Income Tax Appellate Tribunal - Mumbai
Bombay Beads Centre, Mumbai vs Department Of Income Tax on 27 February, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES " B ", MUMBAI
BEFORE SHIRI G. E. VEERABHADRAPPA, HON'BLE PRESIDENT
AND SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. : 3458/Mum/2011
Assessment Year : 2009-10
Office of the DCIT, M/s. Bombay Beads Centre
Central Circle-5, Old CGO Bldg. 80/82, 3rd Bhoiwada,
Annexure, 9th Floor, M.K. Road, 1st floor, Bhuleshwar,
Mumbai-400 020 Vs. Mumbai-400 002.
PAN NO: AAEFB 8560 E
(Appellant) (Respondent)
Appellant by : Shri P. C. Maurya
Respondent by : Shri Lalchand Choudhary
Date of hearing : 27.02.2012
Date of Pronouncement : 02.03.2012
ORDER
PER AMIT SHUKLA (J.M.) :
The present appeal has been filed by the Department against order dated 22.02.2011 passed by the learned Commissioner of Income Tax (Appeals)-36, Mumbai for the quantum of assessment for the Assessment Year 2009-10. The only issue involved in this appeal is whether the seized cash of `.90,31,000/- during the course of search and seizure be treated as advance tax and the assessee be given credit thereof in calculating the tax and interest liability u/s.234 B and 234C.
2. The facts in brief are that the appellant which is a partnership firm is engaged in the business of trading in glass beads. On 24.12.2008 a 2 ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre survey action was conducted on the assessee firm and simultaneously search and seizure action u/s.132 was also conducted at the residential premises of its partner. During the course of search and seizure operation a sum of `.90,31,000/- belonging to the firm was seized and deposited into the account of the Income Tax Department. The said amount remained till the date of the assessment and no part thereof was released. In the course of search action, the assessee firm admitted that said seized amount be treated as additional income and such an offer was accepted by the Income Tax Authorities, which was also shown by the appellant in its income tax return for the Assessment Year 2009-10. The appellant from time to time requested and made a prayer before Investigation Wing i.e. ADIT, Unit III(1), Delhi, as well as before the DCIT, Range 14(1), Mumbai holding jurisdiction over the case of the assessee, to treat the amount so seized towards advance tax liability. The similar request was also made before the Assessing Officer.
2.1 However, while passing the assessment order, the Assessing Officer did not allow any credit in respect of seized amount which was requested to be treated as advance tax and accordingly he charged interest u/s.234B and 234C.
3. Before the learned CIT(Appeals) the assessee relied upon the following decisions :-
i) CIT vs. K K Marketing 278 ITR 596 (Del).
ii) Nikkamal Baburam vs. ACIT 41 SOT 407 (Chd).
iii) ACIT vs. Kwality Bar & Restaurant 118 ITD 108 (Bang).
iv) Sudhakar Shetty vs. ACIT 10 DTR 173 (Mum).
3.1 The learned CIT(Appeals) appreciated the contention of the
appellant for treating the cash seized towards the advance tax payment after observing and holding as under :-
3ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre "10. I have considered the above submissions and the order of the AO. The appellant was covered u/s.133A on December 24,2008 and on the same day the partner's residence's were covered u/s.132 wherein an amount of `.90,31,000/- was seized. The appellant disclosed an income of `.6 crores in the form of stock which was accepted by the department. The appellant filed the return on September 24, 2009, in which the above mentioned income was disclosed and the credit for the cash seized was sought against advance tax third instalment.
The appellant had also vide letter no. March 9, 2009; August 26, 2009 and September 30, 2009 requested the department to adjust the cash against the advance tax. However, the department did not do the same and during the course of assessment the appellant was levied interest u/s.234B and 234C.
11. The Hon'ble Mumbai Bench of ITAT has held in the case of Shri Nitin M Jadia vs. ACIT 107 Taxman 203 that the value of the ornaments seized by the department and requested by the appellant to be sold for giving credit as tax against the tax payable as per return and assessment should be considered as Advance tax for the purpose of calculating interest and the value of the ornaments at the time of appellant's letter to the department requesting for sale should be considered as the amount to be reckoned with.
Similarly, the Hon'ble High Court of Punjab and Haryana in the case of CIT vs. Garg Rice and General Mills, Kharar held that the seized cash should be adjusted against the advance tax payment if the appellant has requested for the same.
12. In the present case also there is a request of the appellant to adjust the cash seized towards the advance tax payment however it was not done and the appellant was further burdened with interest u/s.234B and 234C. Accordingly, following the above cases, the interest charged is deleted and the grounds of appeal of the appellant are allowed."
4. The learned DR strongly relied upon the order of the Assessing Officer and further relied upon the judgment of Hon'ble Madhya Pradesh High Court in the case of Ramjilal Jagannath And Others 4 ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre vs. ACIT reported in 241 ITR 758. On the other hand, the learned AR reiterated the submissions made before the learned CIT(Appeals) and also the judgments relied upon by the assessee before the Ld. CIT(A). Besides this he further relied upon the judgment of Punjab and Haryana High Court in the case of CIT Ashok Kumar reported in (2011) 334 ITR 355.
5. We have carefully considered the submissions of both the parties and the orders of the authorities below and also gone through the various judgements relied upon by the parties. First of all the relevant facts which are relevant for the issue involved are that the action of search and seizure u/s.132 took place on 24.12.2008, during the course of which cash amounting to `.90,31,000/- was found from the residential premises of the partners. The said amount was offered as an additional income for the Assessment Year 2009-10 in the hands of the assessee firm. In the return of income filed on 24.09.2009, the said cash was duly included in the return of income. The assessee vide letter dated 09.03.2010 requested for adjustment of cash against the third instalment of advance tax which was due on 15.03.2009 for the purpose of income for the year ending 31.03.2009. Since the said amount of cash was not adjusted, the assessee made further request vide letter dated 26.02.2009 and again on 30.09.2009 before the Assessing Officer. However, the Assessing Officer did not adjust the tax liability and levied the interest u/s. 234B and 234C for delayed payment of advance tax, even though in the assessment order, the said income has been accepted by him. The provisions for application of seized or requisitioned assets are provided in section 132B of the I.T. Act, the relevant portion of which reads as under :
5ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre "(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 liability determined on completion of the assessment [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 determined on completion of the assessment under Chapter XIV-B 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, may be recovered out of such assets.
Provided - xxxx Provided further xxxx
(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."
5.1 From the perusal of the said section, it is amply borne out that assets on cash which are seized u/s.132 can be adjusted against the amount of any existing liability under the Income Tax Act, Wealth Tax Act, Expenditure Tax Act, Interest Tax Act on the amount of liability determined on the completion of assessment u/s.153A and also the assessment of the year relevant to the previous year in which search is initiated, including penalty or interest payable in connection with such assessment. Here in this case, the assessment relates to the previous year in which search have been initiated. The advance tax is clearly a liability under the Income Tax Act by virtue of section 209 and 210. The 6 ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre word "existing liability" under the Income Tax Act as appearing in section 132B, sub-section (1) clause (i) will also cover the advance tax liability. The assessee has duly requested to adjust his liability for the advance tax prior to the due date of the third instalment i.e. 15.03.2009 in relation to the income which has been offered for the year ending 31.03.2009 i.e. relevant to Assessment Year 2009-10. Thus the liability to pay advance tax existed prior to 15.03.2009 and the assessee was under the law to discharge this liability. This liability got discharged on the date when it made a request on 09.03.2009 to adjust the seized cash towards advance tax. Thus, in our opinion, the Assessing Officer was legally obliged to adjust the seized cash towards the liability for advance tax which existed at that time and there seems to be no infirmity in the finding given by the learned CIT(Appeals).
5.2 As regards to the judgment of Hon'ble Madhya Pradesh High Court in the case of Ramjilal Jagannath And Others vs. ACIT (supra) as have been relied upon by the learned Sr. D.R., the same will not apply in the present case as the Hon'ble High Court was dealing with the provisions of section 132B prior to the Amendment brought in this statue w.e.f. 01.06.2002. Prior to the amendment, the applicability of section 132B related to the assets retained u/s.132(5) of the Act and only when the order has been passed u/s.132(5) the mode for application seized assets and money was required to be deposited for. Thus the said judgment will not be applicable from 01.06.2002.
5.3 This issue now seems to be squarely settled by various judgments as have been relied upon by the appellant. In the case of Nikka Mal Babu Ram reported in (2010) 41 SOT 407 (CHD), the Hon'ble ITAT after considering the judgment of Hon'ble Madhya Pradesh High Court in the case of Ramjilal Jagannath And Others vs. ACIT (supra) and also relying upon the judgment of Sudhakar M. Shetty vs. ACIT reported in 7 ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre (2008) 10 DTR 178 (Mum), CIT vs. KK Marketing reported in (2005) 278 ITR 596 has observed and held as under :
"9. It is well understood that as per section 4 of the Act, an assessee is chargeable to income-tax in respect of his total income. Sub-section (2) of section 4 prescribes that the income- tax so chargeable shall be deducted at source or paid in advance, where it is so deductible or payable under any provision of the Act. We have observed earlier that advance tax liability is governed by sections 208 to 210 of the Act. Similarly, section 140A provides for payment of self- assessment tax on the basis of any return of income required to be filed by the assessee. The relevant provisions also prescribe the dates and the amount of tax required to be paid by an assessee Therefore, the expression 'existing liability in section 132B(1)(i) cannot be read to exclude a particular tax liability, if it can be shown to have existed on a particular date. If the liability to pay advance tax had arisen, it would certainly constitute a part of the 'existing liability' used in section 132B(l)(i) of the Act.
10. In our considered opinion, the doctrine of purposive construction has to prevail in this situation. In the present situation, it is evident that cash was seized from the assessee during search operation and, asessee requested the Department to adjust a part of such cash receipts against the liability of advance tax which arose on account of the income surrendered during the search operation. The Department does not deny possession of the cash since the time of search. Thus, we find no justification for the Revenue to interpret the expression existing liability' in section 132B(l)(i) as not referring to liability of advance tax. Under the Income-tax Act, liability towards advance tax is a part of the scheme of recovery of taxes and such liability definitely falls in the expression 'existing liability' used in section 132B(1 )(i) in the facts and circumstances of the case. The reliance pleaded by the CIT (Appeals) on the judgment of the Hon'ble Madhya Pradesh High Court in the case of Ramjilal Jagannath v. Asstt. CIT [2000] 241 ITR 758 is quite misplaced. As per the Revenue, in terms of the said judgment, the seized cash cannot be adjusted towards advance tax liability. We have carefully perused the said judgment and find that the same does not prohibit adjustment of seized assets towards liability to pay advance tax. In any case, we find that judgment of the 8 ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre Hon'ble Madhya Pradesh High Court is relevant in a situation when section 132(5) was on the Statute, which has since been deleted by the Finance Act, 2002 with effect from 1-6-2002. Section 132(5) of the Act required the Assessing Officer to make an enquiry and thereafter make an order to deal with the seized assets. Section 132(5) of the Act authorizes the Assessing Officer to retain in his custody such assets as in his opinion were sufficient to satisfy the aggregate amounts referred to in clauses (ii), (iia) and (iii) of section 132(5) and obligated him to release the remaining seized assets. In this background, the Hon'ble High Court, on the facts of the case before it, held that unless an order under section 132(5) of the Act is passed, the Assessing Officer could not direct that the assets seized be adjusted towards advance tax liability. The Hon'ble High Court specifically noted that it is only after an order under section 132(5) is passed that the assessee can make a request that the seized amount which is sought to be released in his favour be adjusted or appropriated towards the liability to pay advance tax. Though, in the context of the present assessment year before us, the provisions of section 132(5) are not applicable and therefore, strictly speaking, the ratio of the judgment of the Hon'ble Madhya Pradesh High Court does not apply, so however it is pertinent to observe that the Ho'b1e High Court has not read any blanket prohibition in the Act against adjusting the seized assets against liability for payment of advance tax. Therefore, there is no justification for the CIT (Appeals) to rely upon the order of the Madhya Pradesh High Court in the case of Ramjilal Jagannath (supra) and deny the claim of the assessee.
11. On the other hand, a Co-ordinate Bench of the Tribunal in the case of Sudhakar M Shetty (supra) has clearly laid down that the Revenue is liable to adjust the sized amounted towards the liability of advance tax having regard to the provisions of section 132B of the Act. Before parting, we may refer to an observation made in the assessment order that the CBDT has purportedly clarified in its letter F. No. 286/15/2005-IT (Investigation-II), dated 13-7-2006 that the provisions of Income-tax Law do not permit application of the seized cash against advance tax liability of the assessee for the year in which search took place. In this regard it is to be noted that no such letter has been placed on record by the Revenue. In any case it is also not clear under which statutory powers, such a letter has been issued by the CBDT. Thus, in the absence of any details in this regard the observation of the 9 ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre Assessing Officer does not justify his stand. The action of the Assessing Officer is contrary to the law. In any case, in the present case there is no case set up by the Revenue that the cash seized was liable to be appropriated against any other liability under this Act when the assessee made the request to adjust the same against advance tax liability for the assessment year 2007-08. Therefore, in view of the aforesaid discussion, we set aside the order of the CIT (Appeals), and direct the Assessing Officer to allow adjustment of seized cash against advance tax liability of the assessee as contended in the written communications dated 1-12-2006 and 15-3-2007 and thereafter recompute, if any, interest chargeable under sections 24B and 34C of the Act."
5.4 In the latest judgment, the Hon'ble Punjab and Haryana High Court in the case of CIT vs. Ashok Kumar reported in (2011) 334 ITR 355, it has observed and held as under :-
"Held, dismissing the appeal, that the assessee had made request for adjustment of the advance tax liability of `.3,14,312 against the seized amount of `.5,90,000 on August 28, 1989. Since the first instalment of advance tax was payable on September 15, 1989 and the request for adjustment was made on August 28, 1989 and reminder on September 12, 1989, no interest was eligible under sections 234A and 234B of the Act. The Tribunal had rightly held that the assessee was entitled to adjustment of this amount and no interest could be charged on that basis."
5.5 In view of the provisions of the law as discussed above and also relying upon the aforesaid judgments, we are of the considered opinion that the Assessing Officer was obliged to adjust the seized cash against advance tax liability and, therefore, if any interest chargeable to section 234B and 234C on account of this amount of advance tax is liable to be deleted. The Assessing Officer while recomputing the chargeability of section 234B and 234C will take into consideration the seized cash of `.90,31,000/- towards advance tax prior to 15.03.2009. Therefore, the appeal of the revenue has no merits.
10ITA No : 3458/Mum/2011 M/s. Bombay Beads Centre
6. In the result, the appeal filed by the department is dismissed.
Order pronounced on this 2nd day of March, 2012.
Sd/- - Sd/-
( G. E. VEERABHADRAPPA ) ( AMIT SHUKLA )
PRESIDENT JUDICIAL MEMBER
MUMBAI, Dt: 02.03.2012
Copy forwarded to :
1. The Appellant,
2. The Respondent,
3. The C.I.T.
4. CIT (A)
5. The DR, B - Bench, ITAT, Mumbai
//True Copy//
BY ORDER
ASSISTANT REGISTRAR
ITAT, Mumbai Benches, Mumbai
Roshani