Income Tax Appellate Tribunal - Ahmedabad
Mahendra R.Kothari, Ahmedabad vs Assessee on 13 January, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL " A " BENCH, AHMEDABAD
(BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI, A.M.)
I.T. A. No. 875 /AHD/2010
(Assessment Year: 1986-87)
Shri Mahendra R. Kothari V/S The Income Tax Officer,
105, Vanijya Bhavan, Ward, 11(4), Ahmedabad
Kankaria
(Appellant) (Respondent)
PAN: ACAPK2629K
Appellant by : Shri A.L. Thakkar. A.R.
Respondent by : Shri O.P. Batheja, Sr. D.R.
आदे श)/ORDER
(आदे Date of hearing : 13-01-2014 Date of Pronouncement : 11 -04-2014 PER SHRI ANIL CHATURVEDI,A.M.
1. This appeal is filed by the Assessee against the order of CIT(A)-XVI, Ahmedabad dated 08.01.2010 for A.Y. 1986-87.
2. The relevant facts as culled out from the material on record are as under.
3. Assessee is an individual who was engaged in the business of carting contract for coal. On 31.10.1985 search operation u/s 132 of the Act was carried out at the premises of the Assessee and Rs 40,000/- cash found was seized. Order u/s 132(5) was passed on 27.2.1996 retaining the cash seized. Subsequently an order u/s 143(3) was passed on 30.3.1989 and demand of 2 ITA No 875-A-2010 . A.Y. 1986-87 Rs. 1,08,664/- was raised but the cash seized at the time of search and retained u/s 132(5) of the Act was not appropriated while raising the demand. Against the quantum addition made, assessee preferred appeal before CIT(A). CIT(A) vide order dated 16.12.1991 granted substantial relief to the Assessee. In the order giving the appeal effect (pursuant to the order of CIT(A)), refund of Rs. 8,872/- was granted to Assessee but the cash that was seized at the time of search was not refunded nor any credit of the same was granted to the assessee. Thereafter, AO vide order dated 8.9.1999 passed u/s 154 of the Act granted credit of Rs 40,000/- seized and also granted interest u/s 132(4) from 1.9.1986 to 30.3.1989 (following the expiry of 120 days from the date on which the search u/s 132 was carried out to the date of completion of assessment). Assessee however demanded interest from 1.4.1986 to 28.9.1999 for which it filed rectification application before AO. AO rejected the request of the Assessee by holding as under:-
The Hon'ble ITAT, Ahmedabad vide order dated 09.06.2009 in appeal No. ITA No. 3082/Ahd/2008 has directed to consider a rectification application made by you on 01.11.1999. In the above said application you have claim that interest u/s 132B(4) should be granted from 01.09.1986 to 28.09.1999., instead of the same has been granted from 01.04.1986 to 30.03.1989.
You have also claimed interest u/s 243 as the refund have not been granted within three months from the end of the month in which the claim for refund was made.
In respect of first issue regarding granting of refund u/s 132B(4), it is stated that the refund u/s 132B(4) is allowable from immediately following the expiry of the period of one hundred and twenty days from the date on which the search under section 132 was carried .out to the date of completion of the assessment. In your case, search was completed on 31.1(11985 and the assessment order passed on 30.03.1989. Therefore, you are entitle to interest u/s 132B(4) from 01.03.1986 to 31.03.1989 i.e. 37 months instead of same was granted for 31 months as per rectification order dated 08.09.1999. Hence, you are entitled for further interest on the amount of Rs. 40,000/- for 6 months, i.e. Rs. 3,600/- (@ 1.5% per month). The mistake being apparent on record is hereby rectified u/s 154 of the I. T. Act 1961.
In respect of second issue regarding granting of interest u/s 243 it is stated that as per provision of section 243, the refund is to be issue within the three months from the end of the month in which the claim of refund is made. In your case, the claim of refund was made on dated nil as per order u/s 154 dated 08.09. 1999. In absence of the specific date of claim, the date of claim is treated as made on 08.09.1999. Since the refund of Rs. 55,000/- (Rs. 40,000 + Rs. 15,500 i.e. interest allowable u/s 132B(4) of the Act) was granted within the stipulated period as provided u/s 243 of the Act., the claim of granting interest u/s 243 cannot be acceded to and hence your claim for granting of the refund u/s 243 is hereby rejected.
The total income remains unchanged i.e. Rs: 60,047/- as per order giving appeal effect u/s 250 of the Act dated 10.02.1992.
Calculate the further interest for 6 months at rate as applicable on amount of Rs.40,000/- and issue the demand notice and refund order accordingly.
3 ITA No 875-A-2010
. A.Y. 1986-87
4. Aggrieved by the order of AO, Assessee carried the matter before CIT(A).
CIT(A) dismissed the appeal of the Assessee by holding as under:-
" The main contention of the appellant is that interest u/s.132B(4) should have been granted to him from 1-9-86 to 28-9-99 and not from 1-4-86 to 30-3-89 & that interest u/s. 243 should be allowed to the appellant. Cash of Rs. 40,000/- was seized from the appellant during the course of search on 31- 10-1985. Order u/s. 132(5) was passed on 27-2-1996. Order u/s. 143(3) was passed on 30-3-89 by raising demand of Rs. 1,08,664/-. The appellant filed application dated 1-5-92 u/s. 132(8) before the CIT, Guj.ll, Ahmedabad requesting him to release seized cash of Rs. 40,000/- with interest as the same was not adjusted by the Assessing Officer against the existing liability. The Assessing Officer passed order u/s. 154 dated 8-9-1999 giving credit for the amount of Rs. 40,000/-seized on 31-10-1985. In the said order he allowed interest u/s. 132B(4) for a period from 1-9-86 to 30-3-89 i.e. from the end of six months of the date of passing order u/s. 132(5) to the date of passing order of regular assessment. ( The appellant filed application for interest upto the date of issue if refund order). This order of Assessing Officer was challenged before the CIT(A) who dismissed the appeal filed late without reasonable cause. The ITAT restored the matter to the Assessing Officer to dispose off the application filed by the appellant on 1-11-1999. The Assessing Officer then passed order u/s. 154 on 6-10-2009 rejecting the claim of the appellant. Against this order, the appellant is in appeal before me.
2. As regards the first claim of the appellant, the Assessing Officer has correctly given the interest from 1-9-1986 to 30-03-1989 i.e. from the end of six months of the date of passing order u/s. 132(5) to the date of passing the regular assessment. Therefore, no further interest u/s. 132B(4) can be granted to the appellant.
3. As regards second contention of the appellant that he should be allowed interest of u/s. 243/244 of the Act, it may be mentioned that there are divergent views of various High Court on this issue. For example Hon'ble Kerala High Court in the case of K A Kantha & Sons 186 ITR 97 (Ker) and the Hon'ble M P High Court in 249 ITR 1 (MP) in the case of Manohar Lal Vs CIT have taken one view i.e. section 243/244 does not have any application to seized assets. whereas other High Courts including Allahabad High Court in 282 ITR 189 (All) Bhagwa Prasad Agarwal have taken different views. Since this matter is debatable, the same cannot be rectified u/s. 154 of the Act. This is not a mistake apparent from the records.
4. In the result, appeal of the appellant is dismissed.
5. Aggrieved by the order of CIT(A). Assessee is now in appeal before us and has raised the following grounds:-
1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the A.O. in granting interest u/s.!32B(4) of the Act on the amount of Rs.40,0007- seized during the course of search on 31.10.1985 for a period 01.09.1989 to 30.03.89 i.e. from the end of six months of the date of passing .order u/s.!32(5) to the date of passing order of u/s.154 dtd.08.09.1999 even though the appellant is entitled to the interest up to the date of issue of refund order i.e.04.11.2004.
2. The learned Commissioner of Income Tax (Appeals) has erred in confirming a action of the A.O. in holding the date of order passed u/s.154 i.e.08.09.1999 as the date of claim of interest u/s.243 of the Act and in rejecting the claim of the appellant for further interest on the aforesaid amount up to the date on which the same may be issued as per Sec.243 of the Income Tax Act, 1961.
3. The learned Commissioner of Income Tax (Appeals) has erred in holding that granting of interest up to the date of refund on the amount of cash seized is not a mistake apparent from record and as the matter is debatable same cannot be rectified u/s.154 of the I.T. Act, 1961.
4. The learned Commissioner of Income Tax (Appeals) ought to have considered the fact that the appellant is again before him in second round of appeal on the same issue, after a lapse of period of about 25 years from the date of seizure of cash of Rs.40,000/- he has not received justice in the matter to which he is legally entitled to.
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. A.Y. 1986-87
6. Before us, the Ld A.R. pointed to the chronology of the events placed at page 16 of the paper book. He submitted that though the cash of Rs 40,000 was seized by the department on 31.10.1985, the Assessee was granted interest from 1.9.1986 to 30.3.1989 (i.e. from the end of six months of the date of passing order u/s 132(5) to the date of passing of order dated 8.9.1999 u/s 154 of the Act). The Ld. A.R submitted that the Assessee is entitled to interest upto the date of issue of refund order i.e. 4.11.2004. He further submitted that Assessee is also entitled to interest u/s 243 of the Act which has been wrongly denied to the assessee. He thus submitted that the AO be directed to grant the interest due to the Assessee. Ld D.R on the other hand supported the order of AO and CIT(A).
7. We have heard the rival submissions and perused the material on record.
8. It is an undisputed fact that cash of Rs 40,000/- was seized on 31.10.1985 from the premises of Assessee, it is also a fact that the credit for seized cash was not granted while determining the tax pursuant to the order passed u/s 143(3) on 30.3.1989 but the credit was granted on 8.9.1999. It is also a fact that order u/s 132(5) was passed on 27.2.1996 that Assessee was granted interest u/s 132B(4) from 1.9.1989 to 30.3.1989 (i.e from the end of six months of the date of passing of order u/s 132(5) to the date of passing of order u/s 154) though the credit was granted subsequently.
9. In the case of Chiraujilal Sharma HUF vs. Union of India (Civil Appeal No. 10601 of 2013 order dated 26.11.2013) the Hon'ble Apex Court has noted as under:-
"5 A close look at the above provisions and, particularly, clause (b) of section 132B(4) of the Act clearly shows that where the aggregate of the amounts retained under section 132 of the Act exceeds the amounts required to meet the liability under Section 132B(1)(i), the department is liable to pay simple interest at the rate of fifteen percent on expiry of six months from the date of the order under section 132(5) of the Act to the date of the regular assessment or re-assessment or the last of such assessments or reassessments, as the case may be. It is true that in the regular assessment done by the Assessing Officer, the tax liability for the relevant period was found to be higher and, accordingly, the seized cash under section 132 of the Act was appropriated against the assessee's tax liability but the fact of the matter is that the order of the Assessing Officer was over-turned by the Tribunal finally on 5 ITA No 875-A-2010 . A.Y. 1986-87 20.02.2004. As a matter of fact, the interest for the post assessment period i.e. from 4.3.1994 until refund on the excess amount has already been paid by the department to the assessee. The Department denied the payment of interest to the assessee u/s 132B(4)(b), according to Mr. Arijit Prasad, Ld. Counsel for the revenue on the ground that the refund of excess amount is governed by section 240 of the Act and section 132B(4)(b) of the Act has no application. But, in our view, section 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and section 240 or for that matter 244(A). The former deals with pre-assessment period in the matter of search and seizure and the latter deals with post assessment period as per the order in appeal." It therefore held that the view of the Department is not right on the plain reading of section 132B(4)(b) of the Act as indicated above.
10. Under the peculiar facts and more particularly in the light of judgment of the Hon'ble Supreme Court, we are of view that the action of the authorities below is not justified. We therefore, set aside the order of A.O. and CIT(A), the issue is remitted back to the file of A.O. to decide the issue afresh with direction to grant credit of the seized cash, in the light of judgment of Hon'ble Apex Court rendered in the case of Chironjilal Sharma HUF vs. Union of India and Ors. (supra) to recalculate the interest payable, if any, after granting adequate opportunity of hearing to the Assessee.
11. In the result appeal of the Assessee is allowed for statistical purposes.
Order pronounced in Open Court on 11 - 04 - 2014.
Sd/- Sd/-
(G.C.GUPTA) (ANIL CHATURVEDI)
VICE PRESIDENT ACCOUNTANT MEMBER
Ahmedabad. TRUE COPY
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad