THE issue before the Bench is - Whether when AO did not allow adjustment of the cash seized against the advance tax liability even after the assessee making specific request, interest u/s 234B is leviable and the assessee cannot escape penalty u/s 271AAA. And the verdict goes in favour of the assessee.
Assessee disclosed a sum of Rs. 10 crores during search u/s 132(4) and disclosed in the return of income filed. AO observed that assessee had not paid taxes due on undisclosed income. Assessee contended that default in payment of taxes was due to non acceptance of request of the assessee made before AO to adjust the cash seized against the advance tax liability. Because of non adjustment of seized cash, interest u/s 234B/234C was levied which led to short payment of due taxes and in turn to avail of immunity from penalty proceedings u/s 132(4). AO contended that as per section 132B seized cash could not be adjusted against advance tax liability as the same was not in the nature of ‘existing liability’ and proceeded to impose penalty u/s 271AAA. AO further contended that the amount lying in P.D. account could not be treated as payment either on account of self-assessment tax or advance tax.
CIT (A) allowed the appeal of the assessee observing that when the assessee made request to adjust the amount, this seized amount was liable to be adjusted against the tax payable by the assessee in view of the decision of Hon’ble High Court in the case of CIT vs. Ashok Kumar reported at 334 ITR 355 (P&H). Assessee paid tax and interest payable in respect of undisclosed income and no penalty was leviable u/s 271AAA. Assessee was levied interest u/s 234B for short payment of advance tax due on the income return which in turn was caused by inaction on the part of the A.O. to adjust the seized cash towards advance tax liability as requested by the assessee. The alleged short payment of interest was only on account of incorrect imposition of interest by AO which stands deleted. Therefore, the basis to impose penalty u/s 271AAA in the form of non-payment of taxes/interest does not survive and thus penalty imposed is deleted.
Assessee contended before ITAT that there is no mention with regard to levy of penalty in the order of the AO u/s 271AAA with regard to section 234C. Referring to the provisions of section 271AAA (1) (2) (iii), assessee argued that no time limit has been provided in the said section to pay the taxes and interest. The Revenue cannot add any word in the scheme of any section and therefore, outer limit of payment cannot be read as interest to have been paid before filing of the income tax return. It was also contended that the provisions of section 271AAA had been omitted w.e.f. 01.07.2012 and in place of 271AAA, the new section i.e. section 271AAB had been introduced where the time limit has been prescribed and accordingly levy of penalty in different circumstances has been prescribed in the newly inserted section. Had the time limit for payment of tax alongwith interest could have been the intention of the legislature while incorporating section 271AAA then there would have been no omission of the section 271AAA and there would not have been introduction of new section as 271AAB prescribing the time limit and other conditions.
After hearing both the parties, the ITAT held that,
++ AO has levied penalty u/s 271AAA of the Act keeping in view the provision of section 234B. Section 234C was never the basis of the A.O. while levying penalty and it is for the first time that DR has referred to section 234C of the Act. The seized amount was not adjusted as an advance tax by the A.O. which matter was taken to the A.O. for rectification, which was refused. CIT (A) directed AO to adjust the amount lying PD account as an advance tax. The appeal of revenue against the same is already dismissed. It is also not under dispute that the demand of interest u/s 234C raised vide notice under section 156 was paid within time of 30 days;
++ it is also agreed that there is no time limit mentioned in section 271AAA. Had there been any intention of the law then section 271AAA would not have been omitted which since has been omitted by the Finance Act, 2012 for the searches made under section 132 on or after Ist day of July, 2012 w.e.f. 1.7.2012 by introducing new section as 271AAB where the time limit and the quantum of penalty in different circumstances has been introduced in the Act itself. Therefore, the legislators were clear that there is no intention of the law w.r.t. time limit embedded in section 271AAA with regard to payment of tax together with interest;
++ in the case of DCIT vs. Pioneer Online Ltd., the co-ordinate bench observed that wherein entire tax and interest has been duly adjusted out of seized cash or otherwise paid in deference to notices of demand, well before the penalty proceedings were concluded, the assessee could not be denied the immunity u/s 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings. Following the said case, order of CIT (A) is confirmed.
Facts of the case
Assessee disclosed a sum of Rs. 10 crores during search u/s 132(4) and disclosed in the return of income filed. AO observed that assessee had not paid taxes due on undisclosed income. Assessee contended that default in payment of taxes was due to non acceptance of request of the assessee made before AO to adjust the cash seized against the advance tax liability. Because of non adjustment of seized cash, interest u/s 234B/234C was levied which led to short payment of due taxes and in turn to avail of immunity from penalty proceedings u/s 132(4). AO contended that as per section 132B seized cash could not be adjusted against advance tax liability as the same was not in the nature of ‘existing liability’ and proceeded to impose penalty u/s 271AAA. AO further contended that the amount lying in P.D. account could not be treated as payment either on account of self-assessment tax or advance tax.
CIT (A) allowed the appeal of the assessee observing that when the assessee made request to adjust the amount, this seized amount was liable to be adjusted against the tax payable by the assessee in view of the decision of Hon’ble High Court in the case of CIT vs. Ashok Kumar reported at 334 ITR 355 (P&H). Assessee paid tax and interest payable in respect of undisclosed income and no penalty was leviable u/s 271AAA. Assessee was levied interest u/s 234B for short payment of advance tax due on the income return which in turn was caused by inaction on the part of the A.O. to adjust the seized cash towards advance tax liability as requested by the assessee. The alleged short payment of interest was only on account of incorrect imposition of interest by AO which stands deleted. Therefore, the basis to impose penalty u/s 271AAA in the form of non-payment of taxes/interest does not survive and thus penalty imposed is deleted.
Assessee contended before ITAT that there is no mention with regard to levy of penalty in the order of the AO u/s 271AAA with regard to section 234C. Referring to the provisions of section 271AAA (1) (2) (iii), assessee argued that no time limit has been provided in the said section to pay the taxes and interest. The Revenue cannot add any word in the scheme of any section and therefore, outer limit of payment cannot be read as interest to have been paid before filing of the income tax return. It was also contended that the provisions of section 271AAA had been omitted w.e.f. 01.07.2012 and in place of 271AAA, the new section i.e. section 271AAB had been introduced where the time limit has been prescribed and accordingly levy of penalty in different circumstances has been prescribed in the newly inserted section. Had the time limit for payment of tax alongwith interest could have been the intention of the legislature while incorporating section 271AAA then there would have been no omission of the section 271AAA and there would not have been introduction of new section as 271AAB prescribing the time limit and other conditions.
After hearing both the parties, the ITAT held that,
++ AO has levied penalty u/s 271AAA of the Act keeping in view the provision of section 234B. Section 234C was never the basis of the A.O. while levying penalty and it is for the first time that DR has referred to section 234C of the Act. The seized amount was not adjusted as an advance tax by the A.O. which matter was taken to the A.O. for rectification, which was refused. CIT (A) directed AO to adjust the amount lying PD account as an advance tax. The appeal of revenue against the same is already dismissed. It is also not under dispute that the demand of interest u/s 234C raised vide notice under section 156 was paid within time of 30 days;
++ it is also agreed that there is no time limit mentioned in section 271AAA. Had there been any intention of the law then section 271AAA would not have been omitted which since has been omitted by the Finance Act, 2012 for the searches made under section 132 on or after Ist day of July, 2012 w.e.f. 1.7.2012 by introducing new section as 271AAB where the time limit and the quantum of penalty in different circumstances has been introduced in the Act itself. Therefore, the legislators were clear that there is no intention of the law w.r.t. time limit embedded in section 271AAA with regard to payment of tax together with interest;
++ in the case of DCIT vs. Pioneer Online Ltd., the co-ordinate bench observed that wherein entire tax and interest has been duly adjusted out of seized cash or otherwise paid in deference to notices of demand, well before the penalty proceedings were concluded, the assessee could not be denied the immunity u/s 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings. Following the said case, order of CIT (A) is confirmed.
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