Income Tax Appellate Tribunal - Delhi
Rahul Agarwal, New Delhi vs Acit Circle-46(1), New Delhi on 20 June, 2023
THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F', NEW DELHI
Before Dr. B. R. R. Kumar, Accountant Member
Sh. Yogesh Kumar US, Judicial Member
ITA No. 7956/Del/2019 : Asstt. Year: 2012-13
Rahul Agarwal, Vs. ACIT,
1241, FF, Kucha Bagh, Chandni Circle-46(1),
Chowk, New Delhi-110006 New Delhi-110002
(APPELLANT) (RESPONDENT)
PAN No. AGCPA0708P
Assessee by : Sh. Salil Agarwal, Adv.
Revenue by : Ms. Indu Bala Saini, Sr. DR
Date of Hearing: 14.06.2023 Date of Pronouncement: 20.06.2023
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the as sessee against the order of ld. CIT(A)-16, New Delhi dated 26.07.2019.
2. Following grounds have been raised by the assessee:
"1. T he learned Commissioner of Income Tax (A) erred in dismissing the appeal against the order passed u/s 154 without going thro ugh the facts of the case and is against the statutory provisions of Income Tax Ac t and has erred in not allowing the credit o f cash seized during search of Rs.2,00,00,000/- as adv ance tax.
2. The learne d Commissioner o f Income Tax (A) erred in dismissing the appeal on the ground that no respo nse to letter dated 12.07.2018 have been submitted and have erred in dismissing the claim of cash seized a dvance tax on the basis of theoretical assumptions and allegations and assertions, and is there fore not in accordance with law."2 ITA No. 7956/Del/2019
Rahul Agarwal
3. The issue of adjustment of cash seized against the advance tax stands covered by the judgment of Hon'ble Punjab & Haryana High Court in the case of PC IT Vs. Surinder Kumar Khindri 393 ITR 479. The entire order of the Hon' ble Court is as under:
"Sectio n 132B o f the Income-tax Act, 1961 - Search & seizure - Retained assets, application of Assessment ye ar 2011-12 - Explanation 2 to section 132B inserted with effec t from 1-6-2013 whic h res tricts scope of adj ustment of se ize d cash is not retros pective in e ffect [In favour of assessee] The assessee requested the Assessing O fficer to adjust the cash seized during sear ch against his excepted advance tax liability. The Assessing Officer rejected the assessee's reques t holding that se ized cash could not be adjusted against advance tax liability as the same was not existing liability.
Held that Explanation 2 to section 132B inser ted w ith effect from 1- 6-2013 w hic h restri cts scope of adjustment of se ized cash is no t retros pective in nature; there fore the assessee w as entitled to adjus tment of se ized cash against the advance-tax liability for assessment year 2011-12.
CASES REFERRED TO Ramjilal Jaganna th v. Asstt. C H [20001 241 ITR 758 (MP) (para 3) , C1T v. Ashok Kumar [2012) 20 taxniann.com 432/[20111 334 ITR 355 (Punj . & liar . ) (para 5) and C1T v. Cosmos Builders K Promoters Lid. [2016] 76 ta xmann.com 374 (Punj. & liar.) (para 6).
Denesh Go yal, Adv for the Appellant. Salil Kapoor, Sumit Lal Chandani, Nitin Mehra, Ms. Ananya Kapoor and Saurabh Kapoor , Advs . for the Respondent.3 ITA No. 7956/Del/2019
Rahul Agarwal JUDGMENT Ajay Kum ar Mitt al, J. - This a ppeal has been pre ferre d by the appe llant-Re venue under section 260A of the Income-tax Act, 1961 (in sho rt, "the Act") a ga inst the order dated August 3 I , 2015. anne xure A.3, passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsa r ( in sho rt, "the Tribunal") in I.T.A No. 185/Asr/2015, for the assessment ye ar 2011 -12, claiming the follow ing substantial question of law.
"(i) Whethe r the hon'ble Income-tax Appe llate T ribunal committed an error on fac ts a nd in law by ignor ing the fac t that penalty under section 271 AAA of the Income-tax Act, 1961 w as imposed due to non payment o f ta xes on surrendere d income under se ction 132(4) o f the Income-tax Act, 1961 in the event of the Department not responding to the assessee's request for adjustment of cash seized against a dvance tax liability without appreciating the fact that the advance tax does not constitute the existing liability as per spec ific provisio n o f section 132B of the Inco me-tax Act, 1961 ?
(ii) Whether the hon'ble Income-tax Appe llate T ribunal is cor rect on fac ts and in law by not tre ating the Explanation 2 to Section 132B of the I ncome-ta x Act, 1961 inserted by the Finance Act, 2013 w ith effec t from June 1, 2013 which has cl arified that the "existing lia bility' does not include advance tax payable in acco rdance with the provisio n o f Pa rt C of Chapter XVII ?
(iii) Whethe r the Expla nation 2 to section 132B of the Income-tax Act, 1961 though inserte d by the F inance Act, 2013, with effect from June 1, 2013 be ing clar ificator y in nature , make explicit what was implicit in the provision be fore the inse rtion of the said Explanation?"4 ITA No. 7956/Del/2019
Rahul Agarwal
2. A few fa cts re le vant for the decision of the controvers y invo lved as narra ted in the appeal may be no ticed. On September 9, 2010, during the course of search, cash o f Rs. 99,00,000/- was seized from the residence and bank lockers of the respondent- assessee. V ide letter dated September 15, 2010, the assessee reques ted the Assessing Officer to adjust the cash seized during search against his expected advance tax liability. The reques t o f the assessee was no t accepte d by the Assessing Officer as the Assessing Office r was o f the view that seized cash could no t be adj uste d against a dv ance tax liability as the same w as not existing liability. The assessee file d returned income of Rs. 3,04,23,555/- on March 30, 2012 in which Rs. 3,00,00,000/- was shown as undisclose d income. T he assessee did not pay any tax as according to him, his lia bility to pay tax and interest on re turned income was less than the amount of cas h seized during search. Returned income was accepte d by the Assessing Office r vide order dated February 28, 2013 under section 143(3) of the Act. Seized cash of the assessee was adjus ted against the regular ta xes and inte re st pa yable . L iability de termined on comple tion of assessment orde r was higher than the amount of cash seized due to charging of interest unde r sections 234B a nd 234C of the Act. The Assessing Officer initiated proc eedings under section 271AAA o f the Act as all the conditions specified for no n applic ation of penalty under the sa id pro vision were not fulfilled. The assessee plea ded that he had paid all the taxes and interest in relatio n to undisclosed income and hence no penalty could be levie d. The Assessing Officer did no t accept the plea of the assessee to the effec t that seized cash could be adjusted towards existing tax lia bility a nd no t against advance tax. The Assessing Office r further held tha t Explanation 2 to section 132B o f the Act which states that the existing liabilit y does not include advance tax payable in accordance with the provisions of Par t 'C of Chapter XVII is clarifica tory' in nature and hence applies to all pending proceedings. It was conc luded that the assessee was in default for having failed to 5 ITA No. 7956/Del/2019 Rahul Agarwal pay the taxes and interest in re latio n to undisclosed income declare d and le vied pe nalty under section 271 AAA of the Act vide order dated August 26, 2013, annexure A. I. Aggrie ved by the order, the assessee filed an appe al befo re the Commissione r of Income-ta x (Appeals) (CIT(A)). Vide o rder dated Janua ry 27, 2015, annexure A.2, the Commissioner of Income-ta x (Appea ls) held that Explanation 2 to section 132B of the Act inserted by the Finance Act, 2013 was clarifica tory in nature. It was furthe r held that the s aid amendment did not have retro spective effect. Thus, the Commissio ner of Income- tax (Appeals) allo wed the relief to the assessee. Not satisfied with the order , the De par tment filed an appeal before the Tribunal. Vide order dated August 31, 2015, anne xure A .3, the Tribunal upheld the decis ion taken by the Commissione r of Income-tax (Appeals) and dismisse d the appeal file d by the Department. Hence, the insta nt appe al by the Rev enue.
We have hea rd learned counsel fo r the parties .
3. Learned counse l for the appellant-Revenue relied upon a Single Bench judgment of the Madhya Pradesh High Court in R amjilal Jagannath v . Asstt. CIT [ 2000] 241 ITR 758 to contend that the amount se ized could not be adjusted towa rds the advance tax. Reliance was a lso placed on Explanation 2 to section 132B o f the Act introduced with effect from June 1, 2013 by urging that it was clarifica tory and w ould ope rate re trospectively.
4. On the o ther hand, learne d counsel for the responde nt- assessee s upporte d the impugned or der.
5. We do no t find any merit in the submiss ion made by the learned counsel for the appe llant- Revenue . The iss ue has already been decided by this court against the Revenue in Income Tax Appeal No. 36 of 2004 CIT v. Ashok Kumar [2012] 20 taxmann.com 6 ITA No. 7956/Del/2019 Rahul Agarwal 432/(2011] 334 ITR 355 (Punj. & Har.) wherein it was recorded as under ( page 357):
"I n CI T Vs. Arun Kapoor, I.T.A . No. 149 o f 2003 decided on July 27 2010-- [ 2011] 334 ITR 351 (P& H), this court had occas ion to conside r simila r issue where it has been held that the assessee is entitle d to adj ustment of seize d amount towards advance tax liability from the date of making the applicatio n in that regard. In the present case , the assessee had made request for adjustment of the advance tax liability o f Rs. 3,14,312/- aga inst the se ized amount o f Rs. 5,90,000/- o n August 28 1989. Since the firs t installment of advance tax was payable on Se ptem ber 15, 1989 and the re quest for adjus tment hav ing been made on August 28, 1989 and reminder o n September 12, 1989, no i nte rest w as exigible under sections 234A and 234B o f the Act. The Tr ibuna l has rightly held that the as sessee was entitled to adjustment of the said amount and no inte rest could be charged on tha t basis. The refo re, no fault could be found with the approac h adopted by the Tribuna l."
6. Similarly , CIT v. Cosmos Builders and Promote rs Ltd. [ 2016] 76 taxmann.com 374 (Punj. & Ha r.) the issue was adj udicate d aga ins t the revenue . The assessee has been held e ntitled to adjus tment of cash seize d against its advance tax dues. It has further been held that the Explanation 2 to sectio n 132B of the Act is not retrospec tive in nature . The SLP against the said judgment has already been dismisse d by the apex court vide order da ted May 6, 2016. Moreover , Explanation 2 to section 132B of the Act came into force on June 1, 2013 whereas the present case relates to the assessm ent year 2011-
12. Further, the relevant findings recorded by the Tribunal read thus:
'We find that Explanation 2 to section 132B , as Finance Act, 2013 clearly s tates is effective from June 1, 2013. When the law so specifically s ta tes, there is no scope of holding that it is 7 ITA No. 7956/Del/2019 Rahul Agarwal retros pective in effect. This provision restricts the scope of adjus tment o f se ized cash, and, there fore , is to be treated as advance to the assessee. As held by the hon' ble Supreme Court in the c ase o f CIT v. Vatik a Township (P.) Ltd. [ 20141.367 ITR 466, the legis lation which modifies accrued rights or w hich imposes obligations or impose new duties or attach a new dis ability have to be trea ted a s pro spective , unless the legisla tive intent is c learly to give the enactm ent a re trospective effect. In view of these discussions and consiste nt with the stand taken by the co-ordinate bench, we approv e the re asoning adopte d by the Co mmissioner o f Income-tax (Appeals). Accordingly we approve the order of the Commissioner of Income-tax (A ppeals) and decline to inter fere in the matter."
7. In vie w of the above, we do not find any ground to interfe re with the impugned order dated August 31, 2015, anne xure A.3, passed by the Tr ibuna l. The judgment of learned S ingle Bench of the Madhya Pradesh High Court in Ramjilal Jagannath's case (supra) does not come to the rescue of the Reve nue in view of binding decis ions of the Division Benches of this co urt as no ticed hereinbefo re . Consequently, no substantia l question of law arises and the a ppe al stands dism issed."
4. Further, we find that we have examined the Circular No. 20/2017 of CBDT which is as under:
F . N o . 2 79 / Mi s c. /1 4 0/ 2 01 5 /I T J G ov e rn m en t of I n di a Mi ni st ry o f F i na n c e D ep a rt m en t o f R ev e n ue C ent ra l B o a rd o f D i r e c t T a x e s N ew D elh i , D a t e d 1 2 th Ju n e , 2 0 1 7 8 ITA No. 7956/Del/2019 Rahul Agarwal " Su bj e ct : A pp li ca bi l i ty of Expl a n a ti on 2 to S e ct i on 1 3 2B o f t h e I. T . A c t, 1 96 1 - r eg . -
Se ct i on 1 3 2 B of t h e I n c om e Ta x Ac t 1 96 1 , p r o vid e s f o r a dj u st me n t o f s eiz ed a ss e ts /r e q ui s it i on e d a s s et s a g a in s t th e a m ou n t of any e xi sti n g li a bi l i ty u n d e r th e In c o m e T a x A ct , 19 6 1 , ( th e A ct ) , th e W ea l th -t a x A c t , 1 95 7 , th e Exp en d it u r e- t a x Ac t , 1 98 7 , t he G ift -t a x A ct , 1 9 58 and the In t e r es t - ta x A ct, 1 9 7 4 , a nd t h e a m o un t o f th e l ia b il it y det e rm in ed o n c omp l et i on of t h e a s s e s s m ent un d e r s ec ti on 1 53 A o f th e A c t a n d th e as s e ss m en t o f t h e y ea r r el e va n t t o th e p r e vi ou s y ea r i n w hi ch s ea r c h i s in it ia t e d o r r equ i s it ion is ma d e , o r th e a m o un t o f li a bi l i ty d e t er m in ed on c omp l et i on of t h e a s s e s s m en t u nd e r C h a pt e r XI V- B fo r th e b lo ck p er i od, a s th e c a s e m ay b e ( in cl u d in g a n y p en a lt y l e v i ed o r in t e r e st pa ya b l e in c onn e cti on w i t h su c h a s s es s m ent ) a n d i n r es p ec t o f w h i c h s u ch p e rson i s in de fau lt o r i s d e em e d t o b e in d e fa u lt , o r t h e a m oun t o f li a bi lit y a r i si n g on an a p p li ca t i on ma d e b e f o r e th e S ett l e m en t C o mm i ss i o n u n de r su b - s e ct i on ( 1) o f s e c ti on 2 4 5C o f th e A c t .
2. D ispu t e a r os e b et w ee n th e D epa rt m en t and the a s s e s se es w it h r ega r d t o a d ju stm e n t o f s u ch s ei z ed/ r equ isi ti on ed ca sh a ga i n s t a d v anc e ta x l iab i l it y et c. S e v er a l C o u r ts h e ld t h a t on a n a pp li c a ti on m a d e b y th e as s e ss e e , t h e sei z e d m on ey i s t o b e a dj u st ed a g a i n st th e a dva n c e t ax li a bi l i ty of th e a s s e s s e e . Su b s equ en t l y , Exp l a n a t i on 2 t o S e c ti on 13 2 B o f th e A ct was in s e r ted by the Fi na n c e Ac t , 20 1 3 w. e . f. 0 1 -0 6 -2 0 13 , cla ri f yi ng th a t " e xi s t in g li a b i li t y» d o e s not in c lu de a d va n c e ta x pa ya b l e i n ac c o rda n c e w it h t h e p r o vi s i on s o f P a rt C o f Ch a p t e r X V II of th e A c t. H ow e v e r, th e d i spu t e c ont in u ed on th e i s su e a s t o w h et h er t he a m en d m ent w a s cl a ri fi c a t o ry i n n a tu r e h a v in g r e t ro sp e cti v e a pp li c a bi lit y o r it h a s onl y pr o sp e c ti v e ap pl ic a b il ity .
3. S e v e ra l C ou rt s h a v e h el d t ha t th e in s e rti on o f E xp la n a t ion 2 t o s ect i on 1 3 2 B o f t h e A c t , i s p r o s p e ct i v e in n a tu r e a nd n ot a p pl ic a bl e t o ca s e s p ri o r t o 0 1 . 0 6.2 01 3 . Th e S L Ps f il ed by th e D epa rt m ent a g a i n s t th e j ud gm ent o f t h e H on ' bl e Pu nj a b a nd Ha r y a n a High C ou rt in t he ca s e o f C o s m os B ui l d e rs a n d P r o m ot e r s Lt d . a n d th e H on 'bl e A lla h a b a d Hi gh C o u r t in th e ca s e of S un i l C ha n d ra Gu p ta 2 , h a v e b e en di sm i s s ed . S ub s eq u ent ly , th e C B D T has al s o a c c e pt ed th e j u dgm e n t of th e Ho n ' b l e Pu nj a b & Ha ry an a 9 ITA No. 7956/Del/2019 Rahul Agarwal Hi gh C ou r t in t he ca s e o f Sp a z e To w er s P v t . Lt d . da t ed 1 7 .1 1. 2 0 1 6 , w h er e in i t w a s h eld t ha t t h e E xpl a na t i on 2 t o S ec ti on 1 3 2 B of t h e A c t i s pr o sp e c ti v e i n n atu r e .
4. A cc o rd in gl y , it ha s n o w b e en s ett l ed th a t i n s e rt i on o f E xpl a na t i on 2 to S ec ti on 1 3 2B of th e A c t s h a ll ha v e a p r o s p e cti v e a pp l i ca t i on a n d s o, app ea l s ma y n ot b e fi l ed by th e D ep a rt m en t on th i s i s s ue f o r t h e c a s e s pri o r t o 0 1 .0 6 .2 0 1 3 a nd th o s e a l r e a dy fi l ed m a y b e w i th d ra w n / n ot p r e s s ed u pon .
5. Th e ab o ve m a y b e b r oug ht t o t h e n o t i c e of al l c on c e rn ed .
6. Hin d i v e r si on f ol l o w s. "
S d/ -
( N e et ik a Ba n s al) D epu t y S ec r et a ry t o G ov e rn me n t o f Ind i a
5. Hence, we hereby hold that the order u/s 154 passed by the AO is aga inst the C ircular of the CBDT and the order of the Hon'ble High Court. Suffice to say that we are unable to appreciate the hyper te chnicalities embarked upon by the AO as well as the ld. CIT(A) while dealing with the issue .
6. In the re sult, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 20/06/202 3.
Sd/- Sd/-
(Yogesh Kumar US) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 20/06/2023
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR