, the notice under Section 158BD has been issued.

10.7 Therefore, the submission on behalf of the assessee that in absence of any notice under Section 158BC served upon the assessee – persons   other   than   searched   persons   for   the period   prior   to   the   amendment  in Section 158BD vide Finance Act, 2002, there shall not be any liability to pay interest under Section 158BFA, has no substance and the same is required to be rejected and the said question is required to be answered in favour of the revenue and against the assessee.

11 In view of the above and for the reasons stated above, the present appeals succeed in part. It is observed and 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. 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."

K.L. Swamy v. CIT , CA No. 3704/2012 dated 13.01.2023

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