PRAVINCHANDRA N. KAMDAR,MUMBAI vs. DCIT CEN CIR 7(3), MUMBAI

सुनवाई की तारीख /Date of Hearing : 6.9.2017 घोषणा की तारीख /Date of Pronouncement : 13.11.2017 आदेश / O R D E R PER RAJESH KUMAR, A. M: This is an appeal filed by the assessee challenging the order dated 9.9.2015 passed by the CIT(A), Mumbai-49 whereby the ld.CIT(A) confirming the non-granting of credit of cash seized of Rs.17,50,000/- and pay orders of Rs.58,00,860/- as advance tax against the income tax liability on the income offered in the assessment year 2012-13 made in the statement u/s 132(4) of the Income Tax Act, 1961.

2 I . T . A . N o . 5 1 9 4 / M u m / 2 0 1 5 2. Brief facts of the case are that a search and seizure action was conducted u/s 132(1) of the Act on 24.11.2011 on the assessee. The assessee derived income from salary, house property and the income from other sources. The assessee is a partner in Hamsa Trading Co., M/s Kamdar and Co, VVM Enterprises carrying on business of trading in ferrous and non- ferrous metals. During the search proceedings cash of Rs.17,50,000/- and jewellery worth Rs. 56,36,873/- were found. The cash was seized and a pay orders of Rs.58,00,860/- dated 19.1.2012 was given to the search team for non seizure of jewellary. Thereafter, the assessee filed revised return of income on 25.7.2012 declaring total income of Rs.2,90,54,548/- showing therein the undisclosed cash and jewellery as has been found during the course of search. The AO issued statutory notices u/s 143(2) and 142(1) which were served upon the assessee. The AO after considering the submissions and averments of the assessee framed the assessee vide assessment order dated 30.3.2014 by framing the assessment at Rs.2,96,30,650/- without allowing any credit in the advance tax of cash seized of Rs. 17,50,000/- and pay order of Rs.58,00,860/- given to search team while calculating interest u/s 234B/234C of the Act despite the fact that the assessee by way of written communications requested the department to treat the same as payment towards advances of tax. It is pertinent to note that the cash seized on 24.11.2011 and pay orders dated 3 I . T . A . N o . 5 1 9 4 / M u m / 2 0 1 5 19.1.2012 were declared by the assessee in the statement recorded u/s 132(4) on 19.1.2012. The assessee disclosed income and offered to tax to the tune of Rs.73,86,873/- comprising the cash seized as well as jewellery of Rs.56,36,873/- and the return was filed on 25.9.2012 u/s 139 of the Act and requested for adjustment of cash seized of Rs. 17,50,000/- and pay order of Rs. 56,36,873/- vide letters dated 13.2.2012, 14.3.2012 and 11.12.2013.

“34. I have considered the submission made by the appellant and the case laws cited .. The appellant has claimed credits against the tax liability by way of advance tax, of cash seized of Rs.17,50,000/- on 24.11.2011 and pay orders of Rs.58,OO,860/- dated 19.1.2012 submitted to the IT Department, in view of unreconciled jewellery/ornaments and silver articles etc. arising on account of disclosure of additional income made u/s 132(4} of the Act. The appellant has made various requests/application to adjust the cash seized and pay orders deposited against the tax liability to the A.D.I.T(lnv.} on 13.2.2012 and to the A.O ACIT., Circle 13(2}, Mumbai on 14.2.2013 and as a result of non-granting of the credit of cash seized/pay orders, the interest u/s 234B has been charged at a very high figure of Rs.821297/- 34.1 From the case laws cited by the appellant, it is observed that the courts have held in numerous cases that the assessee was entitled to adjustment of the assets seized u/s 132 of the Act against the liability of advance tax if a request for adjustment was made before the installment became due. In this case the request for adjustment of the seized assets was made by the appellant before the AD on 15.3.2012. However, it is noted that the above said decisions cited by the appellant 4 I . T . A . N o . 5 1 9 4 / M u m / 2 0 1 5 and reproduced in para No. 34.2 above, can be distinguished since these decisions have not considered the Explanation 2 to section 132B inserted by the Finance Act 2013. The Explanation 2 is reproduced as under:- " 132B(1) - The assets seized u/s 132 or requisitioned u/s 132A may be dealt with in the following manner, namely; (i) the amount of any existing liability under this Act, the W T Act, 1957 ( 27 of 1957), the Expenditure 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 u/s 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 XIVB 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 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. " From above, it is noted that the Explanation 2 clarifies the meaning of "existing liability appearing in the section 132B and this would become part and parcel of the provisions from the date of provision itself. In this regard reliance is placed on the Apex Court decision in the case of Bengal Immunity Co. Ltd. v State of Bihar (1955) 6 STC 446 (SC) in which it has been held that; "an explanation once enacted as part of an existing provision becomes part and parcel of such provision from the date of the provision itself, since it is ordinarily intended to remove an ambiguity and make the intention of Parliament clear, as a principle of interpretation of law” Further, an explanation can have effect even for a period prior to its insertion, though it may not have been made retrospective in its operation, as was pointed out in CIT V P Doraisamy Chetty 1990 183 ITR 559 (SC). It is also noted that section 1328 is a machinery/procedural section, on application of seized or requisitioned 5 I . T . A . N o . 5 1 9 4 / M u m / 2 0 1 5 assets, therefore such an amendment would also have retrospective effect. In the decision cited by the appellant in the case of ACIT v Shri Sanjeev Kumar Goyal, the ITAT, Chandigarh have considered that the language of Explanation 2 as noted above reads - "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" and the amendment have made effective from 1.6.2013. Similarly, amendment to section 9 Explanation 4 was made in Finance Act 2012 with a language as " for the removal of doubts, it is hereby clarified " … and it was expressly provided that the amendment would be retrospective w.e.f 01.06.1976. I find that the above comparison is not appropriate since section 9 is a charging section and therefore, the retrospective effect was given by specific mention of the date in the amendment to that section whereas section 1328 is a procedural section and did not require such specific mention of its retrospective application. In view of the above discussion I am of the considered opinion that the term "existing liability" would not include advance tax payable and therefore the claim of the appellant to application of seized cash and pay orders submitted before the department against the advance tax liability is not correct. Accordingly, no relief can be granted with respect to ground no. 3 and the same is dismissed. Since non-granting of credit of RS.75,50,860/- has been upheld, relief u/s 234B on this count claimed in ground no. 4 of the appeal cannot be allowed. However, the AO would allow a consequential relief u/s 2348 while giving effect to this appellate order. Accordingly these grounds are dismissed on above terms. Dismissed “

Lastly, the ld. AR prayed that in view of the facts and case laws relied upon by the ld. AR that the order of the ld.CIT(A) be set aside and direct the AO to treat the money lying with the department towards the advance tax liability and be directed to delete the interest component levied u/s 234B and 234C of the Act.

8 I . T . A . N o . 5 1 9 4 / M u m / 2 0 1 5 6. We have heard both the parties, perused the material placed before us including the orders of authorities below and the orders relied upon by the ld.AR. The undisputed facts of the case are that the cash of Rs.17,50,000/- and jewellery worth Rs. 56,36,873/- were found during search proceedings on 24.11.2011. The said cash was seized and a pay order Rs. 58,00860/- dated 19.01.2012 was given to the search team in lieu of non seizure of jewellery. The assessee filed return of income on 25.7.2012 offering the cash seized and jewelry in the said income. The assessee has specifically requested to The Assistant Director of Income Tax (Inv) Unit VIII(2), Mumbai vide letter dated 13.2.2012, The Asstt. Commissioner of Income Tax, Circle 13(2), Mumbai, vide letter dated 14.3.2012, the Commissioner of Income Tax, Central-IV, Mumbai, vide letter dated 12.11.2013 to adjust/allow credit in the advance tax of money lying with the department. However the AO did not heed to the assessee and no credit of Rs. 75,50,860/- was allowed resulting into interest being charged u/s 234B and 234C. Having discussed all the facts, we are of he considered view that he money lying with the department amounting to Rs.75,50,860/- deserved to be adjusted as advance tax liability and the interest charged under section 234C qua third quarter for non payment of advance tax is not at all legal and justified. u/s 234C, we are of the considered opinion, that the interest for non-default for non payment of tax should not be charges for he last 3rd installment and same is the position 9 I . T . A . N o . 5 1 9 4 / M u m / 2 0 1 5 with regards to charging interest u/s 234B of the Act. The case of the assessee is also supported by the plethora of judgments, which are discussed in the para 8 of the of judgment of the Hon’ble Jurisdictional High Court in the case of CIT V/s Shri Jyotindra B Mody in Income Tax Appeal No.3741 of 2010, dated 21.9.2011 which reads as under : “8 We see no merit in the above contention, because, once the assessee offers to tax the undisclosed income including the amount seized during the search, then the liability to pay advance tax in respect of that amount arises even before the completion of the assessment. Section 132B(1)(i) of the Act does not prohibit utilization of the amount seized during the course of search towards the advance tax payable on the amount of undisclosed income declared during the course of search. In the present case, the assessee, prior to the last date for payment of last installment of advance tax, had in fact by his letter dated 14.3.2007 requested the assessing officer to adjust the amounts towards the existing advance tax liability. Since advance tax liable is to be computed and paid in accordance with the provisions of the Act even before the completion of the assessment, no fault can be found with decision of the ITAT in holding that in the facts of the present case, the amount in question were liable to be adjusted towards the existing advance tax liability”