Whether any interest liability arises during pendency of application before Settlement Commission - NO: HC

THE issue before the Bench is - Whether any interest liability arises during pendency of application before Settlement Commission. NO is the answer.

Facts of the case

The assessees involved are individual. A search took place in the premises of one K.C.Group, where besides cash of Rs. 2,16,500/- and stock to the tune of Rs. 53,21,218/-, certain documents and books of accounts were seized. Notice u/s 158BC was served on the assessee, responding to which, assessees filed return for the block period ending 5.10.2001 on 10.12.2002, disclosing Nil income. Thereafter, they applied u/s 245D(1) to the settlement commission and disclosed Rs. 10 lakhs in the hands of each of the four persons i.e. a total of Rs. 40 lakhs at 2% of turnover of Rs. 20 crores. By a speaking order, these applications were admitted u/s 245D(1). The SETCOM called for a report under Rule 9 read with Section 245D(1) from CIT. The final order directed the revenue to accept the offer of additional income of Rs. 1,48,16,160/- referred to in the body of SETCOM's order. The SETCOM rejected the waiver of interest under various provisions of the Act. Consequently, interest u/s 220(2) in terms of Section 245D(2C) was directed to be recovered. While computing the amounts payable, AO passed in his consequential order Rs. 13,03,211/- as interest recoverable for the period between 1.1.2004 and 26.3.2010.

On appeal, CIT(A) returned the finding that the assessee had deposited tax within the time specified u/s 245D(2A). It had also observed that, however, the AO while passing the order u/s 158BC read with 245D(4) charged interest u/s 245D(2C) for the period starting from 01.01.2004 to 26.3.2010 @ 15% amounting to Rs. 13,03,211/- without appreciating that Section 245D(2C) can be invoked only if the assessee does not deposit income tax payable on income disclosed and admitted under section 245D(1). Assessee had deposited Rs. 6,12,000/- within the time prescribed u/s 245D(2C) on the income of Rs. 10 lakhs as per order u/s 245D(1) in view of the admission. On further appeal, Tribunal considering the judgement of SC in Ajmera Housing Corporation & Anr. Vs CIT 2010-TIOL-66-SC-IT concluded that when the Revenue did not place any material controverting the findings of CIT(A) nor referred any contrary decision, so as to enable us to take a different view in the matter, Tribunal had not inclined to interfere.

Held that,

++ we notice that the question of levying any additional interest over and above what is permissible under Chapter XIX-A would not arise in the given circumstances of the case. Concededly at the time when the application was filed before the settlement commission, the assessee deposited the admitted tax liability. Soon thereafter, when the application was admitted, the amount required was deposited within the time stipulated u/s 245D(6A). The further tax liability determined was payable after the final decision. The records and materials examined by the CIT(A) and upheld by the ITAT disclose that even the tax liability finally determined was satisfied. In these circumstances, the addition of interest for the period during the pendency of the application before the settlement commission was entirely unwarranted. We do not see any reason to disturb the concurrent findings of fact. The appeals do not raise any substantial question of law and are consequently dismissed.