Jivaram Magaji Chaudhary, Pune V. Deputy Commissioner of Income-tax,

ITA 1039/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9382 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 21-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHANSHU SHEKHAR
• Assessee Lawyers: NIKHIL PATHAKP D KUDWA
• Keywords: Gift; Recovery proceedings; Income from undisclosed sources
• Section: 143(3); 133A; 153A; 234B; 32; 132; 154; 11

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE ! '# % !& ! ' BEFORE SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM ' / ITA NO.1039/PUN/2015 ( )( / ASSESSMENT YEAR : 2011-12 SHRI JIVARAM MAGAJI CHAUDHARY, A-7, SUNANDA APARTMENT, ALANDI ROAD, VISHRANTWADI, PUNE 411 015. PAN: AALPC3973B . / APPELLANT V/S THE DY . COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE (1), PUNE. . / RESPONDENT /APPELLANT BY : S/SHRI NIKHIL PATHAK/P.D.KUDWA /RESPONDENT BY : SHRI SUDHANSHU SHEKHAR * / ORDER PER ANIL CHATURVEDI, AM : THE APPEAL OF THE ASSESSEE IS EMANATING OUT OF THE ORD ER COMMISSIONER OF INCOME TAX (APPEALS)-XI, PUNE DATED 27/02/ 2015 FOR THE AY 2011-12. / DATE OF HEARING : 23.05.2017 / DATE OF PRONOUNCEMENT: 31.05.2017 2 ITA NO.1039/PUN/2015 AY.NO.2011-12 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER : 2.1 ASSESSEE IS AN INDIVIDUAL. A SEARCH ACTION U/S 132 OF T HE ACT WAS CONDUCTED ON 06/08/2010 AT RESIDENCES OF SHRI JIVARAM M AGAJI CHAUDHARY (THE ASSESSEE) AND HIS BROTHER SHRI VORARAM C HAUDHARY) AND SIMULTANEOUSLY A SURVEY ACTION U/S 133A OF THE ACT WAS ALSO CARRIED OUT AT THE OFFICE PREMISES OF AAIJEE DEVELOPERS. DURING THE CO URSE OF SEARCH, CASH OF ` 2,57,10,000/- WAS FOUND FROM THE RESIDENCE OF THE ASSESSEE AND OUT OF THIS CASH, ` 2,55,00,000/- WAS FOUND UNEXPLAINED AND ACCORDINGLY SEIZED. DURING THE COURSE OF SEARCH, ASSESSEE ADMITTED UNDISCLOSED INCOME OF ` 6,25,58,000/-. THEREAFTER IN RESPONSE TO NOTICE U/S 153A OF THE ACT, ASSESSEE FILED THE RETURN OF INCOME WHEREIN THE AMOUNT OF ` 6,25,58,000/- DISCLOSED DURING SEARCH WAS OFFERED AS INCOME FROM UNDISCLOSED SOURCES AND THE TOTAL INCOME RETURNED WAS R S.6,55,44,411/- . THEREAFTER, THE ASSESSMENT WAS FRAMED U/S 143(3) VIDE O RDER DATED 18/12/2012 AND THE TOTAL INCOME WAS DETERMINED AT ` 6,55,44,411/- BEING THE SAME AS RETURNED INCOME. ON THE AFORESAID TOT AL INCOME, THE ASSESSING OFFICER RAISED THE TAX DEMAND OF ` 30,28,404/- WHICH INCLUDED INTEREST U/S 234B AND 234C OF THE ACT. ASSESSEE, THERE AFTER, FILED AN APPLICATION U/S 154 OF THE ACT BEFORE THE ASSESSING OFFICER WHEREIN PRAYER WAS MADE FOR GRANTING OF CREDIT OF SEIZED CASH AG AINST THE ADVANCE TAX LIABILITY FOR THE YEAR AND ACCORDINGLY SOUGHT REWORKING OF INTEREST U/S 234B & 234C OF THE ACT. THE APPLICATION MADE U/S 154 W AS REJECTED BY THE ASSESSING OFFICER VIDE ORDER DATED 14/11/2013 INTERALIA FOR THE REASON THAT ACCORDING TO ASSESSING OFFICER, THE SEIZED C ASH COULD BE 3 ITA NO.1039/PUN/2015 AY.NO.2011-12 ADJUSTED U/S 132B ONLY ON COMPLETION OF ASSESSMENT AND THAT IT CANNOT BE ADJUSTED AGAINST THE ADVANCE TAX LIABILITY FOR THE YEA R AND FOR THIS CONCLUSION HE RELIED ON THE CBDT CIRCULAR DATED 13/07/2006 . ACCORDING TO ASSESSING OFFICER AFORESAID CBDT CLARIFIED THAT THE PROVIS IONS OF LAW DO NOT PERMIT APPLICATION OF SEIZED CASH AGAINST THE ADVANCE TAX LIABILITY OF THE ASSESSEE FOR THE YEAR IN WHICH THE SEARCH TOOK PLAC E. ASSESSING OFFICER, THEREFORE, HELD THAT THERE WAS NO MISTAKE APPARENT FROM RECORD WHICH REQUIRES RECTIFICATION U/S 154 OF THE ACT AND ACCORD INGLY REJECTED THE REQUEST MADE BY ASSESSEE. 3. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CA RRIED THE MATTER TO COMMISSIONER OF INCOME TAX(APPEALS) VIDE ORDER DATED 27/02/2015 IN APPEAL NO.[PN/CIT(A)-11/DCIT CEN. CIR.1(1)/PN/108/2014-15] DISMISSED THE APPEAL OF THE ASSESS EE BY HOLDING AS UNDER: 4.3 THE CONTENTIONS PUT FORTH BY THE APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE, THE PROVIS IONS OF SEC. 132B OF THE I T ACT AS AMENDED FROM TIME TO TIME. AS THE GROUNDS O F APPEAL NO.1 2 AND 3 IN SUM AND SUBSTANCE CHALLENGE DENIAL OF ADJUSTMENT OF SEIZED CASH TOWARDS ADVANCE TAX FOR THE YEAR AS SOUGHT BY THE A PPELLANT AND ALSO RESULTANT LEVY OF ADDITIONAL INTEREST U/S 234B & 23 4C BY THE ASSESSING OFFICER, THESE GROUNDS ARE CONSOLIDATED AND ADJUDIC ATED HEREINAFTER. THE CORE ISSUE GIVING RISE TO THE PRESENT APPEAL IS THE DENIAL OF CREDIT BY THE AO FOR ADVANCE TAX PAYMENT OF RS.1,69,26,860/- ON 28/09 /2010 BY WAY OF ADJUSTMENT OUT OF CASH OF RS.2,55,00,000/- SEIZED I N SEARCH ACTION U/S 132 OF I T ACT, 1961 FROM THE APPELLANTS RESIDENTI AL PREMISES ON 06/09/2010. THE GRIEVANCE OF THE APPELLANT IN THIS REGARD IS THAT SEIZED CASH TO THE EXTENT OF RS.1,69,26,860/- WAS SHOWN AS PAID ON 27.03.2012 IN THE ASSESSMENT U/S 143(3) INSTEAD OF 28.09.2010 AS PER APPELLANTS REQUEST MADE IN THE LETTER FILED BEFORE THE CIT FOR ADJUSTMENT OF SEIZED CASH TOWARDS ADVANCE TAX FOR THE YEAR, WHICH ACCORDING T O THE APPELLANT, RESULTED IN EXCESS LEVY OF INTEREST U/S 234B AND SE C. 234C. THE CONTENTIONS OF THE APPELLANT ARE NOT LEGALLY WELL F OUNDED. UNDER SEC.132B,SEIZED ASSETS INCLUDING CASH MAY BE ADJUST ED AGAINST ANY EXISTING LIABILITY UNDER THE INCOME TAX ACT, WEALTH TAX ACT, THE EXPENDITURE- 4 ITA NO.1039/PUN/2015 AY.NO.2011-12 TAX ACT, THE GIFT-TAX ACT AND THE INTEREST TAX ACT AND THE AMOUNT OF LIABILITY DETERMINED ON COMPLETION OF ASSESSMENTS PURSUANT TO SEARCH, INCLUDING PENALTY LEVIED OR INTEREST PAYABLE AND IN RESPECT O F WHICH SUCH PERSON IS IN DEFAULT OR DEEMED TO BE IN DEFAULT. THIS LEGAL POS ITION WAS CLARIFIED IN NO UNCERTAIN TERMS BY INSERTION OF EXPLANATION-2 IN SE C. 132B BY FINANCE ACT 2013. EXPLANATION-2 OF SEC. 132B READS AS UNDER: EXPLANATION 2.- FOR THE REMOVAL OF DOUBTS IT IS HER EBY DECLARED THAT THE EXISTING LIABILITY DOES NOT INCLUDE ADVANCE T AX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART C OF CHAPTER XVII (EMPHASIS GIVEN). 4.3.1 THE RELEVANT PORTION OF EXPLANATORY MEMORANDU M TO THE FINANCE BILL 2013 READS AS UNDER:- VARIOUS COURTS HAVE TAKEN A VIEW THAT THE TERM EX ISTING LIABILITY INCLUDES ADVANCE TAX LIABILITY OF THE ASSESSEE, WHICH IS NOT IN CONSONANCE WITH THE INTENTION OF THE LEGISLATURE. THE LEGISLATIVE INTE NT BEHIND THIS PROVISION IS TO ENSURE THE RECOVERY OF OUTSTANDING TAX/INTEREST/PEN ALTY AND ALSO TO PROVIDE FOR RECOVERY OF TAXES/INTEREST/PENALTY, WHI CH MAY ARISE SUBSEQUENT TO THE ASSESSMENT PURSUANT TO SEARCH. ACCORDINGLY, IT IS PROPOSED TO AMEND THE AFORESAID SECTION SO AS TO CLARIFY THAT THE EXISTING LIABILITY DOES NOT INCLUDE ADVANC E TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART C OF CHAPTER XVII OF THE ACT. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST JUNE,2013. 4.3.2 THE EXPRESSION USED IN THE EXPLANATION FOR T HE REMOVAL OF DOUBTS IT IS HEREBY DECLARED CLEARLY SHOWS THAT THE EXPLANAT ION IS DECLARATORY IN NATURE THOUGH IT WAS INSERTED BY THE FINANCE ACT, 2 013. IF A STATUE IS IN ITS NATURE A DECLARATORY ACT, THE ARGUMENT THAT IT IS N OT TO BE CONSTRUED SO AS TO TAKE AWAY PREVIOUSLY VESTED RIGHTS DOES NOT APPL Y. IN OTHER WORDS, IF THE STATUE IS DECLARATORY, ONE CANNOT ARGUE THAT TH E RETROSPECTIVE OPERATION IS INVALID JUST BECAUSE RIGHTS HAVE VESTED IN THE A SSESSEE PREVIOUSLY. SUCH A CONSTRUCTION IS LEGALLY AND CONSTITUTIONALLY VALI D THOUGH IT MAY BE INEQUITABLE IN ITS OPERATION VIS--VIS ANY INDIVIDU AL ASSESSEE. THE NATURE OF THE AMENDMENT TO SEC. 132B AND THE PURPOSE WHICH IT SEEKS TO ACHIEVE MAKE IT ABUNDANTLY CLEAR THAT IT IS A DECLARATORY A MENDMENT INSERTED TO CLEAR UP DOUBTS ABOUT THE MEANING OF EXPRESSION EX ISTING LIABILITY USED IN SEC. 132B AND IT WOULD BE APPLICABLE EVEN IN RESPEC T OF ASSESSMENT YEARS PRIOR TO INSERTION OF THE SAID AMENDMENT. IN THIS CONTEXT, REFERENCE CAN BE MADE TO THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. PODAR CEMENT (P.) LTD. 226 ITR 625, WHEREIN IT WAS HELD T HAT IF A STATUE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW, RETROSPECTIVE OPERATION IS GENERALLY INTENDED. THUS, IN MY CONSIDERED VIEW , INSERTION OF EXPLANATION-2 IN SEC. 132B BY THE FINANCE ACT, 2013 IS DECLARATORY IN NATURE AND, THEREFORE, HAS TO BE TREATED AS RETROSP ECTIVE. REVERTING TO THE FACTS OF THE PRESENT CASE, APPARENTLY THERE WAS NO EXISTING LIABILITY AS ON THE DATE OF PASSING THE ASSESSMENT ORDER FOR THE YE AR UNDER CONSIDERATION. IN SUCH CIRCUMSTANCES, THE CASH SEIZED UNDER SEC. 1 32 CAN BE ADJUSTED ONLY AGAINST THE DEMAND RAISED ON COMPLETION OF ASS ESSMENT UNDER SE. 143(3) AND NOT TOWARDS ADVANCE TAX FOR THE YEAR. 5 ITA NO.1039/PUN/2015 AY.NO.2011-12 4.3.3 ADVERTING TO THE DECISIONS RELIED UPON BY THE APPELLANT; THESE CASES INCLUDING THE DECISION OF BOMBAY HC IN THE CASE OF SHRI JYOTINDRA B. MODY IN ITA NO.3741/2010 DATED 21.09.2011 WERE DECIDED P RIOR TO THE INSERTION OF DECLARATORY EXPLANATION-2 IN SECTION 132B OF THE I.T. ACT AND IN MY HUMBLE OPINION, THE VIEW TAKEN IN THESE AUTHORITIES IS NO LONGER GOOD LAW AFTER THE INSERTION OF THE SAID EXPLANATION. THERE FORE, THE SAID DECISIONS DO NOT RENDER ANY SUPPORT TO THE CASE OF THE APPELLANT AFTER THE INSERTION OF EXPLANATION-2. IN THE CASE OF KANISHKA PRINTS PVT. LTD. VS. ACIT (34 TAXMAN.COM 307), THE EXPLANATION INSERTED BY THE FI NANCE ACT, 2013 IN SEC. 132B WAS CONSIDERED AND IT WAS HELD THAT EXPLA NATION IS NOT RETROSPECTIVE AFTER REFERRING TO PAGE 807 OF TAXMAN NS PUBLICATION INTERPRETATION OF STATUTES 2 ND EDITION BY SHRI D.P.MITTAL. HOWEVER, IN VIEW OF THE OBSERVATIONS OF SUPREME COURT IN THE CASE OF CIT VS. PODAR CEMENT (P) LTD. 226 ITR 625 ON DECLARATORY AMENDMENTS, THE EXPLANATION-2 IN SEC. 132B, BEING DECLARATORY IN NATURE, OPERATES RE TROSPECTIVELY AND THEREFORE THE SAID DECISION OF ITAT, AHMEDABAD IS A LSO OF NO AVAIL TO THE CASE OF THE APPELLANT. 4.3.4 THUS, AFTER THE INSERTION OF EXPLANATION-2 IN SEC. 132B, WHICH IS DECLARATORY OF LAW, THE SEIZED CASH CANNOT BE ADJUS TED AGAINST THE ADVANCE TAX PAYABLE FOR THE YEAR AND THERE IS NO FL AW OR MISTAKE APPARENT FROM THE RECORD IN THE ASSESSMENT ORDER IN THIS RES PECT WARRANTING RECTIFICATION U/S 154 AND THEREFORE THE AO IS JUSTI FIED IN REJECTING THE RECTIFICATION APPLICATION FILED BY THE APPELLANT. 4.3.5 WITHOUT PREJUDICE TO THE ABOVE AND EVEN PRESU MING FOR A WHILE THAT EXPLANATION-2 IS NOT RETROSPECTIVE IN NATURE AS CLA IMED BY THE APPELLANT, IT IS TO BE NOTED THAT PRIOR TO THE INSERTION OF SAID EXPLANATION-2, THE ISSUE INVOLVED IS HIGHLY DEBATABLE ONE AND COULD BE DECID ED ONLY AFTER LONG DRAWN PROCESS OF REASONING AND ANALYSIS OF THE EXPR ESSION EXISTING LIABILITY IN SEC. 132B AND SUCH CONTENTIOUS ISSUES CANNOT BE SUBJECT-MATTER OF RECTIFICATION UNDER SEC. 154 OF THE I T ACT. TH EREFORE, VIEWED FROM ANY ANGLE, THE RECTIFICATION APPLICATION IN QUESTION FI LED BY THE APPELLANT CANNOT BE ENTERTAINED AND THE SAME WAS RIGHTLY REJECTED BY THE AO. GROUND NO.1, 2 AND 3 THUS FAIL. 4. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TAX(AP PEALS), ASSESSEE IS NOW IN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS. 1. THE HON CIT(A) ERRED IN CONFIRMING THE TAX DEMAN D OF RS.30,28,404 RAISED BY THE AO BY HOLDING THAT THE AMOUN T SEIZED DURING THE COURSE OF SEARCH U/S 132 ON 06.09.2010 COU LD NOT BE ADJUSTED AS PER THE ASSESSEES WRITTEN REQUEST ON 28. 09.2010 FOR DISCHARGING ADVANCE TAX LIABILITY FOR AY2011-12 AND CA LCULATING INTEREST U/S 234B AND 234C AND COULD BE ADJUSTED. 2. THE HON CIT(A) FAILED TO APPRECIATE THAT THE ASSESS EE HAVING OFFERED TO TAX UNDISCLOSED INCOME INCLUDING THE AMOUN T SEIZED DURING THE SEARCH ON 06.09.2010, THE LIABILITY TO PAY AD VANCE TAX IN 6 ITA NO.1039/PUN/2015 AY.NO.2011-12 RESPECT THEREOF AROSE BEFORE COMPLETION OF ASSESSMEN T AND WAS AN EXISTING LIABILITY U/S 132B OF THE IT ACT WHEN THE AS SESSEE REQUESTED FOR APPROPRIATION OF TAX OUT OF SEIZED CASH IN WRITING ON 28.0 9.2010. 3. THE HON. CIT(A) ERRED IN HOLDING THAT INSERTION OF EXPLANATION 2 IN SECTION 132B BY THE FINANCE ACT 2013 IS DECLAR ATORY IN NATURE AND HAS TO BE TREATED AS RETROSPECTIVE WHEN THE AME NDMENT WAS EXPLICITLY TO TAKE EFFECT FROM 1 ST JUNE 2013. 4. THE HON. CIT(A) ERRED IN HOLDING THAT THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF JYOTHINDRA B. MODY IN ITA NO.3741/2010 DATED 21.09.2011 AND THE ITAT AHMEDABAD DECISION IN THE CASE OF KANISHKA PRINTS PVT. LTD. VS ACIT (34 TAXMAN.COM 307) WERE NO LONGER GOOD LAW AFTER THE INS ERTION OF EXPLANATION 2 IN SECTION 132B. THE CIT (A) FAILED TO APPRECIATE THAT THESE SQUARELY APPLIED IN THE FACTS OF THE APPELLANTS CAS E. 5. THE HON. CIT(A) ERRED IN HOLDING THAT THE ASSESSEES REQUEST TO COMPUTE CORRECT TAX DEMAND AND INTEREST U/S 234B AN D 234C WITH REFERENCE TO TAX ADJUSTMENTS ON 28.09.2010 TOWARDS A DVANCE TAX LIABILITY FOR AY 2011-12 WAS RIGHTLY REJECTED BY THE AO. 5. BEFORE US, AT THE OUTSET, LD.AUTHORISED REPRESENTATIVE SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS B UT THE SOLITARY ISSUE IS WITH RESPECT TO NON GRANTING OF CREDIT OF SEIZED C ASH TOWARDS ADVANCE TAX. 6. BEFORE US, LD.AUTHORISED REPRESENTATIVE REITERATED THE SUBMISSIONS MADE BEFORE ASSESSING OFFICER AND COMMISSIONER OF INCOME TA X(APPEALS). HE, FURTHER, SUBMITTED THAT IT IS AN UNDISPUTED FACT THAT T HE CASH OF ` 2,55,00,000/- WAS SEIZED AT THE TIME OF SEARCH CONDUCTED ON 06/09/2010. HE, FURTHER, SUBMITTED THAT ASSESSEE VIDE LE TTER DATED 22/09/2010 ADDRESSED TO ASSISTANT COMMISSIONER OF INCOM E TAX(INVESTIGATION) AND VIDE LETTER DATED 28/09/2010 ADDRE SSED TO COMMISSIONER OF INCOME TAX CENTRAL HAD REQUESTED THE M TO ADJUST THE 7 ITA NO.1039/PUN/2015 AY.NO.2011-12 SEIZED CASH AGAINST THE ADVANCE TAX PAYABLE FOR THE YEA R UNDER CONSIDERATION. HE PLACED ON RECORD THE COPY OF THE AFORE SAID LETTERS. HE SUBMITTED THAT THE ASSESSEES REQUEST WAS TURNED DOW N. HE SUBMITTED THAT THE RELIANCE PLACED BY LD.CIT (A) TO THE AMENDMENT MA DE TO SECTION 132B BY 132B BY FINANCE ACT 2013 IS MISPLACED AS IT IS E FFECTIVE FROM 1 ST JUNE 2013 & THEREFORE NOT APPLICABLE TO ASSESSMENT YEAR 2011-12, BEING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT THE H ONOURABLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. JOTINDRA B. MODI (ITA NO.3741 OF 2010) ORDER DATED 21/09 /2011 HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THA T THE CASH SEIZED CAN BE ADJUSTED AGAINST ADVANCE TAX LIABILITY. HE, FU RTHER, SUBMITTED THAT ON IDENTICAL FACTS AND AFTER CONSIDERING TH E AMENDMENT MADE BY FINANCE ACT 2013 THE AHMEDABAD BENCH OF THE T RIBUNAL IN THE CASE OF KANISHKA PRINTS PRIVATE LTD., VS. ASSISTANT COMMISS IONER OF INCOME TAX REPORTED IN 2014 159 TTJ 699 (AHD) HAS HELD THAT THE INSERTION OF EXPLANATION STATING THAT EXISTING LIABILITY DOES NOT INCLUDE ADVANCE TAX PAYABLE IN SECTION 132B MADE BY FINANCE ACT 2013 WOULD BE APPLICABLE FROM 01/06/2013. HE, FURTHER, SUBMITTED THAT TH E HONOURABLE PUNJAB AND HARYANA HIGH COURT IN THE FOLLOWING DECISIONS HAS HELD THAT THE EXPLANATION TO SECTION 132B INSERTED B Y FINANCE ACT 2013 WAS NOT RETROSPECTIVE IN OPERATION. I) CIT VS. SHRI SANDEEP JAIN, C/O. LUDHIANA STEEL ROLING MILLS, (ITA NO.261/2014 (O&M) ORDER DATED 29/09/2014). II) CIT VS. COSMOS BUILDERS AND PROMOTERS LIMITED (ITA 425/2014 (O & M) ORDER DATED 14/07/2015) 8 ITA NO.1039/PUN/2015 AY.NO.2011-12 III) SPAZE TOWRES PRIVATE LIMITED VS. DCIT (ITA NO.40/20 15 (O&M) ORDER DATED 17/11/2016.) 7. HE ALSO PLACED RELIANCE ON THE DECISIONS OF PUNE TRIBUNAL IN THE CASE OF DEPUTY COMMISSIONER OF INCOME TAX VS. NITIN VALJ IBHAI TAKKAR IN ITA NO.193/PN/2014 ORDER DATED 25/05/2016 AND PUSH PENDRA SUBASH CHANDRA VS. ASSISTANT COMMISSIONER OF INCOME TAX IN ITA NO.1077/PN/2012 ORDER DATED 26/08/2013. HE, THEREFORE, SUBMITTED THAT THE CREDIT OF THE SEIZED CASH BE GIVEN TO THE ASSE SSEE. HE FURTHER, SUBMITTED THAT ASSESSEE WOULD HAVE NO OBJECTION IF THE C REDIT FOR SEIZED CASH IS GIVEN FROM 28/09/2010, (BEING THE DATE OF LETTER OF REQUEST FOR ADJUSTING OF CASH) SUBMITTED TO CIT (A). ON THE ISSUE OF THE FINDING OF CIT(A) WITH REFERENCE TO THE ISSUE CANNOT BE A SUBJECT M ATTER OF RECTIFICATION U/S 154 AS THE ISSUE BEING A DEBATABLE ONE, H E SUBMITTED, THAT AS ON THE DATE OF PASSING OF ORDER BY AO & CIT(A), T HE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF JYOTINDRA MODY (SUPRA), BEING OF JURISDICTIONAL HIGH COURT, WAS BINDING ON THOSE TWO AUTHORITIES AND THAT NOT FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT WA S AN APPARENT ERROR AND FOR THIS PROPOSITION HE RELIED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF STANDARD RADIA TORS VS. CIT (1987) 165 ITR 178 (GUJ). LD.DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDER OF ASSESSING OFFICER AND COMMISS IONER OF INCOME TAX(APPEALS) AND FURTHER SUBMITTED THAT THERE WAS NO MISTAKE IN THE ORDER OF ASSESSING OFFICER WHICH REQUIRES RECTIFICATION U /S 154 OF THE ACT. HE, FURTHER, SUBMITTED THAT THE EXPLANATION 2 ADDED TO SECTION 132B WAS FOR THE PURPOSE OF REMOVAL OF DOUBT AND THEREFO RE IT IS 9 ITA NO.1039/PUN/2015 AY.NO.2011-12 RETROSPECTIVE IN OPERATION AND THEREFORE, THE AMENDMENT MADE IS DECLARATORY IN NATURE AND FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF COMMISSIONER OF INCOME TAX VS. PODER CEMENTS (1997) 226 ITR 625(SC). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE AD JUSTMENT OF CASH SEIZED AT THE TIME OF SEARCH AGAINST THE ADVANCE TAX LIAB ILITY. IT IS AN UNDISPUTED FACT THAT CASH OF RS.2.55 CRORE WAS SEIZED ON 06/08/2010. IT IS ALSO AN UNDISPUTED FACT THAT ASSESSEE VIDE LETTER DTD 28/09/2010, ADDRESSED TO CIT(C) HAD REQUESTED FOR ADJUSTING OF SEIZED CASH AGAINST THE ADVANCE TAX LIABILITY FOR AY 2011-12. IT IS REVENUES CASE THAT THE SEIZED CASH CANNOT BE ADJUSTED AGAINST ADVANCE TAX LIAB ILITY IN VIEW OF THE AMENDMENT MADE TO SECTION 132B BY INSERTION OF EXPLANATIO N 2 BY FINANCE ACT 2013, WHEREIN IT IS STATED THAT EXISTING LIABILIT Y DOES NOT INCLUDE ADVANCE TAX PAYABLE. ON THE ISSUE AS TO WHETHER THE INSERTION OF EXPLANATION 2 TO S.132B BY FINANCE ACT 2013, IS PROSPECTIV E OR RETROSPECTIVE, WE FIND THAT THE CO-ORDINATE BENCH OF AHME DABAD TRIBUNAL IN THE CASE OF KANISHKA PRINTS(SUPRA) HAS OBSERVED THE AM ENDMENT MADE OF S.132B BY INSERTION OF EXPLANATION 2 IS PROSPECTIVE AND IS APPLICABLE FROM 1 ST JUNE 2013. THE RELEVANT OBSERVATION OF THE TRIBUNAL IS A S UNDER:- 11. WE HAVE HEARD THAT THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT DURING TH E COURSE OF SEARCH AT THE RESIDENCE OF DIRECTORS ON 8.2.2007 AND LOCKER ON 7. 3.2007 AGGREGATE CASH OF RS.43 LACS WAS SEIZED. IT IS ALSO AN UNDISPUTED FACT THAT ASSESSEE VIDE HIS LETTER DATED 13.3.2007 SUBMITTED THAT OUT OF TH E CASH SEIZED, RS 10 LACS BE TREATED TOWARDS PAYMENT OF ADVANCE TAX IN THE CA SE OF ASSESSEE AND 10 ITA NO.1039/PUN/2015 AY.NO.2011-12 SIMILARLY BALANCE OF RS. 33 LACS BE TREATED TOWARDS PAYMENT OF ADVANCE TAX IN CASE OF FAMILY MEMBERS/GROUP COMPANIES. IT IS ALSO A FACT THAT VIDE AFORESAID LETTER, THE ASSESSEE HAD REQUESTED THAT C ASH OF RS 8 LACS BE CONSIDERED AS ADVANCE TAX IN THE CASE OF SHREEJI PR INTS P. LTD. THE CO- ORDINATE BENCH OF TRIBUNAL IN THE CASE OF SHREEJI P RINTS (ITA NO 359/AHD/2012 ORDER DATED 20.4.2012) DECIDED IN FA VOUR OF ASSESSEE BY HOLDING AS UNDER: IT IS EVIDENT FROM A BARE READING OF THE AFORESAID PROVISIONS THAT THE EXISTING LIABILITY UNDER THE INCOME-TAX CAN BE DISC HARGED FROM THE ASSETS OR MONEY SEIZED. IN THE PRESENT CASE, THE SEARCH OPER ATION WAS CONDUCTED ON 22-9-2005 AND THE ASSESSEE FILED RETURN ON 31-5-200 6 DECLARING THE SEIZED MONEY AS INCOME. IN OUR OPINION, IF THE ASSESSEE H AS DECLARED INCOME, DURING THE YEAR UNDER CONSIDERATION IN THAT EVENTUA LITY HE IS LIABLE TO PAY ADVANCE TAX AS PER LAW THEREFORE THE A.O. IS REQUIR ED TO FIND OUT WHETHER SUCH LIABILITY WAS EXISTING ON THE DATE OF SEIZURE. IF SUCH LIABILITY IS EXISTING THEN HE IS EMPOWERED TO APPLY/ADJUST THE M ONEY SEIZED IN DISCHARGE OF THE EXISTING LIABILITY EVEN WITHOUT AN Y WRITTEN REPRESENTATION FROM THE ASSESSEE. NOW COMING TO THE FACT OF THE P RESENT CASE, IT IS NOT DISPUTED THAT THE MONEY SEIZED FROM THE PREMISES OF SHRI LALIT PATEL AND SAME WAS SUBSEQUENTLY DECLARED IN THE RETURN OF INC OME FILED ON 31-5- 2006. HENCE, IT CAN VERY WELL BE INFERRED FROM THE RETURN SO FILED THAT THE RESPONDENT/ASSESSEE WAS REQUIRED TO PAY ADVANCE TAX ON SUCH INCOME AS MANDATED U/S.208 OF THE I.T.ACT. THEREFORE, IN VIE W OF THE FACT THAT THERE IS NO AMBIGUITY IN THE PROVISION SO FAR APPLICATION/AD JUSTMENT OF THE SEIZED MONEY IS CONCERNED. FURTHER, THE JUDGMENTS AS RELI ED UPON BY THE LD. D.R. WOULD NOT APPLY ON THE FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE SINCE THIS IS NOT A CASE WHERE APPLICATION U/S.132(5) IS MADE. MOREOVER, SECTION 132(5) IS NO MORE ON STATUE BOOK, EVEN OTHERWISE TH ERE IS DIVERGENCE IN OPINION BETWEEN THE HON'BLE HIGH COURT OF MADHYA PR ADESH AND HON'BLE DELHI HIGH COURT AS FAIRLY POINTED BY THE LD.D.R. THE ORDER OF THE ITAT DELHI BENCH IN ITA NO.1151/DEL/2008 AS RELIED BY TH E LD. D.R. IS ON DIFFERENT SET OF FACTS THEREFORE, IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. THE ISSUE WHETHER THE SEIZED MONEY SHOULD BE APPLIED TOWARDS ADVANCE TAX LIABILITY OF ASSESSEE AND CREDIT SHOULD BE GIVEN CREDIT THERE- FROM THE DATE OF SEIZURE OF MONEY HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT RAJKOT BENCH IN IT A NO. 172/RJT/2010 IN THE CASE OF SHRI RAM S. SARADA V. DCIT AND THE D ECISION OF ITAT MUMBAI BENCH IN THE CASE OF SUDHAKAR M. SHETTY V. A CIT IN ITA NO.4238 & 4239/MUM/2007. RESPECTFULLY FOLLOWING THE RATIO LA ID THEREIN WE DO NOT FIND ANY INFIRMITY INTO THE IMPUGNED ORDER. 12. BEFORE US, LD. D.R. HAS RELIED ON THE AMENDMENT MADE TO S. 132A VIDE FINANCE BILL OF 2013, WE FIND THAT THE AMENDME NT HAS BEEN MADE BY INSERTION OF EXPLANATION AND THE EXPLANATION HAS BE EN MADE APPLICABLE WITH EFFECT FROM 1 ST JUNE, 2013,. FOR READY REFERENCE, THE AMENDMENT MADE BY FINANCE BILL 2013 AND THE MEMORANDUM IS REP RODUCED HEREUNDER:- 13. THE AMENDMENT MADE BY FINANCE BILL 2013 READS A SUNDER:- AMENDMENT OF SECTION 132B. 34. IN SECTION 132B OF THE INCOME-TAX ACT, THE EXPL ANATION SHALL BE NUMBERED AS EXPLANATION 1 THEREOF AND AFTER EXPLANA TION 1 AS SO 11 ITA NO.1039/PUN/2015 AY.NO.2011-12 NUMBERED THE FOLLOWING EXPLANATION SHALL BE INSERTE D WITH EFFECT FROM THE 1 ST DAY OF JUNE, 2013, (EMPHASIS SUPPLIED) NAMELY:- EXPLANATION 2.- FOR THE REMOVAL OF DOUBTS IT IS HER EBY DECLARED THAT THE EXISTING LIABILITY DOES NOT INCLUDE ADVANCE TAX P AYABLE IN ACCORDANCE WITH THE PROVISIONS OF PAR C OF CHAPTER XVII. THE EXPLANATORY MEMORANDUM TO THE FINANCE BILL READ S AS UNDER:- THE EXISTING PROVISIONS CONTAINED IN SECTION 132B O F THE INCOME-TAX ACT, INTER ALIA, PROVIDE THAT SEIZED ASSETS MAY BE ADJUS TED AGAINST ANY EXISTING LIABILITY UNDER THE INCOME TAX ACT. WEALTH TAX ACT , THE EXPENDITURE-TAX ACT, THE GIFT-TAX ACT AND THE INTEREST TAX ACT AND THE A MOUNT OF LIABILITY DETERMINED ON COMPLETION OF ASSESSMENTS PURSUANT TO SEARCH, INCLUDING PENALTY LEVIED OR INTEREST PAYABLE AND IN RESPECT O F WHICH SUCH PERSON IS IN DEFAULT OR DEEMED TO BE IN DEFAULT. VARIOUS COURTS HAVE TAKEN A VIEW THAT THE TERM EXI STING LIABILITY INCLUDES ADVANCE TAX LIABILITY OF THE ASSESSEE, WHICH IS NOT IN CONSONANCE WITH THE INTENTION OF THE LEGISLATURE. THE LEGISLATIVE INTE NT BEHIND THIS PROVISION IS TO ENSURE THE RECOVERY OF OUTSTANDING TAX/INTEREST/PEN ALTY AND ALSO TO PROVIDE FOR RECOVERY OF TAXES/ INTEREST /PENALTY, W HICH MAY ARISE SUBSEQUENT TO THE ASSESSMENT PURSUANT TO SEARCH. ACCORDINGLY, IT IS PROPOSED TO AMEND THE AFORESAID SECTION SO AS TO CLARIFY THAT THE EXISTING LIABILITY DOES NOT INCLUDE ADVANC E TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART C OF CHAPTER XVII OF THE ACT. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST JUNE, 2013 . (EMPHASIS SUPPLIED) 14. IN TAXMANNS PUBLICATION INTERPRETATION OF STA TUTES 2 ND EDITION BY SHRI D.P. MITTAL AT PAGE 807 IT HAS BEEN STATED AS UNDER:- THE EFFECT TO BE GIVEN TO AN EXPLANATORY AMENDMENT DEPENDS UPON SEVE RAL FACTORS, INCLUDING ITS LANGUAGE. WHEN THE LEGISLATURE HAS M ADE THE EXPLANATION OPERATIVE PROSPECTIVELY BY WORDS EXPRESSED THEREIN, ITS OPERATION SHALL HAVE TO BE CONFINED TO THE FUTURE DATE. THE SAME R EASONING GOVERNS THE CASE WHEN PARLIAMENT LIMITS THE RETROSPECTIVITY OF T HE EXPLANATION WITH EFFECT FROM A PARTICULAR DATE. IN SUCH A SITUATION , GIVING FUTURE RESPECTIVITY TO THE EXPLANATION WOULD BE HIJACKING THE INTENTION OF THE LEGISLATURE INTO AN IMPERMISSIBLE AREA-CIT VS. RAJASTHAN MERCANTILE CO. LTD. (1995) 211ITR 400 (DELHI). THUS, THERE IS NO DOUBT THAT ORDINARI LY, A STATUE, AND PARTICULARLY WHEN THE SAME HAS BEEN MADE APPLICABLE WITH EFFECT FROM A PARTICULAR DATE, SHOULD BE CONSTRUED PROSPECTIVELY AND NOT RETROSPECTIVELY. 15. THUS CONSIDERING THE TOTALITY OF THE AFORESAID, INTERPRETATION OF APPLICABILITY OF EXPLANATION, AND AMENDMENT MADE BY FINANCE BILL 2013, FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF TH E CO-ORDINATE BENCH, WE ARE OF THE VIEW THAT THE AMENDED EXPLANATION CANNOT BE APPLIED IN PRESENT CASE. WE THEREFORE ALLOW THE APPEAL OF THE ASSESSE E AND DIRECT THE AO TO GIVE CREDIT OF RS 10 LACS AS ADVANCE TAX. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. 12 ITA NO.1039/PUN/2015 AY.NO.2011-12 9. WE FURTHER FIND THAT, HON'BLE PUNJAB & HARYANA HIGH COU RT IN THE CASE OF SPAZE TOWERS (SUPRA) HAS ALSO HELD THAT THE AMEN DMENT MADE BY INSERTION OF EXPLANATION 2 TO SECTION 132B IS PROSPECTIVE. THE RELEVANT SUBSTANTIAL QUESTION BEFORE HON'BLE HIGH COURT & ITS OBSER VATIONS ARE REPRODUCED HEREWITH FOR READY REFERENCE: II. WHETHER UNDER THE FACTS & CIRCUMSTANCES OF THE CASE, THE TRIBUNAL ORDER IS UNSUSTAINABLE, AS EXPLANATION 2 TO SECTION 132B OF THE INCOME TAX ACT, 1961 INSERTED B Y THE FINANCE ACT, 2013 W.E.F. 01.06.20103 IS PROSPECTIV E IN NATURE? III. WHETHER UNDER THE FACTS & CIRCUMSTANCES OF TH E CASE, EXPLANATION 2 TO SECTION 132B OF THE INCOME TAX ACT , 1961, THOUGH INSERTED BY THE FINANCE ACT, 2013 IS PROSPE CTIVE IN NATURE, PURSUANT TO THE JUDGMENT OF THIS HON'BLE CO URT IN THE CASE OF CIT VS SH. SANDEEP JAIN & OTHERS IN ITA 261 OF 2014, CIT (CENTRAL) LUDHIANA VS. COSMOS BUILDERS & PROMOT ERS LTD., IN ITA NO.425 OF 2014? 3. THE APPEAL IS PRESSED ONLY IN RESPECT OF THESE Q UESTIONS OF LAW AND NOT IN RESPECT OF THE QUESTIONS OF LAW RAISED IN TH E ORIGINAL APPEAL. 4. THE APPEAL IS ADMITTED ON THE ABOVE QUESTIONS OF LAW. THE JUDGEMENT OF A DIVISON BENCH OF THIS COURT DATED 29 .09.2014 IN ITA-261- 2014 TITLED AS COMMISSIONER OF INCOME TAX (CENTRAL), LUDHIANA VS SH. SANDEEP JAIN AND OTHERS COVERS THE CASE IN FAVOUR O F THE ASSESSEE. IT WAS HELD THAT EXPLANATION 2 TO SECTION 132B OF THE INCO ME TAX ACT, 1961 IS PROSPECTIVE IN NATURE W.E.F. 01.06.2013. THE PRESE NT APPEAL IS IN RESPECT OF THE ASSESSMENT YEAR 2008-2009. IN VIEW OF THE S AID JUDGMENT, EXPLANATION 2 WOULD NOT BE APPLICABLE TO THE ASSESS EES CASE. THIS JUDGMENT WAS FOLLOWED BY ANOTHER JUDGMENT OF A DIVI SON BENCH OF THIS COURT DATED 14.07.2015 TO WHICH ONE OF US (S.J. VAZ IFDAR, CJ) WAS A PARTY TITLED AS COMMISSIONER OF INCOME TAX (CENTRAL), LUD HIANA VS M/S COSMOS BUILDERS AND PROMOTER LTD. BY AN ORDER DATED 06.05. 2016, THE PETITION FOR SPECIAL LEAVE TO APPEAL AGAINST THE JUDGMENT FILED BY THE DEPARTMENT WAS DISMISSED BY THE SUPREME COURT. 5. WE ARE BOUND BY THE ABOVE JUDGMENT. IN FACT, IN M/S COSMOS BUILDERS AND PROMOTERS LTD. CASE, THE JUDGMENT IN SH.SANDEEP JAIN AND OTHERS WAS FOLLOWED. WE FOLLOW THE SAME IN THIS AP PEAL ALSO. AS WE ARE BOUND BY THAT JUDGMENT, WE HAVE NOT CONSIDERED MR. SETHIS ARGUMENT ON BEHALF OF THE RESPONDENT THAT THE JUDGMENT DOES NOT LAY DOWN THE CORRECT 13 ITA NO.1039/PUN/2015 AY.NO.2011-12 LAW. HE ALSO RELIED UPON THE MEMORANDUM EXPLAINING THE FINANCE BILL TO CONTEND THAT EXPLANATION 2 TO SECTION 132B IS RETRO SPECTIVE. 6. IN THESE CIRCUMSTANCES, THE QUESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE APPELLANT/ASSESSEE. IT IS ADMITTED THAT THE ORDER OF THE TRIBUNAL IS LIABLE TO BE SET ASIDE AND IS ACCORDINGLY SET ASIDE . 10. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BINDIN G DECISION IN ITS SUPPORT NOR HAS PLACED ANY MATERIAL TO DEMONSTRATE THAT AGAINST THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF KANISHKA PRINT S(SUPRA), REVENUE HAS PREFERRED ANY APPEAL BEFORE HIGH COURT OR THE AFORESAID DECISION OF AHMEDABAD TRIBUNAL HAS BEEN REVERSED, SET ASID E OR OVERRULED IN ANY MANNER BY THE HIGHER COURT. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT, THAT CASH SEIZED AT THE T IME OF SEARCH BE ADJUSTED AGAINST THE ADVANCE TAX LIABILITY AND AS PER LD. AUTHORISED REPRESENTATIVE SUBMISSION THE CREDIT FOR IT BE GIVEN FROM T HE DATE OF ITS REQUEST MADE TO CIT(C) FOR ADJUSTMENT OF CASH. WE THUS DIRECT ACCORDINGLY. IN THE RESULT, THE GROUNDS OF ASSESSEE ARE ALLOWED. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 31 ST DAY OF MAY, 2017. SD/- SD/- (VIKAS AWASTHY) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER PUNE; ! DATED : 31 ST DAY OF MAY, 2017. G G A A N N G G A A D D H H A A R R 14 ITA NO.1039/PUN/2015 AY.NO.2011-12 *+,-%.%) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-11, PUNE CIT-(CENTRAL), PUNE. #$% &&'(, * '(, / DR, ITAT, B PUNE; %+, - / GUARD FILE. * / BY ORDER, // TRUE COPY // // TRUE COPY // // TRUE COPY // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.