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Income Tax Appellate Tribunal, “ A” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI S.S. GODARA
PER CHANDRA POOJARI, ACCOUNTANT MEMBER These appeals by Revenue are directed against different orders of the CIT(A)-I, Madurai in respect of above assessees for the assessment year 2009-2010.
The issue in these two appeals is common in nature, hence these appeals are combined, heard together, and disposed off by this common order for the sake of convenience. The common ground in these appeals is as follows:-
“The learned Commissioner (Appeals) erred in holding that the cash seized during search and seizure operation is to be adjusted towards advance-tax and thereafter interest under Section 234A, 234B and 234C has to be calculated when the provisions of Section 132B provide for adjustment of cash seized only against the existing liability and such existing liability arises on completion of the assessment and demand is created’’.
The facts of the case as narrated in is as below.
There was a search conducted in the business and residential premises of M/s. Sri Kaliswari fireworks group concerns and its partners on 21.10.2008.
Consequent to this, assessment order was completed u/s.143(3) r.w.s. 153C of the Income Tax Act is as under:-
-3- & ITA No.1759/Mds/2014.
(Amount in �) Total income returned 70,58,948 Add: (i) Claim of depreciation 99,878 and interest on car loan as discussed in Para 3(a) (ii) Difference in capital gain admitted as discussed in Para 3(b) 8,11,632 (iii) Undisclosed gold jewellery as 40,27,036 discussed in Para 3(c) (iv) Unaccounted cash found as 8,06,414 discussed in Para 3(d) ------------- 57,44,960 Total income determined 1,28,03,908 Tax payable thereon (as per 35,62,301 annexure enclosed)
The assessee prayed before the Assessing Officer that the amount seized at �6 lakhs to be considered towards advance tax liability payable by assessee on additional income declared/assessed in its case. The Assessing Officer did not agree with the contention of the assessee in view of the provisions of section 132B(1)(i) of the Act. Against this, assessee went in appeal before the CIT(A). The CIT(A) placing reliance on the order of the Tribunal in the case of Shri. Ram S. Sarada vs. DCIT in dated 02.11.2011 observed that cash seized during the course of seizure is -4- & ITA No.1759/Mds/2014.
required to be adjusted against taxes due including advance tax for purpose of computation of interest under sections 234A, 234B and 234C of the Income Tax Act. Against these findings of CIT(A) the Revenue is in appeal.
We have heard both parties and perused the records. The ld. Departmental Representative submitted that in view of the judgment of Tribunal in the case of Gianchand Gupta vs. DCIT [80 ITD 548] (Delhi) wherein held that there is no automatic payment of advance tax on the date of seizure and amount of cash seized and returned by the Assessing Officer would relate back to the order u/s. 132(5) and, therefore, interest of under sections 234A, 234B and 234C is chargeable upto the date of adjustment on the total amount of tax and thereafter on the balance amount and judgment in the case of CIT vs. Amar Ubromal Chawla 77 TTJ 405 (Nagpur), and the issue has to be decided in favour the department. Further, he submitted that there was amendment to section 132B by insertion of Explanation (2) to below section 132(4)(b) that reads as follows.
“ From 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.’’ According to ld. Departmental Representative, it is to be considered as retrospective effect and an amount seized to be adjusted against existing liability only.
-5- & ITA No.1759/Mds/2014
On the contrary, the learned Authorised Representative placed reliance
on the judgment of Bombay High Court in the case of CIT vs. Shri. Jyotindra B. Mody in of 2010 dated 21st September, 2011 wherein observed 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 14th March, 2007 requested the assessing officer to adjust the amounts towards the exisint advance tax liability. Since advance tax liability is to be computed and paid in accordance with the provisons of the Act even before the completion of the assessment, no fault can be found with the decision of the ITAT in holding that in the facts of the present case, the amounts in question were liable to be adjusted towards the existing advance tax liability’’.
Further, we also find that similar issue was considered by co-ordinate bench for the assessment year 2009-10 in the case of Pushpandra Subhash Chandra Vs. ACIT 37 CCH 127 (Pune) and it was held that 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.
-6- & ITA No.1759/Mds/2014
In view of the above judgment of the Bombay High Court which is a superior judicial forum, in our opinion, it is appropriate to follow the same
rather than the Tribunal order. Accordingly, we are inclined to hold that cash seized during the course of search is required to be adjusted against tax due including advance tax for the purpose of computing the interest under sections 234A, 234B and 234C. Thus order passed by the Commissioner of Income Tax (Appeals) is in conformity with the judgment of Bombay High Court cited supra.
Regarding insertion of Explanation 2 to section 132B, in our opinion, all
substantive provisions unless they are specifically stated as being effect to retrospectively, invariably be taken to apply from the date indicated in the enactment or amendment as effective from. The rule of interpretation of an enactment that it must be given a literal interpretation and further it would be taken as effective from the date of enactment given in the amendment.
But, unless amendment specially indicates that it is to be given retrospective operation, the Explanation 2 to section 132B by Finance Act, 2013 which is with effect from 01.06.2013 shall have only prospective effect. If assessment
-7- & ITA No.1759/Mds/2014 was completed based on the provisions that existed on the statutory book, by means of subsequent amendments, it is not permissible to have that amended provisions unless the amendment specially states that its effective from an earlier date. Being so, we are not in a position to appreciate the arguments of the ld. Departmental Representative on this ground also.
In the result, both appeals of the Revenue in ITA Nos.947/Mds/2014 and 1759/Mds/2014 are dismissed.
Order pronounced in the open court at the time of hearing on Monday, the 9th of March, 2015 at Chennai