M/s. Happy Home Developers, Nashik V. Assistant Commissioner of Income-tax.,

ITA 1392/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7389 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift; Search and seizure
• Section: 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , , ' . # , $ , %& BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM ' / ITA NO.1392/PUN/2015 ( ) ) / ASSESSMENT YEAR: 2010-11 M/S.HAPPY HOME DEVELOPERS, 4, SHREE PRAKASH COMPLEX, SHARANPUR ROAD, B/H., KULKARNI GARDEN, NASHIK 422002. PAN: AADFH4970R .. APPELLANT VS. ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1,NASHIK. .. RESPONDENT ASSESSEE BY : SHRI SANKET JOSHI DEPARTMENT BY : SHRI AJAY MODI DATE OF HEARING : 26-09-2017 DATE OF PRONOUNCEMENT : 29-09-2017 * / ORDER PER D.KARAUNAKARA RAO, AM : THIS IS THE APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-12, PUNE DATED 29.07.2015 FOR THE A.Y.2010-11. 2 ITA NO.1392/PUN/2015 HAPPY HOME DEVELOPERS 2. IN THE APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS RE LATING TO LEVY OF INTEREST U/S.234B AND 234C OF THE ACT AND THE SAME READS AS UND ER: 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B OF RS.2,17,085/- AND INTEREST U/S 234C OF RS.1,55,280/ - WITHOUT APPRECIATING THAT THE COMPUTATION OF INTEREST MADE BY THE A.O. IS NOT CORRECT. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT A. THE CASH SEIZED DURING THE COURSE OF SEARCH ACTION U/S 132 COULD NOT BE ADJUSTED AGAINST THE ADVANCE TAX LIABILITY U /S 208 FOR THE YEAR IN WHICH SEARCH ACTION WAS CONDUCTED AND HENCE , THE COMPUTATION OF INTEREST U/S 234B AND 234C MADE BY T HE A.O. WAS CORRECT. B. EXPLANATION 2 TO SECTION 132B INSERTED W.E.F. 01.06 .2013 WHICH STATES THAT THE TERM EXISTING LIABILITY USED IN S UB-SECTION (1) TO SECTION 132B DOES NOT INCLUDE ADVANCE TAX PAYABLE, IS RETROSPECTIVE IN NATURE AND HENCE, SEIZED CASH CANN OT BE ADJUSTED AGAINST THE ADVANCE TAX LIABILITY FOR A.Y.2010-11. 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT A. EXPLANATION 2 TO SECTION 132B HAS BEEN INSERTED W.E .F 01.06.2013 AND THE LEGISLATURE, IN ITS OWN WISDOM, HAS NOT MAD E IT APPLICABLE RETROSPECTIVELY AND HENCE, THERE IS NO REASON TO HO LD THAT THE SAID EXPLANATION INSERTED W.E.F. 01.06.2013 IS APPLICABL E EVEN TO THE EARLIER YEARS. B. WHEN TWO CONTRADICTORY VIEWS ARE POSSIBLE, THE VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED IN VIEW OF THE SUPRE ME COURT DECISION IN THE CASE OF VEGETABLE PRODUCTS LTD. [88 ITR 192] AND THEREFORE, THE VIEW TAKEN BY ITAT, AHMEDABAD IN THE CASE OF KANISHKA PRINTS PVT. LTD. [143 ITD 716] SHOULD HAVE BEEN FOLLOWED OVER THE VIEW TAKEN BY ITAT, DELHI IN THE CASE OF S PAZE TOWER PVT. LTD. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSE E SUBMITS AS UNDER 4] THE LEARNED CIT(A) FURTHER ERRED IN HOLDING THAT AS PER THE PROVISIONS OF SECTION 132B, THE SEIZED CASH CANNOT BE ADJUSTED AGAINST SELF- ASSESSMENT TAX LIABILITY U/S 140A DETERMINED AT THE TIME OF FILING OF RETURN U/S 139(1) FOR THE YEAR IN WHICH SEARCH ACTI ON WAS CONDUCTED AND HENCE, THE COMPUTATION OF INTEREST U/S 234B MAD E BY THE A.O. IS CORRECT. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE IS A BUILDER AND DEVELOPER. THERE WAS SEARCH AND SEIZURE ACTION ON 06.01 .2010 ON THE ASSESSEE U/S.132 OF THE ACT. THE SEARCH RESULTED IN SE IZURE OF CASH OF 3 ITA NO.1392/PUN/2015 HAPPY HOME DEVELOPERS RS.32,24,000/- AS WELL AS THE DECLARATION OF ADDITIONAL INCOME OF RS.1.58 CRORES. THE ASSESSMENT WAS COMPLETED U/S.153A OF THE A CT DETERMINING THE ASSESSED INCOME OF RS.2,07,00,430/-. WHILE COMPUTING TH E TAX LIABILITY ON THE SAID INCOME, AO CHARGED THE STATUTORY INTEREST U /S.234B & 234C OF THE ACT AMOUNTING TO RS.3,72,365/- I.E. 2,17,085/- U/S.234B AND RS.1,55,280/- U/S.234C. IN THE PROCESS, THE AO IGNORED TH E ASSESSEES LETTER DATED 11.03.2010 ADDRESSED TO THE DDIT(INVESTIGAT ION-II), NASHIK AND THE ANOTHER LETTER DATED 14.10.2010 ADDRESSED TO THE D CIT, CENTRAL CIRCLE I, NASHIK CONTAINING THE REQUEST FOR ADJUSTMENT OF THE S EIZED CASH TOWARDS THE ADVANCE TAX LIABILITIES OF THE ASSESSEE. 4. AGGRIEVED WITH THE SAID LEVY OF STATUTORY INTEREST, THE ASSESSEE FILED A RECTIFICATION APPLICATION FOR DELETION OF THE SAID INTEREST AND RELIED ON THE SAID LETTERS OF THE ASSESSEE. THEY CONTAIN THE SPECIFIC REQ UEST FOR APPROPRIATION OF SEIZED CASH AGAINST THE LAST INSTALLMENT OF THE ADVANCE TAX FOR THE PREVIOUS YEAR ENDING WITH MARCH, 2010. IN THE SA ID RECTIFICATION APPLICATION, THE ASSESSEE SUBMITTED THAT THE SAID SEIZED C ASH IS REQUIRED TO BE ADJUSTED AGAINST THE ADVANCE TAX PAYMENT AND NOT TOWARDS THE REGULAR TAX PAYMENT AS DONE BY THE AO. AO REJECTED THE SAID APPLICATION AND PASSED AN ORDER DATED 25/09/2014 IN THIS REGARD AND IT IS AGAINST THE ASSESSEE. IN THIS ORDER AO RELIED HEAVILY ON THE AMENDED PROVISIONS OF EXPLANATION-2 TO SEC 132B OF THE ACT. AGGRIEVED WITH THE SAID RECTIFICATION OF THE AO, ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) DISCUSSED THE ISSUE OF APPROPRIATING THE SAID SEIZED CASH AGAINST T HE ADVANCE TAX LIABILITY AND DISMISSED THE APPEAL OF THE ASSESSEE. THE EXPLA NATION 2 AS WELL AS THE ISSUE OF INTERPRETING THE PROVISION OF EXPLANATIO N-2 TO SECTION TO 4 ITA NO.1392/PUN/2015 HAPPY HOME DEVELOPERS 132B OF THE ACT, WAS INSERTED BY THE FINANCE ACT, 2013 W.EF 01.06.2013. REVENUE HOLDS THAT THE SAME IS CLARIFICATORY IN NATURE AND APPLY TO ALL THE PENDING CASES TOO. EVENTUALLY, CIT(A) HELD THAT THE DECISIO NS RELIED UPON BY THE ASSESSEE BELONGS TO THE YEARS PRIOR TO THE SAID AM ENDMENT TO SEE 132B OF THE ACT. THE CIT(A) DISCUSSED THE ORDER OF THE ITAT, D ELHI IN THE CASE OF SPAZE TOWERS PRIVATE LTD. ( ITA NO. 40/2015 DATED 17.11 .2016), BEFORE THE DISMISSING THE ASSESSEES APPEAL. 5. AGGRIEVED WITH THE SAME, THE ASSESSEE IS IN APPEAL BEFO RE US WITH THE GROUNDS EXTRACTED ABOVE. BRINGING OUR ATTENTION TO THE ASSESSEES LETTER DATED 11.03.2010 (FILED ON 12.03.2010) WRITTEN TO THE DEPARTM ENT WITH A REQUEST TO ADJUST THE SEIZED CASH AGAINST THE ADVANCE TAX LIABILITY FOR THE A.Y. 2010-11, LD.COUNSEL (PAGE 7 OF THE PAPER BOOK) SUBMITT ED THE FINAL INSTALLMENT OF ADVANCE TAX IS DUE ON 15.03.2010. ASSESSEE FILED A LETTER ON 12.03.2010 WITH DEPARTMENT CONTAINING A REQUEST TO ADJUS T THE SAID SEIZED CASH OF RS.32,24,629/- AGAINST THE ADVANCE TAX LIABILITY. ASSE SSEE FOCUSES ON THE FINAL INSTALLMENT OF ADVANCE TAX FOR THE A.Y. 2010-11 IN THE CASE OF THE ASSESSEE FIRM I.E. M/S. HAPPY HOME DEVELOPERS. HE ALSO BROUGHT OUR ATTENTION TO ANOTHER LETTER DATED 14.10.2010 ADDRESSED TO THE AO, CENTRAL CIRCLE I, NASHIK FILED ALONG WITH THE RETURN OF INCOME FILED U/S.139 OF THE ACT. BRINGING OUR ATTENTION TO PAGE 8 OF THE PAPER BOOK , COUNSEL SUBMITTED THAT THE SAID LETTER CONTAINS A MANNER OF THE APPROPRIAT ION OF THE SAID SEIZED CASH TOWARDS ADVANCE TAX LIABILITY OF THE FIRM. 6. FURTHER, BRINGING OUR ATTENTION TO JUDGMENT OF PUNJAB HARYANA HIGH COURT IN THE CASE OF SPAZE TOWERS (P) LTD.(SURPA),(PAGE 5 OF THE PAPER BOOK) DATED 17.11.2016, LD.COUNSEL SUBMITTED THE PROSPECTIVE APP LICABILITY OF 5 ITA NO.1392/PUN/2015 HAPPY HOME DEVELOPERS THE AMENDED PROVISIONS OF EXPLANATION 2 TO SECTION 132B W AS ANSWERED BY THE HON'BLE HIGH COURT IN AFFIRMATION AND DESCRIBED THE SAID AMENDMENT AS PROSPECTIVE IN NATURE. THEREFORE, SAID EXPLANATION-2 TO SECTION 132B OF THE ACT, WHICH KEEPS THE ADVANCE TAX LIABILITIES OUTSIDE T HE MEANING OF EXISTING LIABILITIES AS USED IN SECTION 132B OF THE ACT, IS OP ERATIVE W.E.F 01.06.2013 AND DOES NOT APPLY TO THE CASE PRIOR TO THE SAID AMENDM ENT. IN OTHER WORDS, PRIOR TO THAT DATE OF 01.06.2013, THE EXPRES SION EXISTING LIABILITIES INCLUDES THE ADVANCE TAX LIABILITY. 7. FURTHER ALSO, BRINGING OUR ATTENTION TO THE PRESENT CASE AND ITS FACTS, LD.COUNSEL SUBMITTED THAT THE ASSESSEE FILED THE SAID LETT ER DATED 11.03.2010 WELL IN TIME AND THE DEPARTMENT FAILED TO APPROPR IATE THE SEIZED CASH AGAINST THE ADVANCE TAX LIABILITY I.E. 3 RD INSTALLMENT OF THE ADVANCE TAX OF THE ASSESSEE WHICH FALLS ON 15.03.2010. FINALLY, OUR ATTEN TION WAS DRAWN TO CIRCULAR NO.20/2017 (PAGE 7 OF THE PAPER BOOK) OF THE CBDT AND SUBMITTED THAT THE SAME WAS ISSUED IN CONNECTION WITH AP PLICABILITY OF EXPLANATION-2 TO SECTION 132B OF THE ACT. HE READ OUT THE CONTENTS OF PARA 2 TO 4 OF THE SAID CIRCULAR FOR THE PROPOSITION THAT THE SAID AMENDMENT IS PROSPECTIVE IN NATURE AND THE ADVANCE TAX LIABILITY OF AS SESSEE IN THE YEAR 2010 CONSTITUTES THE EXISTING LIABILITIES. TO THAT EXTENT CBDT ACCEPTED THE JUDGMENT OF HONOURABLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SPACE TOWERS PRIVATE LTD., (SUPRA). THE PARA 4 OF THE SAID CIRCULAR CONTAINS A CONDITIONAL DIRECTION TO THE DEPARTMENT EITHER TO WITHDR AW OR TO NOT PRESS APPEAL FILED BY THE DEPARTMENT ON THIS ISSUE. CONSIDERING THESE DEVELOPMENTS, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXISTING LIABILITY USED IN THE PROVISIONS OF SECTION 132B OF THE ACT IN CLUDES THE ADVANCE TAX LIABILITIES FOR THE PERIOD PRIOR TO 01.06.2013. IN EFFECT, 6 ITA NO.1392/PUN/2015 HAPPY HOME DEVELOPERS LD.A.R. SUBMITTED THAT BOTH THE AO AND THE CIT(A) FAILED IN WRONGLY INTERPRETING THE PROVISIONS SECTION 132B OF THE ACT AND S UBMITTED FOR REVERSING THEIR ORDERS. 8. ON THE OTHER HAND, LD.DR FOR THE REVENUE DUTIFULLY RE LIED ON THE ORDERS OF THE AO AND THE CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE RELATIN G TO INCLUSION OF THE ADVANCE TAX LIABILITIES WITHIN THE MEANING OF THE EXISTIN G LIABILITIES AS USED IN THE PROVISION TO SECTION 132 B OF THE ACT READ W ITH ITS EXPLANATION- 2 TO SAID SECTION FOR THE PERIOD PRIOR TO THE AMENDMENT. FOR ADJUDICATING THE SAID ISSUE, WE PROCEED TO EXTRACT THE RELEVANT PORT ION OF THE SAID SECTION 132B OF THE ACT AND THE SAME READS AS UNDER: SECTION 132B . APPLICATION OF SEIZED OR REQUISITIO NED ASSETS. (1) THE ASSETS SEIZED UNDER SECTION 132.MAY BE DE ALT 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 (3 5 OF 1987), THE GIFT-TAX ACT, 1958 (18 OF 1958) AND THE INTEREST-TAX ACT, 19 74 (45 OF 1974), AND THE AMOUNT OF THE LIABILITY DETERMINED ON COMPLETION OF THE ASSESSMENT. EXPLANATION 2 .-FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE EXISTING LIABILITY DOES NOT INCLUDE ADVANCE TAX P AYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART C OF CHAPTER XVII. 10. THE ABOVE EXPLANATION-2 WAS BROUGHT INTO THE STAT UTE BY THE FINANCE ACT, 2013 W.E.F 01.06.2013. CONSIDERING THE LANGUAGE OF THE S AID EXPLANATION-2, THE REVENUE PROCEEDED TO ADJUST THE SEIZED CASH AGAINST THE REGULAR TAX DEMAND ONLY AND JUSTIFIED THEIR ACTION BY DES CRIBING THE AMENDMENT AS CLARIFICATORY ONE. HOWEVER, THE ASSESSEE HA S TAKEN THIS 7 ITA NO.1392/PUN/2015 HAPPY HOME DEVELOPERS ISSUE TO THE JUDICIAL FORUM WHICH EVENTUALLY DECIDED ISSUE IN FAVOUR OF THE ASSESSEE, AND THE JUDGMENT OF PUNJAB & HARYANA HIGH C OURT IN THE CASE OF SPACE TOWERS PRIVATE LIMITED (SUPRA) HAS BROUGHT REQUISITE CLARITY ON THE ISSUE. THEREFORE, FOR THE PERIOD PRIOR TO THE AMENDMENT, T HE EXISTING LIABILITY INCLUDES THE ADVANCE TAX LIABILITY IN ACCORDANCE WIT H THE PROVISIONS OF PART C OF CHAPTER XVII OF THE ACT. 11. SUBSEQUENTLY, ACCEPTING THE ABOVE JUDGMENT, THE CB DT ISSUED DIRECTION TO FIELD OFFICERS BY WAY CIRCULAR NO.20/2017 DATED 12/06/2017. THE CONTENTS OF PARA 7 AND 8 OF THE CIRCULAR ARE RELEVAN T AND FOR THE SAKE COMPLETENESS OF THIS ORDER, WE PROCEED TO EXTRACT THE S AID PARAGRAPHS HERE AS UNDER : 3. SEVERAL COURTS HAVE HELD THAT THE INSERTION OF EXPLANATION 2 TO SECTION 132B OF THE ACT, IS PROSPECTIVE IN NATURE AND NOT A PPLICABLE TO CASES PRIOR TO 01.06.2013. THE SLPS FILED BY THE DEPARTMENT AGAINS T THE JUDGMENT OF THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F COSMOS BUILDERS AND PROMOTERS LTD. 1 AND THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE O F SUNIL CHANDRA GUPTA 2 , HAVE BEEN DISMISSED. SUBSEQUENTLY, THE CBDT HAS ALSO ACCEPTED THE JUDGMENT OF THE HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF SPAZE TOWERS PVT. LTD. 3 DATED 17.11.2016, WHEREIN IT WAS HELD THAT THE EXPLANATION 2 TO SECTION 132B OF THE ACT IS PRO SPECTIVE IN NATURE. 4. ACCORDINGLY, IT HAS NOW BEEN SETTLED THAT INSERT ION OF EXPLANATION 2 TO SECTION 132B OF THE ACT SHALL HAVE A PROSPECTIVE AP PLICATION AND SO, APPEALS MAY NOT BE FILED BY THE DEPARTMENT ON THIS ISSUE FO R THE CASES PRIOR TO 01.06.2013 AND THOSE ALREADY FILED MAY BE WITHDRAWN / NOT PRESSED UPON. 12. THEREFORE, THE ISSUE IS NOW SETTLED AND THE EXPRESSION ANY EXISTING LIABILITIES DOES INCLUDE THE ADVANCE TAX LIABILITIES PRIOR TO 01 .06.2013. THE CASE OF THE ASSESSEE FALLS PRIOR TO THE SAID DATE OF 01.06.2 013. THE CASH WAS SEIZED IN THE SEARCH INITIATED ON 06.01.2010. ASSESSEE REQUESTED FOR ADJUSTMENT OF THE SAME TOWARDS THE ADVANCE TAX LIABILITIES VIDE HIS LETTER DATED 11.03.2010. CONSIDERING THE ABOVE LEGAL POSITION IN T HE MATTER AND FACTS OF THE PRESENT CASE, WE ARE OF THE OPINION, THE GRO UND NOS. 1 TO 3 8 ITA NO.1392/PUN/2015 HAPPY HOME DEVELOPERS RAISED BY THE ASSESSEE HAVE TO BE DECIDED IN HIS FAVOUR AND AGAINST THE REVENUE. CONSIDERING THE RELIEF, THE ADJUDICATION OF GROUN D 4 WHICH WAS RAISED WITHOUT PREJUDICE, BECOMES AN ACADEMIC EXERCISE. THEREFORE, THE SAME IS DISMISSED AS ACADEMIC. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 29 TH DAY OF SEPTEMBER, 2017. SD/- SD/- ( / SUSHMA CHOWLA ) ( . / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 29 TH SEPTEMBER, 2017 S S . . G G A A N N G G A A D D H H A A R R A A R R A A O O *+,-./0/- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ! ! '#() / THE CIT(A)-12, PUNE. 4. & ! ! '# / THE CIT-CENTRAL, NAGPUR. 5. '() #*& , ! + *& , , ,- , / DR, ITAT, B BENCH, PUNE. 6. )/ 01 / GUARD FILE. // TRUE COPY // !2 / BY ORDER, / / TRUE COPY / / .4 * / SR. PRIVATE SECRETARY, ! + *& , / ITAT, PUNE