PR COMMISSIONER OF INCOME TAX-1 AMRITSAR vs. SURINDER KUMAR KHINDRI

ITA/25/2016HC Punjab & HaryanaPHHC01110446201628 February 2017Author: MR. JUSTICE SURINDER GUPTA,MRS JUSTICE DAYA CHAUDHARY12 pages
AI SummaryDismissed

What were the facts?

During a search on September 9, 2010, cash of ₹99,00,000 was seized from the respondent-assessee. The assessee requested adjustment of this cash against his expected advance tax liability on September 15, 2010, which the Assessing Officer (AO) rejected, deeming advance tax not an existing liability. The assessee filed a return on March 30, 2012, showing ₹3,00,00,000 as undisclosed income. The AO accepted the return under Section 143(3) and adjusted the seized cash against regular taxes and interest. However, due to interest under Sections 234B and 234C, the final liability exceeded the seized cash. The AO initiated penalty proceedings under Section 271AAA, finding that conditions for non-application of penalty were not met. The AO held Explanation 2 to Section 132B, which excludes advance tax from existing liability, to be clarificatory and applicable retrospectively, leading to a penalty order on August 26, 2013. The CIT(A) allowed the assessee's appeal, holding the explanation not retrospective. The Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal. The revenue has appealed to the High Court.

What did the High Court hold?

The High Court found no merit in the revenue's submissions. It held that the issue had already been decided against the revenue by this Court in previous judgments, specifically citing Income Tax Appeal No. 36 of 2004 (Commissioner of Income Tax Vs. Ashok Kumar) and ITA No.425 of 2014 (Commissioner of Income Tax (Central), Ludhiana Vs. M/s Cosmos Builders and Promoters Limited). In these cases, it was held that an assessee is entitled to the adjustment of seized amounts towards advance tax liability from the date of application. Furthermore, the Court affirmed that Explanation 2 to Section 132B of the Act is not retrospective in nature, as it came into force on June 1, 2013, while the assessment year in question is 2011-12. The Court also referred to the Supreme Court's decision in CIT Vs. Vatika Township Private Limited, which states that legislation modifying accrued rights or imposing new obligations is prospective unless clearly intended to be retrospective. The Tribunal's reasoning, which aligned with these principles, was approved. Consequently, the Court held that no substantial question of law arose, and the appeal was dismissed.

What were the issues?

1. Whether the Hon'ble ITAT erred in law and fact by ignoring that penalty under Section 271AAA was imposed due to non-payment of taxes on surrendered income, despite the department not responding to the assessee's request for adjustment of seized cash against advance tax liability, and without appreciating that advance tax does not constitute an existing liability as per Section 132B? 2. Whether the Hon'ble ITAT was correct in law and fact by not treating Explanation 2 to Section 132B, inserted by the Finance Act, 2013 with effect from June 1, 2013, which clarifies that 'existing liability' does not include advance tax, as applicable? 3. Whether Explanation 2 to Section 132B, though inserted by the Finance Act, 2013, with effect from June 1, 2013, is clarificatory in nature and thus makes explicit what was implicit before its insertion? Assessee's contentions: The assessee argued that seized cash should be adjusted against advance tax liability, and that Explanation 2 to Section 132B is not retrospective. The assessee relied on the fact that they had paid all taxes and interest related to the undisclosed income. Revenue's contentions: The revenue contended that seized cash could not be adjusted towards advance tax. They also argued that Explanation 2 to Section 132B, introduced with effect from June 1, 2013, was clarificatory and thus retrospective. The revenue relied on a Single Bench judgment of the Madhya Pradesh High Court in Ramjilal Jagannath and Others Vs. Assistant Commissioner, (2000) 241 ITR 758 (MP).

Which sections of the Income-tax Act were involved?

Section 260A,Section 132(4),Section 132B,Section 271AAA,Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 28.02.2017

The Pr. Commissioner of Income Tax-1, Amritsar

.…Appellant

Vs.

Sh. Surinder Kumar Khindri, 86-Shakti Nagar, Amritsar

…..Respondent

CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

HON’BLE MR. JUSTICE RAMENDRA JAIN

Present: Mr. Denesh Goyal, Advocate for the appellant.

Mr. Salil Kapoor, Mr. Sumit Lal Chandani,

Mr. Nitin Mehra, Ms. Ananya Kapoor, and

Mr. Saurabh Kapoor, Advocates for the respondent.

Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the appellant-revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 31.08.2015, Annexure A.3, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No. 185/Asr/2015, for the assessment year 2011-12, claiming following substantial question o

The order continues below.

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