KAMLESH BHOGILAL KANDOI M/S. BHOGILAL MULCHAND KANDOI vs. A.C.I.T.

Facts

The assessee, Kamlesh Bhogilal Kandoi, filed an appeal before the Gujarat High Court against an order of the Income Tax Appellate Tribunal (Tribunal) dated July 9, 2001, for Assessment Year 1993-94. During the previous year relevant to AY 1993-94, Rs. 4,46,000 was seized from the assessee. Before filing the return of income, the assessee requested that the seized cash be adjusted against the advance tax liability for AY 1993-94. The Assessing Officer issued notices under section 143(2) and an intimation under section 143(1)(a) without adjusting the seized cash. The Commissioner of Income Tax (Appeals) dismissed the assessee's appeal, and the Tribunal confirmed this order. The High Court admitted the appeal on substantial questions of law.

Held

The High Court addressed the two framed questions of law. Regarding the first question, the Court found no error in the Tribunal's decision not to entertain the additional ground of appeal concerning the legality of the intimation under section 143(1)(a). Therefore, this question was answered against the assessee and in favour of the revenue. Concerning the second question, the Court acknowledged the assessee's request to adjust the seized cash against advance tax liability for AY 1993-94, made before the end of the previous year. The Court noted the provisions of sections 234B and 234C and the amendment to section 132B clarifying that existing liability does not include advance tax. The Court, relying on the Delhi High Court's decision in CIT vs. K.K. Marketing, held that the seized cash ought to have been adjusted against the advance tax liability, subject to the provisions of sections 234B and 234C, as the assessee had no intention of shirking its liabilities and the application was made in time. Thus, question 2 was answered in favour of the assessee and against the revenue. The impugned order of the Tribunal was modified accordingly.

Key Issues

1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not entertaining the additional ground of appeal regarding the legality of intimation under section 143(1)(a) of the Income Tax Act, 1961. 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the cash seized cannot be adjusted against the advance liability as requested by the appellant. Assessee's contentions: For issue 1, the assessee argued that the Tribunal erred in not entertaining the additional ground regarding the legality of the intimation under section 143(1)(a). For issue 2, the assessee contended that the Tribunal erred in not appreciating its letter dated March 18, 1993, requesting the adjustment of seized cash against advance tax for AY 1993-94. This adjustment would have reduced or eliminated interest liability under sections 234A/234C. The assessee relied on the Delhi High Court decision in CIT vs. K.K. Marketing. Revenue's contentions: The revenue supported the impugned order passed by the Tribunal, stating it was in accordance with law and required no interference.