Mahabir Prasad Gupta, V. DCIT CC-15,

ITA 1151/DEL/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52858 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Gift; Recovery proceedings
• Section: 153A; 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE G.E. VEERABHADRAPPA, HON'BLE VICE-PRESIDENT AND SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO. 1151/DEL/2008 ASSESSMENT YEAR: 2006-07 SHRI MAHABIR PRASAD GUPTA, VS. DEPUTY CIT, PROP. SUPARIWALA & CO. CENTRAL CIRCLE 15, 555-57, KATRA ISHWAR BHAWAN, NEW DELHI. KHARI BAOLI, DELHI-1100 06 (PAN: AAFPG9144P) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SALIL AGGARWAL, ADV. RESPONDENT BY: MS. Y. KAKKAR, D R ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(APPEALS) DATED 31.01.2008 PASSED FOR ASSESSMENT YEAR 2006-07. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SEC. 234B AND 234C OF THE INCOME-TAX ACT, 1961 WITHOUT ALLOWING CREDIT OF THE AMOUNT OF CASH SEIZED DURING THE COURSE OF SEARCH, WHICH WAS REQUESTED BY THE ASSESS EE TO BE ADJUSTED AGASINT THE TAX LIABILITY ARISING ON ACCOUNT OF SURRENDER M ADE FOR ASSESSMENT YEAR 2006-07, IN A STATEMENT RECORDED UNDER SEC. 132(4) OF THE ACT. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE A SEARC H AND SEIZURE OPERATION WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 22.3.2006. DURING THE COURSE OF SEARCH, A SUM OF RS.20.40 LACS WAS FOUND AND SEIZED. THE SEARCH WAS CONTINUED UP TO 23.3.2006. STATEMENT OF THE ASS ESSEE WAS RECORDED UNDER SEC. 132(4) OF THE ACT. HE HAS DECLARED AN AD DITIONAL INCOME OF RS.5.40 CRORES FOR ASSESSMENT YEAR 2006-07. THE BAN K LOCKER OF THE ASSESSEE WAS OPENED ON 9.5.2006 AND A FURTHER CASH OF RS. 40 LACS WAS SEIZED. IN THIS WAY, THE DEPARTMENT HAS SEIZED A SUM OF RS.60.40 LA CS. ON 12 TH APRIL, 2006, ASSESSEE WROTE A LETTER TO THE DEPARTMENT WHEREBY H E REQUESTED THAT THE AMOUNT OF RS.20,40,000 SEIZED BY THE DEPARTMENT BE TREATED TO HAVE BEEN PAID AS ADVANCE TAX FOR ASSESSMENT YEAR 2006-07. HE FURTHER OBSERVED THAT THIS WILL BE TREATED FOR THE INCOME OFFERED ON 23.3 .2006 UNDER SEC. 132(4) OF THE ACT. SINCE THE DEPARTMENT WAS ABLE TO RECOVER M ORE CASH ON 9.5.2006 FROM THE LOCKER, ASSESSEE MADE A FURTHER REQUEST VI DE LETTER DATED 12.9.2006 FOR TREATING THIS AMOUNT AS TAX PAID. THE DISPUTE A ROSE WITH REGARD TO CHARGEABILITY OF INTEREST UNDER SEC. 234B AND 234C OF THE ACT. ASSESSING OFFICER DID NOT GAVE CREDIT OF THE AMOUNT SEIZED BY THE DEPARTMENT WHILE LEVYING INTEREST UNDER SEC. 234B AND 234C OF THE AC T. THE ASSESSEE MOVED AN APPLICATION TO THE ASSESSING OFFICER REQUESTING HIM TO GIVE THE CREDIT OF THE TAXES PAID BY HIM IN THE SHAPE OF CASH SEIZED B Y THE DEPARTMENT AT THE 3 TIME OF SEARCH. THE APPLICATION OF THE ASSESSEE HAS BEEN REJECTED BY THE ASSESSING OFFICER VIDE ORDER DATED 28.11.2006. 3. DISSATISFIED WITH THE ACTION OF THE ASSESSING OF FICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS ) BUT LEARNED FIRST APPELLATE AUTHORITY HAS ALSO REJECTED THE PRAYER OF THE ASSESSEE. ACCORDING TO THE LEARNED CIT(APPEALS), SECTION 132B ONLY REFE RS TO EXISTING LIABILITY AT THE TIME OF SEARCH. THERE WAS NO EXISTING LIABILITY AGAINST WHICH CASH SEIZED CAN BE ADJUSTED. HE OBSERVED THAT ALTHOUGH CASH WAS SEIZED BY THE DEPARTMENT BUT THE OWNERSHIP OF SUCH CASH DOES NOT VEST WITH THE DEPARTMENT AUTOMATICALLY AND IT REMAINS WITH THE ASSESSEE ONLY . ACCORDING TO THE LEARNED CIT(APPEALS), DEPARTMENT CANNOT DEAL WITH S UCH MONEY UNTIL A PROPER TAX DEMAND IS CREATED AGAINST THE ASSESSEE. HE FURTHER OBSERVED THAT UNLESS AND UNTIL SUCH LIABILITY IS CRYSTALLIZED, TH E CASH SEIZED BY THE DEPARTMENT CANNOT BE ADJUSTED. 4. DISSATISFIED WITH THE ACTION OF THE LEARNED CIT( APPEALS), ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED ITA T. THE APPEAL HAS BEEN ALLOWED VIDE ORDER DATED 28.11.2008 WHICH WAS SUBSE QUENTLY MODIFIED IN A MISCELLANEOUS APPLICATION BEARING NO.64/DEL/08. TH E DEPARTMENT TOOK THE 4 MATTER TO THE HON'BLE HIGH COURT VIDE ITA NO.53/DEL /2010. HON'BLE HIGH COURT HAS REMITTED THE MATTER BACK TO THE ITAT FOR READJUDICATION VIDE ORDER DATED 27.8.2010. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT HON'BLE HIGH COURT HAS REMITTED THE MATTER TO THE ITAT BY OBSERV ING THAT THE ITAT WHILE DECIDING THE APPEAL FAILED TO CONSIDER THE AMENDMEN T INCORPORATED IN SEC. 132B IN THE YEAR 2002. HE FURTHER POINTED OUT THAT IT WAS CANVASSED BEFORE THE HON'BLE HIGH COURT THAT THE ITAT HAS ALLOWED TH E APPEAL OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF K.K. MARKETING REPORTED IN 278 ITR 576 BUT THIS DECISION RELATES TO THE PRE- AMENDMENT SECTION OF 132B OF THE ACT. UNDER THESE C IRCUMSTANCES, HON'BLE HIGH COURT HAS REMITTED THE ISSUE BACK TO THE ITAT. HE TOOK US THROUGH THE AMENDED PROVISIONS AS WELL AS THE OLD PROVISIONS OF SEC. 132B OF THE ACT AND SUBMITTED THAT THERE IS NO SUBSTANTIAL DIFFERENCE B ETWEEN BOTH THE PROVISIONS. IN THE PRE-AMENDED PROVISIONS, AN ORDER UNDER SUB-S ECTION (5) OF SEC. 132 HAS TO BE PASSED AND THE ASSETS RETAINED UNDER THIS SECTION WOULD BE DEALT WITH IN THE MANNER PROVIDED IN SEC. 132(1) OF THE A CT. THIS PASSING OF AN ORDER UNDER SUB-SECTION (5) OF SEC. 132 HAS BEEN DO NE AWAY. THEREFORE, AS FAR AS GIVING CREDIT OF CASH SEIZED BY THE DEPARTME NT IS CONCERNED, IF ASSESSEE 5 HAS MADE A REQUEST FOR ADJUSTING SUCH CASH AGAINST THE ADVANCE TAX LIABILITY TAX THEN IT OUGHT TO BE GRANTED TO THE ASSESSEE. HE FURTHER POINTED OUT THAT THIS ISSUE HAS BEEN CONSIDERED ELABORATELY BY THE I TAT, CHANDIGARH BENCH IN THE CASE OF NIKKA MAL BABU RAM VS. ACIT REPORTED IN 41 SOT 407. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDER OF THE LEARNED CIT(APPEALS). SHE CONTENDED THAT CASH SEIZED DURING THE COURSE OF SEARCH CAN ONLY BE ADJUSTED AGAINST THE EXISTING LIABILITY . WHEN ASSESSEE WROTE LETTER TO THE DEPARTMENT AT THAT POINT OF TIME, THERE WAS NO EXISTING LIABILITY. THE DATE FOR PAYMENT OF ADVANCE TAX HAS ALREADY BEEN EX PIRED AND, THEREFORE, CREDIT OF THIS AMOUNT CANNOT BE GIVEN TO THE ASSESS EE. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. IN ORDER TO APPRECIATE THE CONTRO VERSY MORE LOGICALLY, IT IS IMPERATIVE UPON US TO HAVE A LOOK ON SECTION 132B(I ) WHICH PRESCRIBES THE MODE OF APPLICATION OF SEIZED ASSETS OR REQUISITION ED ASSETS. THE PORTION RELEVANT FOR THE PURPOSES OF PRESENT APPEAL READS A S UNDER: 132B. (1) THE ASSETS SEIZED UNDER SEC. 132 OR REQU ISITIONED UNDER SEC. 32A MAY BE DEALT 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 6 OF 1958) AND THE INTEREST-TAX ACT, 1974 (45 OF 1974 ), AND THE AMOUNT OF THE LIABILITY DETERMINED ON COMPLETION OF THE ASSESSMENT UNDER SEC. 153A AND TH E ASSESSMENT OF THE YEAR RELEVANT TO THE PREVIOUS YEA R IN WHICH SEARCH AS INITIATED OR REQUISITION IS MADE, O R 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 LEVIED 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. 7. A BARE PERUSAL OF THIS CLAUSE WOULD REVEAL THAT IT REFERS TO THE MECHANISM FOR ADJUSTING THE ASSETS SEIZED UNDER SEC . 132 OF THE ACT. SUCH ASSETS CAN BE ADJUSTED, (A) AGAINST THE AMOUNT OF A NY EXISTING LIABILITY UNDER THIS ACT; (B) AGAINST THE AMOUNT OF LIABILITY DETER MINED ON COMPLETION OF ASSESSMENT UNDER SEC. 153A; (C) AGAINST THE AMOUNT OF LIABILITY DETERMINED ON COMPLETION OF ASSESSMENT UNDER CHAPTER XIV B FOR THE BLOCK PERIOD; (D) AGAINST ANY PENALTY LEVIED OR INTEREST PAYABLE IN C ONNECTION WITH SUCH ASSESSMENT. THUS, SECTION 132(1)(I) OF THE ACT AUTH ORIZED THE ASSESSING OFFICER TO RECOVER THE LIABILITY PRESCRIBED UNDER T HE ACT OUT OF THE ASSETS SEIZED UNDER SEC. 132 OF THE ACT. LEARNED COMMISSIO NER IN THE IMPUGNED 7 ORDER, HAS OBSERVED THAT THOUGH ASSETS POSSESSED BY THE DEPARTMENT BUT ITS OWNERSHIP DOES NOT VEST WITH THE DEPARTMENT AUTOMAT ICALLY AND IT REMAINS WITH THE ASSESSEE ONLY. ACCORDING TO THE LEARNED CI T(APPEALS), THE DEPARTMENT CANNOT DEAL WITH SUCH MONEY UNTIL A PROP ER TAX DEMAND IS CREATED AGAINST THE ASSESSEE. HE ALSO EMPHASIZED TH AT UNTIL AND UNLESS SUCH LIABILITY IS CRYSTALLIZED, THE CASH SEIZED BY THE D EPARTMENT CANNOT BE ADJUSTED. IN OUR OPINION, WHEN ADVANCE TAX IS TO BE PAYABLE B Y AN ASSESSEE BY VIRTUE OF THE OPERATION OF INCOME-TAX ACT, 1961 AND THE DEPAR TMENT IS ALREADY POSSESSING MONEY BELONGING TO THE ASSESSEE AND ASSE SSEE MADE A PRAYER FOR ADJUSTING SUCH AMOUNT AGAINST THE ADVANCE TAX PAYME NT OR ANY TAX REQUIRED TO BE PAID BY THE ASSESSEE THEN CREDIT OUGHT TO BE GIVEN BECAUSE THE DEPARTMENT HAS DEPRIVED THE ASSESSEE OF HIS MONEY B Y SEIZING THE CASH OTHERWISE ASSESSEE WOULD HAVE PAID THE TAX ON 12.4. 2006 AND 12.09.2006. THE ITAT IN THE CASE OF NIKKA MAL BABU RAM (SUPRA), HAS MADE A LUCID ENUNCIATION OF LAW AND FACTS ON THIS ISSUE, AND IT IS WORTH TO TAKE NOTE OF THE DISCUSSION MADE BY THE ITAT WHICH READ AS UNDER: 9 . IT IS WELL UNDERSTOOD THAT AS PER SECTION 4 OF TH E ACT, AN ASSESSEE IS CHARGEABLE TO INCOME-TAX IN RESPECT OF HIS TOTAL INCOME. SUB-SECTION (2) OF SECTION 4 PRESCRIBES THA T THE INCOME-TAX SO CHARGEABLE SHALL BE DEDUCTED AT SOURC E OR PAID IN ADVANCE, WHERE IT IS SO DEDUCTIBLE OR PAYABLE UN DER ANY 8 PROVISION OF THE ACT. WE HAVE OBSERVED EARLIER THAT ADVANCE TAX LIABILITY IS GOVERNED BY SECTIONS 208 TO 210 OF THE ACT. SIMILARLY, SECTION 140A PROVIDES FOR PAYMENT OF SELF-ASSESSMEN T TAX ON THE BASIS OF ANY RETURN OF INCOME REQUIRED TO BE FI LED BY THE ASSESSEE. THE RELEVANT PROVISIONS ALSO PRESCRIBE TH E DATES AND THE AMOUNT OF TAX REQUIRED TO BE PAID BY AN ASSESSE E. THEREFORE, THE EXPRESSION EXISTING LIABILITY IN SE CTION 132B(1)( I ) CANNOT BE READ TO EXCLUDE A PARTICULAR TAX LIABILIT Y, IF IT CAN BE SHOWN TO HAVE EXISTED ON A PARTICULAR DATE. IF THE LIABILITY TO PAY ADVANCE TAX HAD ARISEN, IT WOULD CERTAINLY CONSTITU TE A PART OF THE EXISTING LIABILITY USED IN SECTION 132B(1)( I ) OF THE ACT. 10. IN OUR CONSIDERED OPINION, THE DOCTRINE OF PURPOSI VE CONSTRUCTION HAS TO PREVAIL IN THIS SITUATION. IN T HE PRESENT SITUATION, IT IS EVIDENT THAT CASH WAS SEIZED FROM THE ASSESSEE DURING SEARCH OPERATION AND, ASSESSEE REQUESTED THE DEPARTMENT TO ADJUST A PART OF SUCH CASH RECEIPTS A GAINST THE LIABILITY OF ADVANCE TAX WHICH AROSE ON ACCOUNT OF THE INCOME SURRENDERED DURING THE SEARCH OPERATION. THE DEPART MENT DOES NOT DENY POSSESSION OF THE CASH SINCE THE TIME OF S EARCH. THUS, WE FIND NO JUSTIFICATION FOR THE REVENUE TO INTERPR ET THE EXPRESSION EXISTING LIABILITY IN SECTION 132B(1)( I ) AS NOT REFERRING TO LIABILITY OF ADVANCE TAX. UNDER THE IN COME-TAX ACT, LIABILITY TOWARDS ADVANCE TAX IS A PART OF THE SCHE ME OF RECOVERY OF TAXES AND SUCH LIABILITY DEFINITELY FALLS IN THE EXPRESSION EXISTING LIABILITY USED IN SECTION 132B(1)( I ) IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE RELIANCE PLEADED BY THE CIT 9 (APPEALS) ON THE JUDGMENT OF THE HONBLE MADHYA PRA DESH HIGH COURT IN THE CASE OF RAMJILAL JAGANNATH V. ASSTT. CIT [2000] 241 ITR 758 IS QUITE MISPLACED. AS PER THE REVENUE, IN TERMS OF THE SAID JUDGMENT, THE SEIZED CASH CANNOT BE ADJUSTED TOWARDS ADVANCE TAX LIABILITY. WE HAVE CAREFULLY PE RUSED THE SAID JUDGMENT AND FIND THAT THE SAME DOES NOT PROHI BIT ADJUSTMENT OF SEIZED ASSETS TOWARDS LIABILITY TO PA Y ADVANCE TAX. IN ANY CASE, WE FIND THAT JUDGMENT OF THE HON BLE MADHYA PRADESH HIGH COURT IS RELEVANT IN A SITUATION WHEN SECTION 132(5) WAS ON THE STATUTE, WHICH HAS SINCE BEEN DEL ETED BY THE FINANCE ACT, 2002 WITH EFFECT FROM 1-6-2002. SECTIO N 132(5) OF THE ACT REQUIRED THE ASSESSING OFFICER TO MAKE AN E NQUIRY AND THEREAFTER MAKE AN ORDER TO DEAL WITH THE SEIZED AS SETS. SECTION 132(5) OF THE ACT AUTHORIZES THE ASSESSING OFFICER TO RETAIN IN HIS CUSTODY SUCH ASSETS AS IN HIS OPINION WERE SUFF ICIENT TO SATISFY THE AGGREGATE AMOUNTS REFERRED TO IN CLAUSE S ( II ), ( IIA ) AND ( III ) OF SECTION 132(5) AND OBLIGATED HIM TO RELEASE T HE REMAINING SEIZED ASSETS. IN THIS BACKGROUND, THE HO NBLE HIGH COURT, ON THE FACTS OF THE CASE BEFORE IT, HELD THA T UNLESS AN ORDER UNDER SECTION 132(5) OF THE ACT IS PASSED, TH E ASSESSING OFFICER COULD NOT DIRECT THAT THE ASSETS SEIZED BE ADJUSTED TOWARDS ADVANCE TAX LIABILITY. THE HONBLE HIGH COU RT SPECIFICALLY NOTED THAT IT IS ONLY AFTER AN ORDER U NDER SECTION 132(5) IS PASSED THAT THE ASSESSEE CAN MAKE A REQUE ST THAT THE SEIZED AMOUNT WHICH IS SOUGHT TO BE RELEASED IN HIS FAVOUR BE ADJUSTED OR APPROPRIATED TOWARDS THE LIABILITY TO P AY ADVANCE TAX. THOUGH, IN THE CONTEXT OF THE PRESENT ASSESSME NT YEAR 10 BEFORE US, THE PROVISIONS OF SECTION 132(5) ARE NOT APPLICABLE AND THEREFORE, STRICTLY SPEAKING, THE RATIO OF THE JUDGMENT OF THE HONBLE MADHYA PRADESH HIGH COURT DOES NOT APPLY, S O HOWEVER IT IS PERTINENT TO OBSERVE THAT THE HONBLE HIGH COURT HAS NOT READ ANY BLANKET PROHIBITION IN THE ACT AGA INST ADJUSTING THE SEIZED ASSETS AGAINST LIABILITY FOR PAYMENT OF ADVANCE TAX. THEREFORE, THERE IS NO JUSTIFICATION FOR THE CIT (A PPEALS) TO RELY UPON THE ORDER OF THE MADHYA PRADESH HIGH COURT IN THE CASE OF RAMJILAL JAGANNATH ( SUPRA ) AND DENY THE CLAIM OF THE ASSESSEE. 8. WE DO NOT FIND ANY DISPARITY ON FACTS, THEREFORE , RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH AND IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THE APPEAL OF THE ASSESSEE AND DIRECT THE DEPARTMENT TO GIVE CREDIT OF RS. 60,40,000 TO THE ASSESSEE FROM T HE DATE, WHEN ASSESSEE MADE APPLICATION FOR TREATING THE CASH AS PAYMENT O F ADVANCE TAX/FARE WHILE COMPUTING THE INTEREST CHARGEABLE UNDER SEC. 234B A ND 234C OF THE INCOME- TAX ACT, 1961 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 14.10.20 11 SD/- SD/- ( G.E. VEERABHADRAPPA) ( RAJPAL YAD AV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 14/10/2011 MOHAN LAL 11 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR