THE issue before the bench is - Whether the assets or cash seized u/s 132 of the Act is adjustable against the amount of any "existing liability" under the Act which does not include "advance tax" payable in accordance with the provisions of Part 'C' of Chapter XVII of the Act. And NO is the answer.
Facts of the case
A) Revenue raised additional ground in this appeal challenging the order of CIT(A) in admitting the additional evidences in the form of the letters dated 30.06.2008 and 18.08.2008 and allowing the appeal of the assessee on the basis of the two letters.B) Search and seizure operation was carried out on the premises of the assessee during the financial year 2008-09 which was related to A.Y. 2009-10. At the time of search cash was found at different places and seized by the Revenue authorities. On 29.4.2008 a letter addressed to Additional Director of Investigation requesting that the seized cash may kindly be adjusted and appropriated against the tax liability in respect of the income of the A.Y. 2008-09 which was offered as the income in the statement made u/s 132(4). Letter dated 30.06.2008 addressed to Assistant Director Investigation was also filed stating the fact that the assessee had discharged its more than 60% of tax liability in the form of seized cash which had been requested to be adjusted towards the tax liability for the A.Y. 2008-09 and also paid first installment of the tax. Another letter dated 18.8.2008 addressed to Additional Director of Investigation was also submitted and reiterated the fact that the assessee has discharged its more than 70% of tax liability in the form of seized cash which had been requested to be adjusted towards tax liability and also paid 2nd instalment of the tax. Assessee filed return u/s 139(1) of the Act on 30.9.2008 disclosing taxable income including therein such sum which had not yet been entered in the books of accounts including the cash. In response to notice dated 31.08.2009 issued to the assessee u/s 153A of the Act, Assessee filed a return of income on 18.05.2010 disclosing income including an income which had been disclosed u/s 132(4) of the Act. The assessment was framed u/s 153A/143(3). An outstanding demand was raised after giving credits of taxes already and also by granting adjustment of refund relating to A.Y. 2009-10 against the total tax payable. AO denied prayer of the assessee that the adjustment of seized cash should be given from the date of search i.e. 29.4.2008. AO gave adjustment of seized cash towards aforesaid demand from 23.2.2011. AO levied interest u/s 234A & 234B.
Revenue submitted that the two letters dated 30.06.2008 and 18.08.2008 were not filed before the AO and the CIT(A) erred in accepting the additional evidence without following the due procedure as per Rule 46A of the Income Tax Rules, 1962 and considering and accepting these letters without confronting them to the AO.
Revenue submitted that Advance tax is referable to the income of the current year which has not yet ended on search. Unless the investigations are carried out which end only on assessment, it can never be said with certainty that the assets seized were acquired from the current year's income. With regard to the letters relied on by the assessee, it was submitted that letters were not in regard to application of seized cash towards the advance tax liability and two of the letters were for release of jewellery, hence, these could not be taken to be letters towards adjustment of cash towards advance tax. It was submitted that all three letters were found addressed to the ADIT (Inv) and not the AO and the ADIT has no power at all to appropriate the seized cash in any manner as this power involves discharge of quasi judicial function was to be performed by the AO, a quasi judicial authority. It was submitted that search took place on 29-04·-2008 relevant to AY 9-10 whereas the assessment under consideration is AY 8- 9, therefore, there cannot be any question of adjustment of cash seized against the advance tax for AY 8-9 at all because advance tax is payable only during the currency of the assessment year and not for the closed assessment years. It was submitted that the question of adjustment of cash towards the advance tax liability would have been possible only for AY 2009-10 and not for earlier years.
Assessee submitted that these impugned letters were placed before the AO by the assessee during assessment proceedings, hence, there was no requirement to follow Rule 46A of the Rules. It was also contended that as per certification given on the paper book filed by the assessee, these letters were placed before the AO, hence, additional grounds of the Revenue were irrelevant and could not be admitted.
Assessee submitted that amount which was seized on 29.4.2008 was actually adjusted but instead of having given credit of the same from the date of search and seizure i.e. 29.4.2008 the same was given credit only on 23.2.2011 by the AO himself without any basis. It was submitted that amount of cash seized was to be adjusted against existing liability, if any, and since there was no existing liability of A.Y. 2008-09 and therefore the remaining sum ought to have been adjusted against the admitted liability of tax on declared income. It was submitted that it was not permissible for the Revenue that on one hand the Revenue is holding the amount of cash seized without giving any credit and paying any interest thereon despite the fact that the assessee had prayed that the said sum be adjusted towards the tax liability and further on the other hand, the Revenue charged the interest from the assessee. It was submitted that provision section 234B(2) specifically provides that whereby on the date of determination of total income or completion of regular assessment, if tax was paid by the assessee u/s 140A of the Act or otherwise, the total interest u/s 234B of the Act shall be calculated after reduction of interest on tax already paid, and no interest u/s 234B (2) could be levied without giving adjustment of the amount seized on 29.4.2008 which was to be prayed by the assessee to be adjusted by the assessee towards the tax on that date i.e. 29.04.2008 and not on 23.2.2011.
Having heard the parties, the tribunal held that,
A) ++ The letters dated 30.06.2008 and 18.08.2008 were submitted before the AO and the AO gave detail deliberations and findings thereon. However, during first appellate proceedings the CIT(A) considered these letters and relief was granted for the assessee relying on the same letters but this contention of the Revenue is not acceptable that the CIT(A) admitted additional evidence without confronting the same to the AO in contravention of Rule 46A of the Rules. Hence, additional grounds based on this legal contentions are not admissible and we dismiss the same;
B) ++ Clarificatory Explanation No. 2 inserted to section 132B of the Act would be of retrospective effect from the date of insertion of provision of section 132B of the Act i.e. from 01.06.2002;
++ we take respectful guidance from the decision of Apex Court in the case of CIT vs. Shelly Products and Ors. and CIT vs. Kanji Shivji and Co. wherein it was held that the clarificatory and declaratory provisions which were inserted to clarify the law so as to remove doubts are of retrospective effect even if, the same provisions are stated to be applicable from a particular assessment year or date;
++ the Explanation 2 attached to section 132B of the Act, is a clarificatory provision which is of retrospective effect, even if, the same was stated to be applicable from a particular date. We also hold that Explanation 2 to section 132B of the Ac t is retrospectively effective from the date of insertion of provision of section 132B of the Act w.e.f. 1.6.2002;
++ the assets or cash seized u/s 132 of the Act is adjustable against the amount of any "existing liability" under the Act which does not include "advance tax" payable in accordance with the provisions of Part 'C' of Chapter XVII of the Act. At the same time, we take cognisance of the provisions of section 208 which stipulates the conditions of liability to pay "advance tax";
++ in view of the above provision of section 208 of the Act, the amount of cash seized could not be adjusted as advance tax for the A.Y. 2008-09. From the copy of return of income submitted by the assessee for A.Y. 2008-09, we observe the assessee has shown advance tax paid as Rs.1.50 crore besides self assessment tax paid of Rs.3,37,50,000/- and cash seized amount of Rs.4,44,81,500/-. Therefore the assessee himself has not treated the amount of cash seized as an advance tax;
++ in the statement recorded u/s 132(4) of the Act on 29.04.2008 Shri J.S. Chawla, Director of the assessee company has not clearly mentioned that the seized cash may be adjusted against the tax liability of the assessee;
++ there is no specific request for adjustment of cash seized and however in these letters the assessee has mentioned this fact that the assessee has infact discharged his tax liability due by more than 60% and 75% respectively on the date of filing of these letters compassing the adjustment of cash seized as well as the payment of installment of tax;
++ the assessment was framed u/s 153A/143(3) of the Act on 24.12.2010 on total income of Rs.27,91,00,920/- therefore, the application of assets u/s 132B of the Act r/w Explanation 2 would be possible only on conclusion of assessment proceedings i.e. 24.12.2010. Therefore, on the basis of foregoing discussions we reach to fortified and logical conclusion that the AO has wrongly granted adjustment of seized cash from 23.2.2011 and the CIT(A) also grossly erred in holding that the assessee was entitled to adjustment of seized cash from 01.07.2008. Hence, ground no. 1 of the assessee is adjudicated with the direction to the AO that the adjustment of cash seized be given for the assessee from the date of completion of assessment proceedings u/s 153A /143(3) of the Act i.e. from 24.12.2010 as per provisions of Explanation 2 to section 132B of the Act.
A) ++ The letters dated 30.06.2008 and 18.08.2008 were submitted before the AO and the AO gave detail deliberations and findings thereon. However, during first appellate proceedings the CIT(A) considered these letters and relief was granted for the assessee relying on the same letters but this contention of the Revenue is not acceptable that the CIT(A) admitted additional evidence without confronting the same to the AO in contravention of Rule 46A of the Rules. Hence, additional grounds based on this legal contentions are not admissible and we dismiss the same;
B) ++ Clarificatory Explanation No. 2 inserted to section 132B of the Act would be of retrospective effect from the date of insertion of provision of section 132B of the Act i.e. from 01.06.2002;
++ we take respectful guidance from the decision of Apex Court in the case of CIT vs. Shelly Products and Ors. and CIT vs. Kanji Shivji and Co. wherein it was held that the clarificatory and declaratory provisions which were inserted to clarify the law so as to remove doubts are of retrospective effect even if, the same provisions are stated to be applicable from a particular assessment year or date;
++ the Explanation 2 attached to section 132B of the Act, is a clarificatory provision which is of retrospective effect, even if, the same was stated to be applicable from a particular date. We also hold that Explanation 2 to section 132B of the Ac t is retrospectively effective from the date of insertion of provision of section 132B of the Act w.e.f. 1.6.2002;
++ the assets or cash seized u/s 132 of the Act is adjustable against the amount of any "existing liability" under the Act which does not include "advance tax" payable in accordance with the provisions of Part 'C' of Chapter XVII of the Act. At the same time, we take cognisance of the provisions of section 208 which stipulates the conditions of liability to pay "advance tax";
++ in view of the above provision of section 208 of the Act, the amount of cash seized could not be adjusted as advance tax for the A.Y. 2008-09. From the copy of return of income submitted by the assessee for A.Y. 2008-09, we observe the assessee has shown advance tax paid as Rs.1.50 crore besides self assessment tax paid of Rs.3,37,50,000/- and cash seized amount of Rs.4,44,81,500/-. Therefore the assessee himself has not treated the amount of cash seized as an advance tax;
++ in the statement recorded u/s 132(4) of the Act on 29.04.2008 Shri J.S. Chawla, Director of the assessee company has not clearly mentioned that the seized cash may be adjusted against the tax liability of the assessee;
++ there is no specific request for adjustment of cash seized and however in these letters the assessee has mentioned this fact that the assessee has infact discharged his tax liability due by more than 60% and 75% respectively on the date of filing of these letters compassing the adjustment of cash seized as well as the payment of installment of tax;
++ the assessment was framed u/s 153A/143(3) of the Act on 24.12.2010 on total income of Rs.27,91,00,920/- therefore, the application of assets u/s 132B of the Act r/w Explanation 2 would be possible only on conclusion of assessment proceedings i.e. 24.12.2010. Therefore, on the basis of foregoing discussions we reach to fortified and logical conclusion that the AO has wrongly granted adjustment of seized cash from 23.2.2011 and the CIT(A) also grossly erred in holding that the assessee was entitled to adjustment of seized cash from 01.07.2008. Hence, ground no. 1 of the assessee is adjudicated with the direction to the AO that the adjustment of cash seized be given for the assessee from the date of completion of assessment proceedings u/s 153A /143(3) of the Act i.e. from 24.12.2010 as per provisions of Explanation 2 to section 132B of the Act.
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