Income Tax Appellate Tribunal - Amritsar
Shelly Mehta , Amritsar vs Assessee on 12 December, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL: AMRITSAR BENCH: AMRITSAR
BEFORE SHRI H L KARWA, VP AND SHRI D K SRIVASTAVA, AM
ITA No. 57/ASR/2010
AY: 2007-08
Smt. Kamla Mehta c/o v. DCIT, Central Circle,
Amritsar
M/s S.K. Trading Co
94-Lawrence Road, Amritsar
PAN: ACEPM 1028 L
ITA No. 58/ASR/2010
AY: 2007-08
Smt. Shelly Mehta c/o v. DCIT, Central Circle,
Amritsar
M/s S.K. Trading Co
94-Lawrence Road, Amritsar
PAN: ACEPM 1029 M
Appellants by: Shri P.N. Arora
Respondent by: Shri Tarsem Lal, DR
Date of hearing: 12.12.2011
Date of pronouncement: 16.12.2011
ORDER
D K Srivastava: While the appeal bearing ITA No. 57/ASR/2010 filed by Smt. Kamla Mehta is directed against the order passed by the ld. CIT(A) on 17.11.2009, the other appeal bearing ITA No. 58/ASR/2010 filed by Smt. Shelly Mehta is directed against the order passed by the CIT(A) on the same date, namely, 17.11.2009. At the time of hearing, it was submitted by both the parties that the facts and the grounds of appeal in both the cases are identical and therefore they should be disposed off by a consolidated order. For the sake of convenience, a consolidated order is therefore being passed to dispose off both the appeals.
2. In ITA No. 57/ASR/2010 the assessee, namely, Smt. Kamla Mehta has taken the following grounds of appeal:-
"1 That on the facts and in the circumstances of the case, the ld. CIT(A) has materially erred in confirming the levy of interest u/s 234B of the Income-tax Act, 1961 by the AO by holding the appellant in default 2 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 and being liable to pay advance-tax on the amount surrendered and settlement made during the course of search operations u/s 132 of the Act, even though after the close of the previous year, on 17.7.2007.
That both the authorities below have grievously erred in not following the orders of ITAT Amritsar Bench in t case of Brij Printing works, Amritsar (ITA No. 329/ASR/1996) as pointed out by the appellant being directly on the issue.
2. That the ld. CIT(A) has further erred in affirming AO's action for levy of interest u/s 234B for the period of 25 months from 1.4.2007 to 28.4.2009 (date of assessment order u/s 143(3)) and not giving credit of the amount recovered by the Department on 28.7.2007 amounting to Rs. 21,89,136/- which has been lying idle with the Department, thereby quietly ignoring appellant's several request letters filed with the Department for adjustment of cash seized by it on the said date against the income-tax liability due consequent to the admission of income y the appellant during the course of search u/s 132.
In addition to above, both the departmental authorities below have ignored the income tax return filed by the appellant on 18.2.2008 showing the undisclosed income admitted during the search proceedings. As per the said return, the appellant was liable to pay the consequent income tax liability u/s 140A, against which set off of amount recovered on 28.7.2007 had been claimed, and balance self assessment tax was deposited into the Government Treasury.
3. That the ld. CIT(A) has erred in placing a very narrow and restricted interpretation to the term 'existing liability' u/s 132B of the Act, which is unreasonable and unworkable.
4. That on the facts and in the circumstances of the case, the ld. CIT(A) has failed to appreciate that since the appellant had herself requested the Department for adjusting the cash seized as the 'tax paid' by her, there is no necessity of application of section 132B of the Act.
5. The ld. CIT(A) has grievously erred in not following the judgment of the Hon'ble Supreme Court in this regard reported at 145 ITR 1, 145 3 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 ITR 7, 145 ITR 11, 59 ITR 767, 69 ITR 864 holding that the income tax liability accrues and arises and does crystallize before the end of the accounting year and whatever is quantified subsequently by proceedings in assessment relate back to the last day of the relevant accounting year.
6. That on the facts and in the circumstances of the case, and on proper construction of the express provisions of section 234B and the scheme of the Income-tax Act, 1961 the order of ld. CIT(A) upholding AO's action of levying interest u/s234B is not legally justified and sustainable."
3. In ITA No. 58/ASR/2010, the assessee, namely, Smt. Shelly Mehta has taken the following grounds of appeal:-
"1 That on the facts and in the circumstances of the case, the ld. CIT(A) has materially erred in confirming the levy of interest u/s 234B of the Income-tax Act, 1961 by the AO by holding the appellant in default and being liable to pay advance-tax on the amount surrendered and settlement made during the course of search operations u/s 132 of the Act, even though after the close of the previous year, on 17.7.2007.
That both the authorities below have grievously erred in not following the orders of ITAT Amritsar Bench in t case of Brij Printing works, Amritsar (ITA No. 329/ASR/1996) as pointed out by the appellant being directly on the issue.
2. That the ld. CIT(A) has further erred in affirming AO's action for levy of interest u/s 234B for the period of 25 months from 1.4.2007 to 28.4.2009 (date of assessment order u/s 143(3)) and not giving credit of the amount recovered by the Department on 28.7.2007 amounting to Rs. 21,89,136/- which has been lying idle with the Department, thereby quietly ignoring appellant's several request letters filed with the Department for adjustment of cash seized by it on the said date against the income-tax liability due consequent to the admission of income y the appellant during the course of search u/s 132.
4 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 In addition to above, both the departmental authorities below have ignored the income tax return filed by the appellant on 18.2.2008 showing the undisclosed income admitted during the search proceedings. As per the said return, the appellant was liable to pay the consequent income tax liability u/s 140A, against which set off of amount recovered on 28.7.2007 had been claimed, and balance self assessment tax was deposited into the Government Treasury.
3. That the ld. CIT(A) has erred in placing a very narrow and restricted interpretation to the term 'existing liability' u/s 132B of the Act, which is unreasonable and unworkable.
4. That on the facts and in the circumstances of the case, the ld. CIT(A) has failed to appreciate that since the appellant had herself requested the Department for adjusting the cash seized as the 'tax paid' by her, there is no necessity of application of section 132B of the Act.
5. The ld. CIT(A) has grievously erred in not following the judgment of the Hon'ble Supreme Court in this regard reported at 145 ITR 1, 145 ITR 7, 145 ITR 11, 59 ITR 767, 69 ITR 864 holding that the income tax liability accrues and arises and does crystallize before the end of the accounting year and whatever is quantified subsequently by proceedings in assessment relate back to the last day of the relevant accounting year.
6. That on the facts and in the circumstances of the case, and on proper construction of the express provisions of section 234B and the scheme of the Income-tax Act, 1961 the order of ld. CIT(A) upholding AO's action of levying interest u/s234B is not legally justified and sustainable."
4. As stated earlier, facts as well as the grounds of appeal taken by both the assessees are common. For the sake of convenience, the facts are being extracted from the record of Smt. Kamla Mehta.
5. At the time of hearing Grounds No.1,3,4,5 and 6 were not pressed by both the assessees. They are therefore dismissed as not pressed. We are now 5 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 left with only one ground of appeal, i.e., ground No. 2 in both the appeals, for disposal.
6. Briefly stated the facts of the case are that search and seizure operations were carried out by the Income-tax Department on 17.7.2007 at the premises of both the assessees. In addition, search was also carried out in the case of Shri Sarup Chand during which a sum of Rs. 43,73,136/- found deposited in the bank account of Shri Sarup Chand in Standard Chartered Bank, was seized. The amount so seized from the bank account of Shri Sarup Chand was later deposited in the personal deposit account of CIT-I, Amritsar. A note was appended in the return of income filed by both the assessees, namely, Smt. Kamla Mehta and Smt. Shelly Mehta that the amount seized from Sarup Chand, which was lying in the personal deposit account of CIT-I, Amritsar, should be adjusted against self assessment tax payable by both the assessees. Affidavit of Sarup Chand claiming that the money seized from him belonged to both the aforesaid assesses, was also filed. Both the assessees also wrote to the AO for adjustment of the cash seized from the bank account of Shri Sarup Chand against the tax liability of both the assessees. The AO apprised the CIT-I, Amritsar of the aforesaid facts upon which he was informed that the adjustment of cash seized from the bank account of Sarup Chand against the demand/liability of both the assessees should be sought after creation of demand. The assessment was framed in due course not only in the cases of both the assessees but also in the case of Shri Sarup Chand. A copy of the assessment order passed by the AO on 28.4.2009 in the case of Shri Sarup Chand has been placed by the assessee in the paper book filed before us. Perusal of the assessment order passed in the case of Shri Sarup Chand shows that Shri Sarup Chand has not been assessed with regard to the amount seized from his bank account. The AO therefore again approached the CIT for adjustment of the amount seized from the bank account of Shri Sarup Chand and lying in the personal deposit account of CIT-I, Amritsar for adjustment against demand due from both the assessees upon which the CIT-I, Amritsar allowed the AO to adjust the cash seized from the bank account of Shri Sarup Chand against the demand due from both the assessees, vide his letter dated 26.6.2009. The adjustment was accordingly allowed by the AO. However, perusal of the assessment order passed by the AO shows that he has charged 6 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 interest u/s 234B in the cases of both the assessees. The grievance of the assessee is that the AO should have adjusted the cash seized from the bank account of Shri Sarup Chand against the self assessment tax due u/s 140A from both the assessees in terms of section 132B and charged interest u/s 234B accordingly. The case of the Department, on the other hand, is that the cash was not seized from the possession or the premises of either Smt. Kamla Mehta or Smt. Shelly Mehta and therefore the AO was justified in not adjusting the cash seized from Shri Sarup Chand against the self assessment tax due from both the assessees.
7. Aggrieved by the order passed by the AO charging interest u/s 234B, both the assessees filed appeal before the ld. CIT(A) . The ld. CIT(A) however dismissed the appeal filed by the assessees with the following observations (extracted from the appellate order of the CIT(A) in the case of Smt.Kamla Mehta):-
"The moot point to be decided in this appeal is as to whether seized cash could have been adjusted towards the advance tax liability of the assessee. There are divergent decisions of the Courts as regards the application of seized cash towards the advance tax liability. The Hon'ble Delhi High Court in the case of CIT v. K.K. Marketing 278 ITR 596 has held that there is nothing to prohibit the assessee from making a request from adjustment of the cash seized against the advance tax liability. In this case he assessee had requested the AO to adjust the seized cash towards the tax liability. However, on the other hand Hon'ble Madhya Pradesh High Court in Ramjilal Jagannath v. ACIT, 241 ITR 758 held that unless the AO makes an enquiry, the occasion to retain the assets or to adjust the assets shall come into existence only after a final order is made u/s 132(5) of the Act. Also, in Gian Chand v. DCIT (2002) 80 TD 548, the Delhi Bench of the Tribunal held that seized cash can be adjusted against the existing liabilities and not towards advance tax. In this connection, it will be useful to refer to the provisions of section 132B of the Act. Clause (i) of sub section (1) of section 132B prescribes the procedure for application of the seized or requisitioned assets the provisions of clause (i) of sub section (1) of section 132B reads as under:-
7 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 "132B. Application of seized or requisitioned assts - (1) The asset seized u/s 132 or requisitioned u/s 132A may be dealtl 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 the tax liability determined on completion of the assessment u/s 153A and the assessment of the year relevant to the previous year in which search is initiated or requisition if 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 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."
The provisions of clause (i) can be split to understand as to how the seized assts have to be applied and this will show that assets seized can be applied:-
(i) towards the amount of AY existing liability under Income-
tax Act, 1961;
(ii) towards the existing liability under the Wealth-tax Act, 1957;
(iii) towards the existing liability under the Expenditure Tax Act, 1987;
(iv) towards the existing liability under the Givt tax Act, 1958;
(v) towards the existing liability under the Interest tax Ac, 1974; and
(b) (i) towards the liability determined on completion of assessment u/s 153A;
(ii) towards the liability determined on completion of the assessment of the year relevant to the previous year in which search took place or requisitioned was made;
(iii) towards the liability determined on assessment under Chapter XIV-B for the block period; and 8 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000
(iv) towards the penalty or interest payable and pertaining to above assessment done under Income-tax Act.
It would, thus, be seen that controversy that arises is about the issue whether advance tax liability can be said to be covered by the phrase 'existing liability' as used u/s 132B (1)(i) of the Income-tax Act.
A moot question that arises is whether advance tax is an existing liability? Analysis of clause (i) of section 132B(1) would show that u/s 132B the phrase 'existing liability' is used in reference to the Income-tax Act, 1961, the Gift-tax Act, Wealth-tax Act, the Expenditure-tax and the Interest-tax Act which impliedly means that the interpretation of this phrase has to be the same under all these Acts referred to. That is, it cannot hold different meanings under different Acts.
Normal rule of interpretation is that general words and phrases in a statute receive general construction unless there is something in the Act itself to indicate that they should be given restrictive or special meaning. If rule/doctrine of 'noscitur a sociis' which requires that associated words take their meaning from one another is applied to interpret, the word 'existing' has to be understood in its cognate sense whereby it would become clear that it cannot be interpreted differently in reference to Income-tax Act.
Under the Gift-tax Act, the Wealth-tax Act, the Expenditure-tax and the Interest-tax Act, the concept of 'advance payment of tax' is not applicable. The words 'existing liability' cannot mean advance tax under the Income-tax Act. Under all these Acts including the Income-tax Act the meaning which will hold good with equal force is that it means a liability which is crystallized by way of assessment and which is still not paid as on the date of seizure."
8. Aggrieved by the order passed by the ld. CIT(A), both the assessees are now in appeal before this Tribunal. In support of appeal, it was submitted that the AO ought to have adjusted the cash seized from the bank account of Shri Sarup Chand against self assessment tax due u/s 140A in the cases of both the assessees in terms of section 132B and interest u/s 234B charged accordingly.
9 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000
9. In reply, the ld. Departmental Representative has filed written submissions, which read as under:
"It is submitted that the assessee's appeal deserves to be dismissed on the following grounds:
1. In none of its grounds of appeal, the assessee has challenged the holding of the ld. CIT(A) that there is conflict in judicial opinion as to whether advance tax liability can be adjusted against the assets retained u/s 132B of the Income-tax Act, 1961 but w.e.f. 1.6.2002 with the substitution of the said section by the FinanceAct,2002,the provisions; of substituted section are very clear and do not permit application of adjustment of seized asset like cash, bullion, jewellery etc. towards the advance tax liability. Since the, assessee has not challenged this sole finding of the ld. CIT(A) ,its appeal is not maintainable.
2. The cash of which the assessee demanded adjustment was found deposited in the name of Shri Sarup Chand, an employee of the husband of the assessee. Shri Sarup Chand admittedly had given an affidavit which the assessee had filed alongwith the return but the said affidavit needed to be scrutinized and the request of Shri Sarup Chand for adjustment; of the cash retained against the liability of the assessee could not accepted as proceedings in his own case had been initiated by the AO under section 153A vide notice issued on 25.1.2008. Shri Sarup Chand's request for adjustment of tax could be accepted only after completing his assessment and reaching a conclusion that the cash found deposited in his name in the Bank did not form part of his total income. Assessment in the case of Shri Sarup Chand as lawfully initiated u/s 153A was completed by the AO 28.4.2009 i.e. simultaneously with the assessment of the assessment. A copy of assessment order of Shri Sarup Chand is available at 34 and 35 of the paper book filed by the assessee. Thus,till 28.4.2009, no adjustment of the cash retained as found from the bank account of Shri Sarup Chand could be adjusted against the demand of the assessee.
3 The assessee has demanded the adjustment of the cash against the self tax assessment tax liability vide note appended along with
10 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 return and also in letter addressed to the CIT. It may be mentioned here that in the charging of interest u/s234B, credit for tax paid u/s 140A is not given as is obvious from the Explanation to section 234B explaining the meaning of 'assessed tax' on which interest u/s 234B is charged.
4 Without prejudice to the above submissions, it may be mentioned that the assessee has never made any request for adjustment of the cash retained against the advance tax liability and he raised this issue only before the ld. CIT(A) and never before the AO. Before the AO, the assessee was only demanding adjustment against the self assessment tax.
5 The assessee's claim that h amount retained in respect of cash found in the account of Shri Sarup Chand during search on 17.7.2007 be adjusted against the advance tax liability is also not tenable as the amount was retained on 17.7.2007 and after the accounting period relevant to the assessment year under consideration.
It is, therefore, prayed that the assessee's appeal may kindly be dismissed."
10. The ld. counsel for the assessee has filed his rejoinder submissions in both the cases. The written submissions filed in the case of Smt. Kamla Mehta are reproduced below for the sake of better appreciation of the case:-
"This written submission is submitted in response to the submissions given by the Departmental Representative on 8.2.2011 (though it is dated 8.6.2011), was handed over for the first time to the Tribunal. The submissions have got no basis and justification for the following reasons:-
That it is absolutely wrong that the assessee has not challenged the finding of the ld. CIT(A) in appeal. It is relevant to point out that this point has been emphatically raised in Ground of Appeal No 2, before the Tribunal, which is reproduced as under:-
"2. That the ld. CIT(A) has further erred in affirming AO's action for levy of interest u/s 234B for the period of 25 months from 1.4.2007 to
11 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 28.4.2009 (date of assessment order u/s 143(3). And not giving credit of the amount recovered by the Department on 28.7.2007, amounting to Rs. 21,89,136/- which has been lying with the Department, thereby quietly ignoring appellant's several request letters filed with the Department for adjustment of cash seized by it on the said date against the income tax liability due consequent to the admission of income by the appellant during the court of search u/s 132.
In addition to the above, both the Departmental authorities below have ignored the income tax return filed by the appellant on 18.2.2008 showing the undisclosed income admitted during the search proceedings. As per the said return, the appellant was liable to pay the consequent income tax liability u/s140A, against which set off of amount recovered on 28.7.2007 had been claimed and balance self assessment tax was deposited into the Govt Treasury."
Thus this objection of the Departmental Representative stands rebutted.
That as far as the adjustment of the amount which was retained in the name of Shri Sarup Chand, an employee of the husband of the assessee, it is an admitted fact that on page No.26 of the paper book, the assessee replied to the A.D.I (Inv) on 3.8.2007, in which a reference was made to the letter addressed to Shri Sarup Chand, by the A.D.I. (Inv) and the appellant has requested for transferring the amount with the Income-tax Department in the personal account of the appellant. A letter was also addressed to Shri Sarup Chand to the A.D.I.(Inv) which was filed on 6.8.2007 (Refer page Nos. 27 and 28 of the paper book) in which it was categorically stated by Shri Sarup Chand that he is enclosing herewith an affidavit executed on 3.8.2007, stating full facts and he has also requested to transfer the amount from the Standard Chartered Bank to the Income-tax Department as the same belongs to the family members of the appellant and an affidavit in this regard is also available at page Nos. 29 to 31 of the paper book, in which Shri Sarup Chand has deposed all the material facts and he has mentioned that he has got nothing to do with the bank accounts and they belong to the family members of Smt. Kamla Mehta and Smt. Shelly Mehta.
12 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 Again, a letter dated 2.2.2008, filed on 15.2.2008, was addressed to the Dy CIT, by Shri Sarup Chand, in which it was pointed out that the amount of Rs. 21,89,136/- (1/2 of Rs. 43,78,272/-) may be adjusted against the demand arising against the undisclosed income of Smt. Kamla Mehta and Smt. Shelly Mehta and he again referred in the said letter about the reply submitted to the A.D.I (Inv) on 30.8.2007 (Refer page No.l32 of the paper book).
It is relevant to point out that Smt. Kamla Mehta and Smt. Shelly Mehta, have offered this amount relating to AY 2007-08, as their undisclosed income.
It is relevant to point out that the assessment in the case of Shri Sarup Chand was completed by the same AO and the returned income has been accepted and the assessment order is available at page Nos. 36 & 37 of the paper book, wherein no additions on account of these two amounts viz., Rs. 34,03,087/- an Rs. 9,75,202/- respectively have been made which belongs to Smt. Kamla Mehta and Smt. Shelly Mehta and the AO has completed the assessment of Shri Sarup Chand on the basis of his reply which is reproduced as under:-
"During the course of assessment proceedings, the assessee was asked to explain the source of money lying the above said accounts. The assessee submitted the following reply:
Copy of affidavit of Mr. Sarup Chand dated 3.8.2007, filed in the office of DI(Inv) Amritsar submitted that the money seized from bank account s i.e. (i) bank account No 54305030887 and (ii) bank account No. 54310182894, with Standard Chartered Bank, The Mall, Amritsar having credit balance of Rs. 34,03,087.75 and Rs. 9,75,202.91 respectively belonging to Smt. Kamla Mehta and Shelly Mehta who have sold the house at 56, Palm Groove, Amritsar and the same is surrendered at the time of search on 17.7.2007.
This fact has also been admitted by Shri Sunil Kumar Mehta, Smt. Kamla Mehta and Smt. Shelly Mehta during the course of search 13 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 proceedings as well as during the course of assessment proceedings, hence no adverse inference is drawn."
It is relevant to point out that when the amount is lying with the Department, why the Department should not give credit for the same especially when they have not allowed any interest on the amount seized and lying with the Department. It is relevant to point out that your kind attention is invited to the letter issued by the Standard Chartered Bank on 31.7.2007, in which they have categorically stated that they have transferred the amount of Rs. 9,75,202/- and Rs. 34,03,069/- on 28.7.2007, Totaling Rs. 43,78,272/- in the account of the Income-tax Department (Refer page Nos. 71 of the paper book). When the Department has prepared an inventory of these two pay orders which are available at page nos. 67 and 70 of the paper book. These two pay orders were received by the Department on 28.7.2007. Thus the credit should have been allowed to the appellant on the same date when it was received by the Department.
It is further relevant to point out that the Department has mainly relied on the order of the ld. CIT(A) , according to him deduction on seized amount is hot allowable for working out interest u/s 234B of the Income-tax Act, 1961.
But the same should have been allowed as this view finds support from the decision of the ITAT,Mumbai "J" Bench in the case of Sudhakar M. Shetty v. ACT, reported in (2008) 10 DTR (Mumbai) (Trib) page 173. (Refer page Nos. 99 to104 of the paper book).
Again, your kind attention is invited to the decision of Income-Tax Appellate Tribunal, Chandigarh Bench "A" in the case of Nikka Mal Babu Mal reported in (2010) 41 SOT 407 (Chd). If we go through the judgments, it is crystal clear that under the amended provisions, we are entitled for adjustment and it is an existing liability which has to be considered while working out interest u/s 234B of the Income-tax Act, 1961. Even, Hon'ble Punjab & Haryana High Court has explained in the case of CIT v. Arun Kapoor reported in 334 ITR 351, in which their Lordships were pleased to observe that whenever a request is made for 14 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 adjustment of the seized against the retained assets, the same has to be allowed). Earlier even the ITAT Amritsar Bench, Amritsar in the cases of ACIT v. Shri Ajay Kapoor, Shri Deepak Kumar Kapoor, Shri Chuni Lal Kapur, Shri Arun Kumar Kapur and Shri Ravi Kumar Prop. M/s Shree Chenab Textiles, Amritsar in ITA Nos. 330, 331, 332, 333 and 335 (AAR/1996 vide order dated 29.11.2002 (Refer page nos. 55 to 61 of the paper book) in which they have held that the amount is with the Department, the assessee is entitled for claim of the same amount and for which the assessee as well as Shri Sarup Chand had made several written requests.
It may be further pointed out that in the concluding para No. 2.2 of page No. 4 of the assessment order, it was observed by the DCIT, as under, which is reproduced as under:-
"2.2 search and seizure operation u/s 132(4) was conducted on 17.7.2007, and cash amounting to Rs. 43,73,136/- was seized from the above bank accounts in the name of Shri Sarup Chand in Standard Chartered Bank which was deposited in P.D. account of CIT, Amritsar. The assessee Smt. Kamla Mehta and Smt. Shelly Mehtra has appended a note in the Income-tax returns for the AY 2007-08 along with affidavit of Shri Sarup Chand that the amount lying in P.D account of CIT-I, may be adjusted as self assessment tax paid on 31.7.2007. The assessee has written letters to this office and CIT-I, Amritsar to adjust this amount against the self assessment tax liability."
Furthermore, it may be pointed out that u/s 140A of the Income- tax Act, 1961 the credit has to be allowed for the amount of tax if any already paid under the provisions of the Act., as the amount/tax retained by the Department is u/s 132B, and while working out interest u/s 234B of the Act, the same has to be considered and allowed as self- assessment tax paid on 31.7.2007, while working out the calculations of interest u/s 234B.
It is relevant to point that departmental authorities did not appreciate that this an existing liability which has to be considered while 15 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 working out interest u/s 234B of the Income-tax Act, 1961 in view of the following decisions:-
House of Lords in Whitney v. IRC(1926) 10 Tax Cases 88 (HL) by the Federal Court in Chatturam v. CIT (1947) 15 ITR 320 (FC) and against emphasized by the Hon'ble Supreme Court in Goodyear (I) Ltd v. State of Haryana &Ors, AIR 1990 SC 781.
The Hon'ble Supreme Court's judgment in Keshoram Industries & Cotton Mills Ltd v. CWT(1966) 59 ITR 767 (SC) and H.H. Sethu Parvathi Bavi v. CWT (1968) 69 ITR 864 (SC) are also the direct authorities for the proposition that the tax liability under the Income-tax, Wealth-tax and Gift-tax laws accrued and arises and crystallize before the end of the accounting year and whatever is quantified subsequently by proceedings in assessment, reassessment, appeal, revision, rectification, reference etc. would necessarily relate back to the last day of the relevant accounting year.
This is also reiterated by the Hon'ble Supreme Court in CWT v. K.S.N. Bhatt (1983) 37 CTR (SC) 273: (1984) 145 ITR 1 (SC), CSWT v. Vimla Ben Vadilal Mehta (1983) 37 CTR (SC) 280: (1984) 145 ITR 11 (SC) and CWT v. VAdilal Lallubhai (1983) 37 CTR 277: (1984) 145 ITR 7 (SC).
Therefore, the liability to tax on seized assets cannot be regarded as not being an existing liability on the date of seizure and before the last day of the accounting year not can it be regarded as liability arising on the day of the order of assessment made on the taxpayer.
It is relevant to point out that u/s 234B of the Income-tax Act, 1961 while completing the assessment, tax paid u/s 140A from 28.7.2007 has to be deducted while charging interest under this section. It is now crystal clear that no interest can be charged u/s 234B of the Act, as the amount is lying with the Department since 28.7.2007, and the request for adjustment has also been made and after 28.7.2007, no interest can be charged u/s 234B of the Income-tax Act, 1961.
16 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 It is relevant to point out for your kind information that in para - 4, the ld. DR in his written submissions has wrongly mentioned that the assessee has never made any request for adjustment of the cash retained against the advance tax liability and he has raised this issue before the ld. CIT(A) and never before the AO.
In this connection, ld. DR has failed to appreciate that in the computation of income at page Nos. 2 and 3, it was clearly requested to adjust the amount. Afterwards several letters were furnished in this connection, which are available at page Nos. 26,27,28,29,30,31 & 32. Thus the contention of the ld. DR is inconsistent with facts of the case.
In view of these circumstances, it is very respectfully prayed that no interest should be charged u/s 234B of the Income-tax Act, 1961 after allowing the credit of the retained amount from 28.7.2007."
11. Apart from the aforesaid written submissions, the ld. counsel for the assessee has relied upon several judgments which are as under:-
1 S.M. Wahi V. Assistant Director of Income Tax (International Taxation) (2010) 47 DTR (Del) (Trib) 241 2 Vinod Poddar and Another (1994) 208 ITR 722 (Pat) 3 CIT v. Kkesr Kimam Karyalaya (2005) 278 ITR 596 (Del) 4 Gian Chand Gupta v. DCIT (2001) 72 TTJ (Del) 665.
5 Sudhakakr M Shetty v. ACIT(2008) 10 DTR (Mum)(Trib) 173 6 ACIT-Amritsar v. Shri Ajay Kapoor c/o M/s Brij Printing Works, Amritsar in ITA No. 330/ASR/1996 orderdated29.11.2002, AY 1994-95.
12. We have heard both the parties and carefully considered their oral as well as written submissions including the authorities referred to by them. The short issue is whether the cash seized from the bank account of Shri Sarup Chand can at all be adjusted against the self assessment tax due u/s 140A in the cases of both the assessees, namely, Smt. Kamla Mehta and Smt. Shelly Mehta u/s 132B even without ascertaining the tax liability of Sarup Chand upon assessment. It is not in dispute that all the three persons are income-tax assessees and that they have been assessed individually to tax in the 17 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 assessment year under appeal. It is also not in dispute that the cash was seized from the bank account of Shri Sarup Chand and not from the possession or the premises of either of the assessees before us. The claim of both the assessees is that they have filed affidavit in which it has been claimed that the cash seized from the bank account of Shri Sarup Chand belongs to both the assessees and therefore they should be adjusted against the self assessment due from both the assessees. In our view, the mere filing of affidavit is not sufficient to establish the ownership of cash. Apparent is considered to be real unless proved otherwise. In the present case, the cash was seized from the bank account of Shri Sarup Chand. Filing of mere affidavit of Shri Sarup Chand does not by itself establish that the cash seized from his bank account belonged to both the assessees and not to the person from whose possession it was seized. The affidavits so filed before the AO was the subject matter of enquiry by the AO and it was only when the assessment order was passed that the cash seized from the bank account of Shri sarup Chand was not assessed in his hand and thereafter the cash so seized was adjusted against the demand due from both the assessees. It cannot therefore be said that the cash seized from the bank account of Shri Sarup Chand belonged to both the assessees till a decision was taken by the AO in this behalf in the assessment order passed in the case of Shri Sarup Chand on 28.4.2009. Since the assessment order in the case of Shri Sarup Chand was passed on 28.4.2009, the AO has rightly adjusted the cash seized from the bank account of Shri Sarup Chand against the liability of both the assessees after 28.4.2009.
13. The claim of the assessee that cash seized from the bank account of Shri Sarup Chand should have been adjusted by the AO against self assessment tax due u/s 140A from both the assessees in terms of section 132B has no legs to stand. Section 132B permits adjustment of seized assets including cash against the existing liability of the person from whom it is seized and not against the existing liability of others. In the present case, cash was seized from the bank account of Shri Sarup Chand and not from the possession or premises of either Kamla Mehta or Shelly Mehta. Therefore neither Kamla Mehta nor Shelly Mehta was entitled to seek adjustment of cash seized from the bank account of Shri Sarup Chand against their liabilities u/s 132B on the basis of mere affidavit of Sarup Chand. In fact, such types of 18 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT ITAs No. 57 and 58/ASR/2000 claims/adjustments are completely outside the scope of section 132B. Till the assessment in the case of Sarup Chand was completed, the AO was not in a position to know as to whether there would be any liability against Sarup Chand for the satisfaction of which the seized cash would be required. It is only after the assessment in the case of Shri Sarup Chand was completed that the AO could know that the seized cash was not required to be applied to satisfy any demand due from Sarup Chand as there was no demand found due against him upon the assessment. It was therefore not open to the AO to adjust the cash seized from the bank account of Sarup Chand against the self assessment tax due u/s 140A from both the assessees without completing the assessment in the case of Shri Sarup Chand. It was only after the assessment of Shri Sarup Chand was completed by the AO that the AO could know that the cash seized from him would not be required in his case and therefore adjusted the cash so seized from him against the demand due from both the assessees. In this view of the matter, the AO, in our considered view, has rightly adjusted the amount of cash seized against the demands due from both the assessees after completing the assessment in the case of Sarup Chand.
14. The ld. counsel for the assessees has relied upon several judgments. However, none of them is relevant on the facts of the case before us.
15. In view of the foregoing, the order passed by the ld. CIT(A) in both the cases is confirmed. Resultantly the appeal filed by both the assessees is dismissed.
Order pronounced on 16.12.2011
Sd/- Sd/-
(H L KARWA) (D K
SRIVASTAVA)
VICE PRESIDENT ACCOUNTANT
MEMBER
Amritsar, 16.12.2011
SURESH
Copy to:-
1. The Appellant, Smt. Kamla Mehta and Smt. Shelly Mehta
2. The Respondent, Dy CIT
3. The CIT(A)-I, Ludhiana
4. The Ld. CIT, Ludhiana
5. The D.R., Income Tax Department, Amritsar
19 Smt. Kamla Mehta and Shelly Mehta v. Dy CIT
ITAs No. 57 and 58/ASR/2000