Income Tax Appellate Tribunal - Delhi
Mr. Anil Sanghi, Noida vs Dcit, New Delhi on 30 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A", NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
&
SHRI O.P. KANT, ACCOUNTANT MEMBER
I.T.(SS)A No.7/DEL/2012
Block Period : 1/4/1986 to 1/11/1996
Anil Sanghi v. DCIT
E-10, Sector 15 Central Circle 23
Noida New Delhi
TAN/PAN:ABJPS5202L
(Appellant) (Respondent)
Appellant by: Shri V. K. Bindal, Advocate
Respondent by: Smt. Aparna Karan, CIT (DR)
Date of hearing: 03 10 2017
Date of pronouncement: 30 11 2017
ORDER
PER AMIT SHUKLA, J.M.:
The aforesaid appeal has been filed by the assessee against the impugned order dated 12/12/2011 passed by the DCIT, Central Circle-23, New Delhi (Assessing Officer) under section 158BC(c)/254 of the Income Tax Act, 1961 for the Block Period 1/4/1986 to 1/11/1996.
2. The assessee in the grounds of appeal has mainly challenged the charging of interest of Rs.32,58,48,452/- under section 220(2) on the tax liability of Rs.16,66,74,000/-. To contest this issue, the assessee has raised the following grounds:-
I.T.(SS)A. No.7/DEL/2012 21. The learned assessing officer erred in charging interest of Rs.32,58,48,452/- u/s 220(2) of the Act on the tax liability of Rs.16,66,74,400/- ignoring that funds to the extent of Rs.22,52,83,598/- were seized during the course of search from the various company assessees of the assessee's group (who had irrevocably authorised the department to adjust their seized amounts / funds against the demand due from the assessee before completion of the assessment) alongwith Rs.72,56,848/- being amount seized from / refunds due to the assessee were lying with the Department for adjustment against tax liability of the assessee. Thus no interest u/s 220(2) is chargeable from the assessee and therefore levy of interest u/s 220(2) should be deleted.
2. Without prejudice to the above ground of appeal, the learned assessing officer erred in charging interest of Rs.32,58,48,452/- u/s 220(2) of the Act w.e.f 1/1/98 (i.e. the due date of payment of tax in the case of original assessment order dated 28/11/97) ignoring that the original assessment order has been set aside by the Hon'ble ITAT and therefore the case of the assessee is covered under clause 2(1) of Circular no. 334 [F.No. 400/3/81-ITCC] dated 3/4/1982 "and therefore, the interest u/s 220(2) can be charged w.e.f 1/2/08 (i.e. the due date for payment of tax in case of fresh/ second assessment order dated 28/12/2007 passed in pursuance to directions of the Hon'ble ITAT).
Necessary directions in this regard should be issued.
3. Besides this, assessee has also raised separate additional grounds, vide petition dated 27/9/2013, which reads as under:-
1. The learned assessing officer erred in law and on facts in creating infructuous demand initially in the case of various I.T.(SS)A. No.7/DEL/2012 3 companies of the assessee group and then making improper adjustments of money seized from them resulting into creation of huge demand of Rs. 49.25 crores including interest u/s 220(2) in the case of the assessee though the money belonging to the assessee was lying with the department since the date of search. Thus necessary directions should be given for proper adjustment of the seized money w.e.f the date of filing the returns of income and adjustment claims by the companies also.
2. Without prejudice to the above, the assessing officer erred in law and on facts in not giving effect to the ITAT order dated 17/3/2006 passed in the first round of assessment in the case of assessee and group companies where the assessment made in the case of group companies was held as void-ab-initio. This has resulted into levy of interest u/s 220(2) of the Act. Thus necessary directions should be issued to give appeal effect to the said order.
4. In the case of the assessee, there is a chequered history of various rounds of litigations and assessment orders and also in the case of various companies wherein similar additions were made in their hands. In order to appreciate the facts qua the levy of interest under section 220(2), following chronology of events has been submitted by the ld. counsel for the assessee before us:
Date Particulars/ Background 28/11/97 Assessment (First Round):
Anil Sanghi- Assessment Order u/s 158BC of the Act (after search on 01/11/1996) was passed by making certain additions to his returned income of Rs 27.65 Crores which included investments made in all his companies and was assessed at Rs 29.46 I.T.(SS)A. No.7/DEL/2012 4 In case of companies, additions were made for the amounts received from Mr. Anil Sanghi besides some other additions. [Assessed at 30.44 Crores as against Nil returned income]. This also included the amount received from Mr. Sanghi which had already been offered by him as his income in the return submitted u/s 158BC of the Act.
17/03/06 ITAT Order (First round)
a) Anil Sanghi - Matter restored back to the AO with direction to verify the peak amount.
b) PCSL (Company) - Since most of the money had come from Mr. Anil Sanghi, therefore, the matter was remanded back with a direction that no addition can be made for the amount received from Mr. Anil Sanghi as same income cannot be taxed twice.
c) Other Companies - Assessment Orders held invalid since no search warrants could be produced by the revenue for verification.
31/10/07 In case of the companies matter was remanded back by the Hon'ble High Court to ITAT as search warrants were produced in the High Court by the Revenue. (It has been contented that the delay was on part of the department as the revenue took almost 9 years to produce the search warrants before the High Court for which the Revenue was penalized also by imposing a cost of Rs 1,00,000/- by the High Court which the Revenue had paid).
ITAT (Second innings) Only for other companies 30/04/08 Companies - The Assessment Orders were held invalid due to the deficiencies in search warrants I.T.(SS)A. No.7/DEL/2012 5 High Court (First Round) (Second innings) Only for other companies 30/09/09 In case of companies the matter was remanded back to the ITAT to decide on merits.
ITAT (First Round) (Third innings) Only for other companies 23/07/10 Companies -Matters were decided on merits by the Tribunal with the directions to exclude the income offered by Mr. Anil Sanghi in his return of income so that there is no double taxation of the same amount.
Assessment (Second round) 28/12/07 Anil Sanghi - Addition made to the returned income in first round was reduced and total income was assessed at Rs. 27.79 Crores Companies - The additions for the amounts received by the companies from Mr. Anil Sanghi were deleted and the total income of the companies was assessed at Rs. 4.46 Crores. (It has been contended that, the revenue accepted its error made earlier in the year 1997 to tax the same amount twice resulting into impugned excessive levy of interest).
ITAT order (Second Round) 06/01/11 Anil Sanghi - The issue of levy of interest u/s 220(2) of the Act was remanded back to AO Companies - In case of some companies, all other additions have been deleted whereas in case of some, substantial other additions have been deleted and some are pending before ITAT.
I.T.(SS)A. No.7/DEL/2012 6Asstt. Order (Third round) Anil Sanghi - Interest u/s 220(2) of the Act has been levied since the date of first assessment order ITAT order (Third Round) Anil Sanghi - The appeal is under consideration
5. From the above chronology of events and on a perusal of the impugned orders as well as the material placed before us on record, it is seen that a search and seizure action was conducted under section 132(1) in the case of the assessee on 1/11/1996. In response to notice under section 158BC, assessee had declared undisclosed income of Rs.27,64,93,610/- which was on account of cash deposits made in various bank accounts in the name of various entities/companies, which was net of withdrawals. As against this, assessment was completed vide order dated 28/11/1997, whereby undisclosed income was assessed at Rs.29,45,82,089/-. Simultaneously, similar addition on account of bank deposits in the hands of various companies/entities was also made, i.e., (i) M/s Prahlad Finance & Capital; (ii) M/s Patliputra Credit & Securities Ltd.; (iii) Independent Couriers Pvt. Ltd.; (iv) Shri G.K. Gupta; (v) M/s Patliputra International Trading Ltd.; (vi) Kandla Petro Chemicals Corp. Ltd.; (vii) Harmony Psychitary Centre Pvt. Ltd.; (viii) Uikam Investment & Finance Pvt. Ltd.; (ix) Vaidahi Lease & finance Pvt. Ltd.; (x) Annie Investment & Finance Co. P. Ltd.; (xi) Shilpi Securities Pvt. Ltd.; and (xii) Professional Leasing & Capital Services Ltd. In case of one of the companies i.e. in the case of M/s Patliputra Credit & Securities Ltd., the Assessing Officer I.T.(SS)A. No.7/DEL/2012 7 held that addition in the hands of the company should be made on protective basis and in the case of Shri Anil Sanghi, i.e., the assessee; it should be made on substantive basis. One very important fact to be noted here is that, before the completion of block assessment proceedings, that is, on 24/9/1997, assessee wrote a letter to the Income Tax Department that the cash seized during the course of search amounting to Rs.22.55 crores should be adjusted against the undisclosed income of the assessee and from the demand arising out of the block assessment order. In the case of group companies (as aforesaid) also, whose bank accounts were searched, they have filed returns of income declaring 'Nil' income and categorically stated that they have received the entire funds from the assessee and also wrote separate authorization letters of even date, 24/11/1997 to the Assessing Officer along with copy to the CIT, Central Circle 1, New Delhi, that the entire amount of cash seized or refunds due to them should be appropriated against the income tax liability of the assessee. Thus, the entire cash seized was offered for tax in the hands of the assessee not only by the assessee, who owned up the entire undisclosed income, but also various companies from whose possession these cash seized was recovered and was categorically stated that the money deposited in their accounts actually belonged to the assessee. As against the tax liability of Rs.16,58,96,202/- determined as per original block assessment order in the case of the assessee, seized cash amount of Rs. 22.53 crores was offered to be adjusted against the said tax liability by the assessee who had owned up the entire cash and simultaneously these companies have also stated that these cash belong to the assessee.
I.T.(SS)A. No.7/DEL/2012 86. Later on, after various rounds of litigation as stated in the chart of events above, from the stage of the Tribunal in the case of the said companies, addition on this account stood deleted and it was specifically held that this addition has rightly been made on substantive basis in the case of the assessee. Thus, finally in the case of all the companies, the Department accepted or rather the issue got settled from the appellate forums that tax from the said undisclosed income was to be paid by the assessee. Now post assessment order giving effect of ITAT orders, a huge interest under section 220(2) has been charged by the Assessing Officer from the date of demand notice of original assessment order dated 28/11/1997, without even acknowledging that prior to the date of assessment only, the entire amount was offered in the hands of the assessee and also cash seized was requested to be adjusted against the said tax liability. When the levy of interest was challenged by the assessee, the Assessing Officer was finally directed by the Tribunal, vide dated 6.1.2011, to correctly compute interest under section 220(2). In pursuance thereof, the Assessing Officer issued notice to the assessee as why interest under section 220(2) should not be levied from the date of first demand notice given alongwith the original block assessment order. In response, assessee's submissions before the Assessing Officer was as under:-
"6. The assessee filed return of income declaring an undisclosed income of Rs. 27,64,93,670/-. The assessee invested the undisclosed income in his group companies which were also covered under search action u/s 132 and from whom huge amounts were seized.I.T.(SS)A. No.7/DEL/2012 9
8. On 24-09-1997 the assessee requested the IT Department that the tax due on his undisclosed income be recovered from the borrowers / PCSL whose money has been seized by the IT Department as can be seen from the return of undisclosed income already placed on record.
9. The group companies whose bank account were searched/ seized and who were also issued notices u/s 158BC, filed their return of income declaring 'Nil' undisclosed income for the block assessment period. Since these companies received their entire funds from Anil Sanghi and did not have any income tax liability, these companies filed authorization letters dated 24-11-1997 to Assessing Officer along with copy of CIT Central -I, New Delhi requesting that the refunds due to them, be appropriated against the income- tax liability of the assessee.
11. As stated above, all these companies filed their returns of income declaring Nil undisclosed income and Rs. 22,52,83,598/- seized from them belonged to the assessee only. Due to this reason, on 24-11-1997 these companies irrevocable authorized the IT Department to adjust their seized money towards the tax liability of Anil Sanghi. This step was taken by the assessee and by these companies to cooperate with the IT Department so as to ensure that tax due on the undisclosed income of the assessee stands recovered.
12. On overall perusal of the above facts, it would be seen that the tax liability of the assessee was Rs. 16,58,96,202/- and which was much lower than Rs. 22,52,83,598/- seized from the companies. Further in view of the authorization letters filed by these companies, if the above seized amount would have been adjusted against the tax liability of the assessee, then no demand would have remained I.T.(SS)A. No.7/DEL/2012 10 outstanding as on the date of the assessment order i.e. 28-1- 1997.
20. As stated on 24-09-1997 the assessee requested the IT Department to adjust the amount seized from his borrowers against his tax liability which was ratified by these companies by filing their letters dated 24-11-1997. Thus the money seized on 20-09-1996 was lying with the department as on 28-11- 1997being the date of order passed in the case of the assessee. However, the Assessing Officer adjusted the seized funds against the demand of the companies which was created on surmises and conjectures. If the said seized amount would have been adjusted against the tax liability of the assessee then no interest u/s 220(2) would have been chargeable from the assessee.
21. As stated in para 10 above, the demands created in these companies have been reduced to nil as the I TAT allowed the appeals filed by these companies by holding the assessment made as void ab initio.
22. The CBDT has issued a Circular No. 334 dated 03-04- 1982 on section 220(2). A copy of the said circular is enclosed. The circular clarifies the position regarding levy of interest u/s 220(2) of the Act. It provides that where an assessment order is cancelled under section 146 or cancelled / set aside by an appellate / revisional authority and the cancellation /setting aside becomes final (i.e. it is not varied as a result of further appeals / revisions ) no interest under section 220 (2) can be charged pursuant to the original demand notice. The necessary corollary of the position will be that even when the assessment is reframed, interest can be charged only after the expiry of thirty five days from the date of service of demand notice pursuant to such fresh assessment order. However, if the original assessment order I.T.(SS)A. No.7/DEL/2012 11 is either varied or even set aside but no further appeal' the original order is restored either in part or wholly, then the interest payable u/s 220 (2) will be computed with reference to the due date reckoned from the original demand notice and with reference to the tax finally determined. The fact that during an intervening period there was no tax payable by the asses see under any operative order would make no difference to the position.
24. In case of assessee, the first assessment order passed u/s 158BC (c) was on 28-11-1997 and which was set aside to the file of the Assessing Officer for fresh consideration by the Hon'ble ITAT vide composite order dated 17-03- 2006 already placed on record. The department has not filed any appeal before the Hon'ble high Court against the set aside of the said assessment order which proves that the setting aside by the ITAT has become final. Furthermore, fresh assessment order was passed in the second round u/s 158BC / 254 on 28-12-2007 by the Assessing Officer as per directions of the Hon'ble ITAT.
25. Thus the conditions laid out in para 2(1) of the circular stands fulfilled and therefore the interest u/s 220(2) can be charged only after the expiry of thirty days from the date of service of demand notice pursuant to such fresh assessment order in the second round and no interest could be charged u/s 220(2) till said date. In case of the assessee, the fresh assessment order was passed on 28-12-2008 and which was served on the assessee on 01-01-2008 and therefore the due date for payment of income tax is on 31-01-2008. Thus interest u/s 220(2) can be charged w.e.f. 01-02-2008 and no interest can be charged prior to the said date as has been charged."I.T.(SS)A. No.7/DEL/2012 12
7. However, the Assessing Officer rejected the entire contentions raised by the assessee on the ground that:-
Firstly, the amount was seized from the bank accounts of various companies and, therefore, in terms of provisions of section 132(4), presumption is that it belongs to these companies and the same is to be adjusted against the outstanding demand, if at all, in the hands of the companies and if any amount is left out after such adjustment, the same can be adjusted against the outstanding demand of the assessee. The Assessing Officer had rightly adjusted the seized amount against tax demand of the companies before adjusting the same against the tax liability of the assessee.
Secondly, reliance placed on CBDT Circular No.334 dated 3/4/1982 by the assessee on clause (i) would not be applicable, because here in this case neither the assessment order was cancelled or set aside by the Appellate/revisional authority. Here clause (ii) will apply because the matter was restored to the Assessing Officer whereby part of the addition was reduced as per the direction of the Tribunal. Thus, assessee cannot take shelter of clause (i) of the CBDT Circular No.334; and Lastly, he distinguished various judgments as relied upon by the assessee as per discussion appearing in para 2.6 of his order.I.T.(SS)A. No.7/DEL/2012 13
8. We have heard the rival submissions and also perused the relevant material placed on record. As discussed by us in the foregoing paragraphs, it is an undisputed fact that in the block assessment order it was categorically held by the Assessing Officer in the case of the assessee that, assessee had given money to several companies, out of which an amount of Rs.22.55 crores was seized from the accounts of various companies during the course of search. Not only the assessee had owned up the said money in the accounts of the companies, but also, these companies have submitted and given a letter to the Assessing Officer as well as to the concerned Commissioner of Income Tax that this money belongs to the assessee and not to them. In the wake of this background, assessee had offered this income as undisclosed income in the return of income filed for the Block Period and requested the departmental authorities to adjust the amount so seized from these companies' account against the tax liability for which irrevocable letters were also furnished by these companies. In some of the cases, addition in the hands of the companies were made on protective basis and on substantive basis it was held that the money seized and offered to tax as undisclosed income by the assessee to be added in the hands of the assessee. Finally after various rounds of litigation, it has now been settled in the cases of the companies that this money does not belong to them, albeit same needs to be taxed in the hands of the assessee. Once the money found from the bank account of these companies have been rebutted by these companies that the money belongs to the assessee and assessee on the other hand accepts that it is his undisclosed income, then ostensibly there could be no presumption which can be drawn against the I.T.(SS)A. No.7/DEL/2012 14 companies in terms of section 132(4A) that money belongs to them, because that presumption stands categorically rebutted.
9. The contention/objection raised by the Assessing Officer in the impugned order that the said amount could not have been adjusted against assessee's tax liability, cannot be upheld in wake of the facts and circumstances of the case as discussed above. If the Department on its own volition has made the addition, both in the hands of the assessee as well as in the hands of the companies for the same amount and chooses to adjust cash seized out of the demand of the companies, which was denied by the companies in their hands; and ultimately has been found to be not sustainable in their assessments, then charging of interest under section 220(2) from the assessee for such a huge delay of payment of demand cannot be attributed to the assessee, especially when finally Revenue in the wake of appellate orders had accepted that the amount seized from the companies belong to the assessee and instead of refunding the same to the said companies should have adjusted the cash in the hands of the assessee that very time under the given facts and circumstances of the case. Whence the Revenue chose to procrastinate the proceedings and sit for more than 10 years, despite assessee's request and also by the companies, then how such a huge amount of interest under section 220(2) for the entire period of delay can be fastened upon the assessee which ostensibly attributed to the Department. If some infructuous exercise of making addition is made in the hands of the companies, which ultimately has been found to be untenable /unsustainable, because already substantive addition has been accepted in the block assessment order of the assessee, then for I.T.(SS)A. No.7/DEL/2012 15 such insouciant attitude of the Department, one cannot fastened the assessee with such huge liability of interest under section 220(2). Now finally, when Revenue has admitted that the amount seized belong to the assessee and tax liability was upon the assessee only, then, in our opinion, such cash seized/ offered to settle the cash liability, should have been accepted and assessee should be deemed to have made the payment specified in the demand notice within the period of limitation as provided u/s 220(1); and cannot be treated in default for not making the payment and thereby shift the adjustment of seized cash after expiry of more than 10 years from the date of demand created by the Assessing Officer. Thus, we hold that the interest u/s 220(2) under the given facts and circumstances of the case cannot be imposed from the date of original demand notice and resultantly, ground No.1 as raised by the assessee is allowed.
10. In view of the above finding given above, other issue raised vide ground No.2 has become purely academic in nature and the same is dismissed as infructuous.
11. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 30th November, 2017.
Sd/- Sd/-
[O. P. KANT] [AMIT SHUKLA]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED:30th November, 2017
JJ:1411
I.T.(SS)A. No.7/DEL/2012 16
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar
Date
1. Draft dictated on
2. Draft placed before author
3. Draft proposed & placed before the
second member
4. Draft discussed/approved by Second
Member.
5. Approved Draft comes to the
Sr.PS/PS
6. Kept for pronouncement on
7. File comes back to PS/Sr. PS
8. Uploaded on
9. File sent to the Bench Clerk
10. Date on which file goes to the AR
11. Date on which file goes to the Head
Clerk.
12. Date of dispatch of Order.