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the figures, for the sake of convenience, these appeals were heard together and are being disposed of, by this consolidated order.
The assessee has raised the following grounds of appeal in for A.Y. 2013-14.
“1. The order of the CIT(A) is erroneous both on facts and in law.
2. The Ld. CIT(A) erred in not admitting the appeal and dismissing the same in limine.
3. The Ld. CIT(A) erred in dismissing the appeal in limine rather than disposing the appeal on merits.
4. The Ld. CIT(A) ought to have appreciated the fact that the Assessing Officer has not adjusted the self-assessment tax, which is not legal.
5. The Ld. CIT(A) erred in not admitting the appeal without appreciating the fact that the appellant has already filed two request letters for the adjustment of the cash seized against the self-assessment tax payable.
6. The Ld. CIT(A) erred in not appreciating the fact that the request letters filed by the appellant ought to have been considered and the cash seized in the premises of the searched parties should have been first adjusted against the self assessment tax of all the concerned assessees and the balance towards demand payable.
7. The Ld. CIT(A) ought to have adjudicated the appeal on merits after considering the request letters filed by the appellant for adjusting the cash seized towards the self-assessment tax.”
2.1 Similar grounds are raised by the assessee in the remaining two appeals i.e., and 432/Hyd/2024.
Facts of the case, in brief, are that assessee, an individual earning commission and interest income, initially filed her original return for AY 2013-14 on 11.03.2014 admitting total income at Rs. 3,54,930/-. Following a search and seizure operation under section 132 of the Act on 22.11.2018, centralized to the Hyderabad circle by order under section 127 on 22.05.2019, a notice under section 153A dated 09.07.2019 was issued. In response, the assessee filed a revised return on 06.01.2021, declaring Rs. 6,94,910/- as total income, inclusive of commission and interest.
3.1. During the course of assessment proceedings, certain discrepancies were found by the Assessing Officer in the books of account regarding a cash balance as on 01.04.2012, totaling Rs. 20,13,280/-, which the assessee failed to substantiate, leading to its addition to the assessed income. Thereafter, Assessing Officer issued penalty proceedings under section 271(1)(c) for concealing income. Finally, the Assessing Officer completed the assessment u/s 143(3) r.w.s. 153A of the Income Tax Act interalia making an addition of Rs.20,13,280/- to the total income of the assessee towards difference in cash balance and passed assessment order on 19.04.2021.
Feeling aggrieved by the order passed by the Assessing Officer, assessee filed appeal before the Ld. CIT(A), who dismissed the appeal of assessee in limine.
Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
The only short question that arises before us is whether the assessee is entitled to adjust the cash seized during the course of search against the self assessment tax or not ? In this regard, the ld. AR has drawn our attention to the letter of assessee dt.24.03.2021 wherein the assessee has sought for the adjustment of the self assessment tax demand of Rs.72,224/- for the assessment year 2013-14 and submitted that the said amount may kindly be adjusted against the cash seized for a sum of Rs.4,18,31,540/- during the course of search. Similar request was also made by the assessee before the ld.CIT(A) on 04.03.2024. However, despite the above request, the ld.CIT(A) had passed the order against the assessee observing in Para 6.4 and 6.4.1 as under :
“6.4 I have examined the report of the AO dt,07.03.2024. The AO has submitted that the appellant had filed the return of income in response to the notice u/s. by declaring a total income of Rs.6,94,910/- on which the total tax payable was Rs.88,898/-. However, the appellant has paid tax of Rs.6,924/- before fifing of the appeal. Therefore, there was a shortfall of Rs.72,224/-. The Section 249(4) refers to tax due on the income returned. In the present case under consideration, the appellant has not paid self assessm.ent tax in full that is required to be paid by the appellant before filing the appeal.
6.4.1 It is imperative that the provision or section 140A is also to be referred to so as to find out whether the appellant has paid the tax due on the returned income”. As per the provision or section 140A, the assessee shall be liable to pay tax together with interest payable for any delay in furnishing the return or for default or delay in payment of advance tax before furnishing the return. Explanation to Sec-140A clarifies that where the amount paid by the assessee falls short of aggregate of tax and interest, the amount so paid shall first be adjusted towards the interest payable and the balance if any, shall be adjusted towards the payable. Since the appellant has paid only Rs.6,924/- before filing of the appeal as per provisions u/s 139(1), there is a shortfall or Rs.72,224/- (ROI filed in responsc to the notice u/s. 153A) in payment of admitted tax in terms of the Explanation to the provision of sec.140A. Therefore, in my view, the case of the appellant clearly attracts the provision of section 249(4)(a). As far as compliance to the provisions of section 249(4)(a) of the IT Act is concerned, it is evident that the appellant had not made payment of admitted tax on returned income before the filing of appeal on 30.07.2021. The provision contained in section 249(4)(a) I.T, Act, are of mandatory in nature, as held by Hon’ble Madras High Court in a decision in the case of S. Alagarsamy Vs. ITI (296 ITR 43). The Hon’ble High Court observed that payment of tax due on income returned by assessee before an appeal against assessment order, is a condition precedent and non-compliance of same renders appeal not maintainable. Thus, the above judicial pronouncetncnt also support the view that provisions of section 249(4)(a) of the IT Act are of mandatory in nature. Since, the appellant has not paid the admitted tax in full before the due date of filing of the appeal, in my view, the appeal filed by the appellant for the assessment year 2013-14 is not liable to be admitted for non-payment of admitted tax as per the provisions contained in section 249(4)(a). Accordingly, I do not admit the appeal for adjudication on merit.”
6.1. The ld. AR has submitted that the issue is no more res integra and the Hon’ble Delhi High Court in the case of CIT Vs. Pramod Kumar Dang in ITA 62/2001 dt.10.01.2014 and also the Tribunal of Hyderabad Bench in the case of P. Madhusudhan Vs. ACIT in dt.21.06.2016 has decided the issue in favour of the assessee.
Per contra, ld. DR has relied upon the orders of lower authorities.
Heard and perused the material available on record. In the present case, the search has taken place in the premises of the assessee itself on 22.11.2018 and thereafter, notice u/s 153A of the Act was issued on 09.07.2019 calling upon the assessee to file return of income. In response, the assessee has filed the return of income on 06.01.2021 for the A.Y. 2013-14 declaring total income of Rs.6,94,910/-. Based on the return of income and other documents, the Assessing Officer passed the assessment order against the assessee quantifying the demand of the assessee for A.Y. 2013-14 for a sum of Rs.7,37,272/-. Feeling aggrieved by the order passed by the Assessing Officer for A.Y. 2013-14, the assessee preferred the appeal before the ld.CIT(A). Similar assessment orders were passed for A.Y. 2017- 18 and 2019-20 assessing the total tax demand of amount of assessee for an amount of Rs.1,10,70,553/- and Rs.64,37,527/-, respectively. Feeling aggrieved by such orders, the assessee preferred appeals before the ld.CIT(A) as mentioned hereinabove. The Ld.CIT(A) has dismissed the appeals of the assessee as the assessee failed to deposit the self assessment tax as a pre- condition for filing the appeal u/s 249(4)(a) of the Act. It is mentioned by the ld.CIT(A) in his order that a show cause notice dt.05.03.2024 was issued to the assessee as to why the appeal is not dismissed, in limini, for non payment of admitted tax as per the provisions of section 249(4)(a) of the Act. In response to the show cause notice, assessee filed a reply dt.12.03.2024, copy of which is also produced before us along with the letter dt.24.03.2021, which was received in the office on 27.02.2024, stating that earlier letter was not traceable, wherein the assessee made a request for adjustment of the cash seized with the tax demand. The ld.CIT(A) had called for response from the Assessing Officer and the Assessing Officer had confirmed that no request was made by the assessee for adjustment of outstanding tax assessment liability against the cash seized.
On the basis of the above said report, the ld.CIT(A) has dismissed the appeal of the assessee in limine, as assessee failed to make payment of self assessment tax demand. From perusal of all the three assessment orders, it is clear that the total tax demand payable for A.Y. 2013-14 is Rs.7,37,272/-. Similarly, for A.Ys.2017-18 and 2019-20, the total tax demand payable is Rs.11,0,70,553/- and Rs.62,13,720/-, respectively. The ld. AR to buttress his statement has relied upon the judgments mentioned hereinabove. It will be useful to mention here that for the purposes of adjustment or application of the seized or requisite asset under Section 132B provides as under :
[Application of seized or requisitioned assets69. 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-tax 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 determined69a on completion of the assessment 70[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 determined69a on completion of the assessment under Chapter XIV- B for the block period, as the case may be] (including any penalty levied69a 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, may be recovered out of such assets: 71[Provided that where the person concerned makes an application to the Assessing Officer within thirty days from the end of the month in which the asset was seized, for release of asset and the nature and source of acquisition of any such asset is explained] to the satisfaction of the Assessing Officer, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released, with the prior approval of the Chief Commissioner or Commissioner, to the person from whose custody the assets were seized: Provided further that such asset or any portion thereof as is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or for requisition under section 132A, as the case may be, was executed; (ii) if the assets consist solely of money, or partly of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied; (iii) the assets other than money may also be applied for the discharge of any such liability referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, the Tax Recovery Officer under authorisation from the Chief Commissioner or Commissioner under sub-section (5) of section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act.
(3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized. (4) (a) The Central Government shall pay simple interest at the rate of 72[one-half per cent for every month or part of a month] on the amount by which the aggregate amount of money72a seized under section 132 or requisitioned under section 132A, as reduced by the amount of money72a, if any, released under the first proviso to clause (i) of sub- section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section. (b) Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or requisition under section 132A was executed to the date of completion of the assessment 73[under section 153A or] under Chapter XIV-B. 73a[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.] 73b[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 perusal of the provisions of said section, it is clear that the first proviso contemplates for filing an application within 30 days from the end of the month in which the assets were seized to the Assessing Officer explaining the requisite amount for adjustment of the existing liability which referred to in this clause and the Assessing Officer on receipt of such application, after recording satisfaction and after taking approval from the PCIT, as the case may be, may do needful. However, the explanation to Section 132B inserted w.e.f. 01.06.2013 has clearly mentioned that the advance tax payable in agreeing to part C of Chapter XVII is not included in the existing liability.
Admittedly, as per the averments made before us as well as the averments captured in the order of ld.CIT(A), the assessee was not able to place on record any communication filed by her before the Assessing Officer made requests for adjustment of the existing self-assessment tax liability. Now the question is whether the amount of cash lying which was seized by the Revenue can be adjusted against the advances, which were required to be deposited, is a condition precedent for filing the appeal before the ld.CIT(A) or not. The ld. AR relied upon the decision of P. Madhududhan (supra) and also the decision in the case of CIT Vs. Pramod Kumar Dang (supra) and we had the occasion to go through both the decisions. Both the decisions pertain to assessment year prior to 2013 by virtue of the explanation to section 132B was inserted and therefore, in our understanding, both the decisions are not applicable to the facts of the present case for the assessment years 2017-18 and 2019- 20.
In the present case, undoubtedly, the huge amount of cash was recovered and seized during the course of search, which was sufficient to meet the tax liability. However, no application has been filed by the assessee before the Assessing Officer as provided under 1st proviso to section 132B of the Act and for the first time, the application was filed before the ld.CIT(A) on 12.03.2024.
12.1 In our considered opinion, once the money seized by the department was lying with the Revenue and advance tax was to be paid by the assessee as a precondition to file the appeal, then the said tax, if any, to be paid by the assessee could be adjusted in the accounts of the Revenue against the amount lying with it. For both purposes, the money will flow in the account of the Revenue / adjust to the account of the Revenue. Merely the assessee has not made an application for the adjustment of the existing liability, will not preclude the assessee from filing the appeal for non-deposit of tax liability, if the same can be adjusted from the seized cash. In our view, to make a request, at the stage of appellate proceedings, before the ld.CIT(A) for adjusting against the existing tax liability from the amount seized by the Revenue during the course of the search, is not prohibited, though, technically speaking, the application for adjudication is to be made within the time period provided by the 1st proviso of Section 132B of the Act. In view of the above, we deem it proper to remand back the matter to the file of ld.CIT(A) with a direction to examine afresh the contention of the assessee and find out whether at the stage of appellate proceedings, the request for adjustment of the seized amount can be accepted by the Revenue as against the tax demand now raised or not. In this case, the ld.CIT(A) concludes that the tax demand cannot be adjusted, so the authority may ask the assessee to deposit the self-assessment tax as provided under section 149 of the Act. Afterwards, the ld.CIT(A) is directed to decide the appeal on merits. We have not expressed any opinion on the merits and admissibility of the assessee's claim, the ld.CIT(A) is directed to decide the appeal without being influenced by our observation made hereinabove. Accordingly, the appeal of the assessee for A.Y. 2013-14 is allowed for statistical purposes.
Now coming to the other appeals of assessee i.e., ITA 431/Hyd/2024 for A.Y. 2017-18 and for A.Y. 2019-20, which are identical to the facts and issues raised in ITA 430/Hyd/2024, our decision in ITA No.430/Hyd/2024 would apply mutatis mutandis to these appeals also. Accordingly, ITA Nos.431 and 432/Hyd/2024 are allowed for statistical purposes.
In the result, appeals of assessee in and 432/Hyd/2024 are allowed for statistical purposes.
In the combined result, all the appeals of assessee are allowed for statistical purposes.