MAHAVEER KUMAR JAIN ,HYDERABAD vs. ASSISTANT COMMISSIONER OF INCOME TAX ,CENTRAL CIRCLE-3(3), HYDERABAD

O R D E R Per S. S. Godara, J.M.

These three assessees’ appeals for A.Y. 2018-19 arise from the Commissioner of Income Tax (Appeals)-11, Hyderabad’s separate orders; all dated 01.09.2021, in case No.10503, 10502 and 10501/2017-18, involving proceedings u/s. 154 of the Income Tax Act, 1961 [in short, ‘the Act’], respectively. Heard both the parties. Case files perused. 2 We come to the lead assessee Shri Anand Kumar Jain’s appeal ITA 416/Hyd/2021 raising the following substantive grounds : “1. The learned First Appellate Authority, in the facts and circumstances of the case, is not justified in rejecting the appellant’s claim for adjustment of seized cash towards self- assessment tax for the purpose of charging interest u/s 234B of the Act in the order passed u/s 153A.

2. The learned First Appellate Authority, failed to appreciate the fact that since the appellant claimed the adjustment of seized cash as self-assessment tax, the Ld. Assessing Officer is not justified in charging interest u/s 234B of I.T Act, 1961 in facts and circumstances of the case.

3. The appellant craves leave to add, amend, delete or substitute any ground or grounds during the course of the hearing.”

3 Next comes the CIT(A)’s detailed discussion upholding the Assessing Officer’s rectification action as under :

6. The Decision: In the instant case, the appellant filed his return of income on 18.08.2018 for AY 2018-19 admitting income of Rs.89,40,700/- which included additional income of Rs.75,35,065/- admitted u/s 132(4) during the course of search operations held at his premises on 21.11.2017. The assessment was completed u/s 143(3) dt.31.12.2019 accepting the returned income of Rs.89,40,700/ -. Subsequently the order u/s 143(3) was rectified vide order u/s 154 of I.T. Act dated 23.11.2020 by levying interest u/s 2348 amounting to Rs4,53,882/- as against Rs.15,795/-levied in the assessment order. During the appeal proceedings, the appellant contended that it had made the specific claim amounting of Rs.21,55,000/--, out of the total cash seized, be treated as Self Assessment tax. Further, the appellant treated that since the amount has been seized on 21.11.2017 which is FY 2017-18 relevant to A.Y 2018-19, the same has to be treated as advance tax. The Assessing Officer initially had no.t levied the interest, however, the same was rectified u/s 154 and the demand was raised accordingly along with the levy of interest u/s 234B as per law. The relevant provisions of Section 132B which deals with application of seized or requisitioned assets are reproduced as under: Application of seized or requisitioned assets. 132B. (1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:- (i) the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-lax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) and the Interest-tax Act, 1974 (45 of 1974), and the amount of the liability determined on completion of the assessment under section 153A and the assessment. of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is deemed to be in default) or the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C, may be recovered out of such assets: Explanation. 1.-In this section,- (i) block period" shall have the meaning assigned to it in clause (a) of section 158B; (ii) "execution of an authorisation for search or requisition" shall have the same meaning as assigned to it in Explanation 2 to section 158BE. Explanation, 2.-For the removal of doubts, it is hereby declared that the "existing liability" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII. "

It is important to note that the advance tax payable by the appellant thus cannot be adjusted against the cash seized and when the appellant files the return, it is mandatory to pay all the taxes due as on the date-of the return for the same co be valid along with the relevant interest u/s 234B and 234C. The Self-assessment tax is nothing but the payment of advance tax with applicable interest. Further, it is pertinent to mention here that in the Explanation 2 to Section 132B reproduced above, it has been clearly stated that 'existing liability' does not include advance tax payable. Further, the Central Board of Direct. Taxes ('CBDT') has issued Circular No. 20/2017, date 12-6-2017 in which it has been clarified that Explanation 2 to section 132B of the Act, inserted with effect from 1-6-2013 and which states that "existing liability does not. include advance tax payable in accordance with the provisions of Part-C of Chapter XVII of the Act", shall have prospective application. The circular is brought out as under: "Subject: Applicability of Explanation :3 to Section 132B of the I. T. Act, 1961reg. - Section 132B of the Income Tax Act 1961, provides for adjustment of seized assets requisitioned assets against the amount under the Income Tax Act, 1961, (the Act), the Wealth-tax Act, 1957, the Expenditure-tax Act, 1987, the Gift-tax Act, 1958 and the Interest-tax Act, 1974, and the amount of the liability determined on completion of the assessment under section 153A of the Act and the. assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is deemed to be in default, or the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C of the Act.