Madhya Pradesh High Court
Ramjilal Jagannath And Ors. And Kailash ... vs Assistant Commissioner Of Income-Tax ... on 21 April, 1999
Equivalent citations: [2000]241ITR758(MP)
Author: R. S. Garg
Bench: R.S. Garg
JUDGMENT R. S. Garg, J.
1. This order shall dispose of Writ Petition No. 4127 of 1994 (Ramjilal Jagannath v. Asst. Commissioner of Income-tax, Raipur) and Writ Petition No. 1803 of 1993 (Kailash Chand v. Asst. Commissioner of Income-tax, Jabalpur).
2. The facts in a nutshell for disposal of these two petitions are that in a raid made in the premises of the petitioners' firms and their partners of Writ Petition No. 4127 of 1994 between January 9, 1992 to January 13, 1992, cash amounting to Rs. 3,50,000 was seized. The petitioners moved different applications for adjustment of the seized amount towards the advance tax for the financial year 1991-92, the relevant assessment year being 1992-93. The respondents did not appropriate the said amount towards the payment of the advance tax, therefore, the petitioners have filed Writ Petition No. 4127 of 1994, seeking a direction against the respondents that they be asked to adjust the said amount of Rs. 3,50,000 towards the advance tax.
3. In Writ Petition No. 1803 of 1993 the officials of the Income-tax Department, raided the business and residential premises of the petitioner between November 16, 1988 and November 20, 1988 and seized the books of account, ornaments and cash Rs. 2,30,000. The petitioner applied to respondent No. 1, vide his application dated March 10, 1989, to adjust the seized amount towards the tax payable in advance. He also made a submission that the gold ornaments be released in favour of the petitioner to pay the advance tax. The Department did not adjust the said amount, therefore, the petitioner has filed the petition seeking the relief that it be held that the petitioner is not liable to pay any interest under Sections 234B and 234C of the Income-tax Act, and has also challenged the orders passed by the respondents annexed with the petition as annexures P-5 and P-7.
4. The submission of Shri Nema, learned senior counsel for the petitioners, was that the petitioners of each of the cases are liable to pay the advance tax under the provisions of the Income-tax Act. Referring to Sections 208, 219, he submitted that the advance tax is an existing liability, therefore, the petitioners were justified in making a request to the Department that the seized amount be adjusted towards the advance tax. According to him, the amount seized under the provisions of Section 132 is to be dealt with under Section 132(5) of the Act and the assets are to be disposed of in accordance with Section 132B of the Act and as there was an existing liability of advance tax which was to be paid on or before March 15 of the accounting year, the respondents could not refuse to adjust the amount. According to him, on one side, the respondents have retained the assets belonging to the petitioner and on the other hand are charging interest under Sections 234B and 234C of the Act.
5. Shri Sapre, learned counsel for the Revenue, submits that proceedings under Sections 132, 132A and 132B are independent proceedings and cannot be clubbed with the liability of paying the advance tax. According to him, unless the liability is found or decided under Section 132(5) of the Act, one is not entitled to say that the seized amount be adjusted towards the advance tax because by that time nobody knows what would be left for adjustment or refund. According to him, unless the proceedings under Section 132(5) are completed, the provisions of Section 132B would not come into play. His further submission is that the assessee is required to pay the advance tax in accordance with the provisions of law and by no stretch of imagination the seized amount can be deemed to be paid amount. His further submission is that if ultimately it is found that the amount was wrongly retained and the amount was more than the existing liability, then under the provisions of law, the petitioner would be entitled to statutory interest.
6. Shri Nema, learned counsel for the petitioners, in reply submits that the Income-tax Officer has to specify the amount that will be required to satisfy any existing liability under the Act and is required to retain in custody such assets or part thereof which are sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) and would release the remaining portion in favour of the person from whom it was seized, therefore, and as the liability to pay the advance tax is an existing liability, the petitioners of each of the petitions were justified in asking the Department to adjust the seized amount towards the advance tax. He submits that the Department was not justified in rejecting the claim of the petitioners.
7. For proper appreciation of the submission of the parties, it would be necessary to refer to Section 207 of the Income-tax Act and the onward Sections.
8. Section 207 provides that in accordance with the provisions of Sections 208 to 219 tax shall be payable in advance during any financial year in respect of the total income of the assessee which would be chargeable to tax. According to Section 208, advance tax shall be payable during a financial year in every case where the amount of such tax payable by the asses-see during that year, as computed in accordance with the provisions of Chapter XVII is one thousand five hundred rupees or more. The mode of computation of advance tax is provided under Section 209. Section 210 provides for payment of advance tax by the assessee of his own accord or in pursuance of the order of the Assessing Officer. The advance tax is to be paid in instalments in accordance with Section 211 of the Act. For a company, the instalments are to be paid on June 15, September 15, December 15 and March 15, but in the case of the assessees other than companies, the instalments are to be paid by September 15, December 15 and March 15. The proviso to Clause (b) of Sub-section (1) of Section 211 provides that any amount paid by way of advance tax on or before March 31, shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of the Act. Section 214 provides that where the advance tax is paid in excess, then the Government shall pay interest on it. Under Sections 215, 216 and 217, the interest is payable by the assessee in different contingencies. Section 218 provides that when an assessee shall be deemed to be in default, while Section 219 provides that any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of Chapter XVII shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit, therefore, shall be given to the assessee in the regular assessment.
9. From these provisions, it would clearly appear that the assessee of his own accord or under the directions of the Assessing Officer has to pay the advance tax under Section 208 on or before each of the due dates specified in Section 211. The advance tax is to be paid either of one's own volition or under the orders of the Assessing Officer. If one pays the tax of his own accord, then it is a voluntary act on his part. Even if he pays the tax under the directions of the Assessing Officer, it would again be a voluntary act on the part of the assessee because the failure may lead to some penalty and payment of interest. A case of seizure is not a voluntary act. In a case of seizure the assessee is not required to do anything ; he is not required to pay anything to the Department either towards any tax or towards any liability. It is for the Department and the officers of the Department to make a search and after finding the incriminating articles to seize the same. The act of search and seizure in fact is an act in terrorem which is recognised and accepted by law. A voluntary payment is not akin to seizure nor can the seizure be taken to be a payment. Though an assessee is obliged to make the payment of advance tax in accordance with Section 211, but it cannot be gainsaid that the amount seized would not be deemed to be paid.
10. Section 132 provides for search and seizure. It provides that if the officer described in Sub-section (1) of Section 132 in consequence of information in his possession, has reason to believe that search is necessary, then he may authorise a particular category of officer/officers to enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or things are kept. The officer may be authorised to break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available. They may also be authorised to search persons, seize any books of account, documents, money, bullion, jewellery or other valuable article or thing found as a result of such search. Sub-section (3) of Section 132 provides that the authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with Sub-section (3). The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of the above referred articles and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922, or under the 1961 Act. Where any books of account, other documents, money, bullion, jewellery or other valuable articles or things are or is found in the possession or control of any person in the course of a search, it may be presumed that such books of account, etc., belong or belongs to such person ; that the contents of such books of account and other documents are true, etc. Sub-section (5) of Section 132 which is important for the purposes of the present petitions reads as under :
"132. (5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this Section and in Sections 132A and 132B referred to as the assets) is seized under Sub-section (1) or Sub-section (1A), as a result of a search initiated or requisition made before the first day of July, 1995, the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Deputy Commissioner,--
(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him ;
(ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act ;
(iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment;
(iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in Clause (a) of Sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized :
Provided that if, after taking into account the materials available with him, the Assessing Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly :
Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in Clauses (ii), (iia) and (iii) or any part thereof, the Assessing Officer may, with the previous approval of the Chief Commissioner or Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case."
11. Sub-section (6) provides that the assets retained under Sub-section (5) may be dealt with in accordance with the provisions of Section 132B. Sub-section (7) provides that if the Assessing Officer is satisfied that the seized assets or any part thereof were held by such person for or.on behalf of any other person, the Income-tax Officer may proceed under Sub-section (5) against such other person and all the provisions of this Section shall apply accordingly,
12. According to Sub-section (5) where any money, bullion, jewellery or other valuable article or thing referred to as the assets in Sections 132A and 132B is seized under Sub-section (1) or Sub-section (1A) as a result of a search initiated, the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within 120 days of the seizure, make an order, with the previous approval of the Deputy Commissioner,--
"(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him ;
(ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or the 1961 Act ;
(iii) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922)/1961 Act as if the order had been the order of regular assessment ;
(iv) specifying the amount that will be required to satisfy any existing liability under the 1961 Act and any one or more of the Acts specified in clause (a) of Sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized."
13. It would clearly appear from these provisions that after the assets are seized, the Income-tax Officer has to proceed in accordance with the procedure prescribed under Sub-section (5) of Section 132. Not only he has to estimate the undisclosed income in a summary manner, but has to calculate the amount of tax on the income so estimated determining the amount of interest payable and the amount of penalty imposable and specify the amount that would be required to satisfy the existing liability, but has also to retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the abovereferred amounts. It would clearly appear from these provisions that Section 132(5) provides for a complete procedure. Unless the Income-tax Officer makes an enquiry as may be prescribed and makes an order, the assets seized cannot be dealt with in any other manner. The assets shall be retained by the Income-tax Officer until a final order is made by him in accordance with Sub-section (5) of Section 132. The occasion to refund or return the assets or to retain the assets or to adjust the assets shall come into existence only after a final order is made by the Income-tax Officer under Section 132(5). Immediately after an order is passed under Sub-section (5) of Section 132, the Income-tax Officer is authorised to retain in his custody such assets or part thereof as are in his opinion are sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) of Sub-section (5) of Section 132 and obliges him to release the remaining portion. So long as a final order is not passed and the Income-tax Officer records a finding that the assets in his possession or part thereof are sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii), he cannot direct release of the remaining portion nor can he direct that the assets seized can be adjusted towards advance tax. The right to receive the money would accrue in favour of an assessee only after a final order is made under Section 132(5) and if such an order is made, then only the assessee can make a request to the Income-tax Officer that the amount which is sought to be released in his favour may be adjusted or appropriated towards the liability of the payment of advance tax. The scheme of Sub-section (5) of Section 132 clearly provides that the seized assets shall not be disposed of nor shall be dealt with in any manner unless after making an enquiry, an order is made by the Income-tax Officer. The first proviso to Sub-section (5) further provides that if after taking into account the materials available with him, the Assessing Officer is of the view that it would not be possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly.
14. In the opinion of this court, unless a final order is made by the Income-tax Officer under Sub-section (5) of Section 132, the seized assets cannot be dealt with in any manner except for their release in accordance with the second proviso to Sub-section (5).
15. As already observed, Sub-section (6) of Section 132 provides that the assets retained under Sub-section (5) may be dealt with in accordance with the provisions of Section 132B. A juxtapose reading of Sub-section (5) and Sub-section (6) would make it clear that if in the final order the Income-tax Officer comes to the conclusion that the seized assets are more than the liability and are more than sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) of Sub-section (5), then the other assets shall be released forthwith. If the assets are more than the liability, the same shall be released forthwith, but the amount so retained under Sub-section (5) is to be dealt with in accordance with the provisions of Section 132B.
16. The object of Sub-section (5) of Section 132 is to estimate the undisclosed, income which is described in clause (c) of Sub-section (1) of Section 132. The enquiry under Sub-section (5) of Section 132 is of a summary nature, limited for the purpose of a temporary estimation of undisclosed income and retainment of that portion of the money which is, in the opinion of the authority, sufficient to satisfy the amount of tax, etc., on the income so estimated. There is no confiscation of the property involved. Only a temporary deprivation of possession of money with a view to facilitate the recovery of the amount of tax that may be found due from the person, is contemplated under Section 132(5).
17. Section 132B reads as under :
"Application of retained assets.--(1) The assets retained under Sub-section (5) of Section 132 may be dealt with in the following manner, namely :--
(i) The amount of the existing liability referred to in Clause (iii) of the said Sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in Clause (i) of that Sub-section relates (including any penalty levied or interest payable in connection with such assessment or reassessment) and in respect of which he is in default or is deemed to be in default may be recovered out of such assets,
(ii) If the assets consist solely of money, or partly of money and partly of other assets, the Income-tax 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, 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, 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 fifteen per cent, per annum on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (iii) of Sub-section (5) of that Section exceeds the aggregate of the amounts 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 six months from the date of the order under Sub-section (5) of Section 132 to the date of the regular assessment or reassessment referred to in Clause (i) of Sub-section (1) or, as the case may be, to the date of last of such assessments or reassessments."
18. According to Section 132B, the assets retained under Sub-section (5) of Section 132 may be dealt with in the manner as provided under subSection (1) of Section 132B. The amount of the existing liability referred to in Clause (iii) of Section 132(5) and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous year to which the income referred to in Clause (i) the retained amount is to be appropriated. If the assets consist solely of money, the Income-tax Officer may apply such money in the discharge of the liabilities and the assessee shall be discharged of such liabilities to the extent of the money so appropriated. The assets other than money may also be applied for the discharge of any such liability by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. The assets or proceeds thereof which remain after the liabilities referred to in Clause (i) of Sub-section (1) of Section 132B are discharged shall immediately be made over or paid to the person from whose custody the assets were seized. The Central Government shall be obliged to pay simple interest at the rate of 15 per cent, per annum on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (iii) of Sub-section (5) of Section 132 exceeds the aggregate of the amounts required to meet the liabilities referred to in Clause (i) of Sub-section (1) of Section 132B. The interest shall be payable after expiry of the period of six months from the date of the order under Sub-section (5) of Section 132 to the date of the regular assessment or reassessment, as the case may be, to the date of the last of such assessments or reassessments.
19. A conjoint reading of Sections 132(5) and 132B would make it clear that if the assets retained are in excess of the liability to tax, then immediately after the application of retained assets or the money, the excess amount shall be refunded and the Government shall pay interest on the amount from a particular date. It would clearly appear from these two provisions that it does not only call upon the Income-tax Officer to make an enquiry and pass an order, but it obliges him to retain that much of the assets which are sufficient to satisfy the amount of tax liability because in case there is unnecessary retainment, the Government is obliged to pay the interest.
20. From the discussion aforesaid, it would clearly appear that the amount seized under Section 132 cannot be dealt with unless an order is made by the Income-tax Officer either under Section 132(5) or the money is applied or appropriated in accordance with Section 132B. The petitioner's submission that the amount could be adjusted towards the existing liability of the advance tax cannot be accepted.
21. The submission of learned counsel for the petitioners that the assessees are not liable to pay interest under Section 234B or 234C also cannot be accepted. Section 234B provides that if there is a default in payment of the advance tax, then the assessee would be liable to pay simple interest at the rate of two per cent. per month. Section 234C provides that if there is any deferment of advance tax, then the assessee shall be liable to pay interest on the said amount. In the present case, I have already found that the amount/assets seized could not be appropriated towards the advance tax ; the assessee cannot escape his liability either under Section 234B or 234C. Irrespective of the seizure of the amount, the assessee was obliged to pay the advance tax in accordance with law and if he has not paid the advance tax in accordance with the provisions of the Income-tax Act, he cannot avoid the liability either under Section 234B or Section 234C.
22. Learned counsel for the petitioners placed his strong reliance on the judgment in the matter of Satpal D. Agarwal (HUF) v. Asst. CIT [1998] 62 TTJ 98. In the said matter, a Division Bench of the Income-tax Appellate Tribunal has observed that in the case of seizure of the cash, it cannot be said that the assessee had defaulted in payment of taxes when the amount had been retained by the Revenue Department. In the said matter also, a request was made by the assessee to the Department that the cash seized be appropriated towards the advance tax liability. The learned members of the Tribunal observed that though the Assessing Officer has to wait for adjustment of seized assets till the finalisation of the assessment, yet in the case of cash, it cannot be said that the assessee had defaulted in payment of taxes when the amount had been retained by the Revenue Department. In the opinion of this court, the approach of the Tribunal is not in accordance with law. I have already held that the seized amount cannot be appropriated or applied towards any other liability until an order is made by the Income-tax Officer under Section 132(5). The Tribunal has also not considered that the seizure is not a voluntary payment. The Tribunal has also not considered that the Income-tax Officer is entitled to retain the amounts under the authority of law and is required to return the excess amount forthwith under Section 132(5) and to apply the retained amount under the provisions of Section 132B of the Income-tax Act. The learned members have simply observed that because the money was lying with the Department, it could not be held that the assessee defaulted in payment of the taxes. In the opinion of this court, the approach of the Tribunal is not correct.
23. In the premises aforesaid, I am of the opinion that the petitioners are not entitled to any relief. The petitions deserve to be and are accordingly dismissed. There shall be no order as to costs.