Sheetal Infrastructure Pvt.Ltd., Ahmedabad V. The ACIT.,Cent.Circle--1(3), Ahmedabad

ITA 1415/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6109 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 14-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDHAN
• Assessee Lawyers: S N DIVATIA
• Section: 40A(3); 153A; 234B; 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO. 1415/AHD/2013 (ASSESSMENT YEAR:2009-10) SHEETAL INFRASTRUCTURE PVT. LTD., 25, 4 TH FLOOR, SHUKAN MALL, SHAHIBAUG, AHMEDABAD 380004 APPELLANT VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3, AHMEDABAD RESPONDENT PAN: AAICS9312A /BY ASSESSEE : SHRI S. N. DIVATIA, A.R. /BY REVENUE : SHRI K. MADHUSUDHAN, D.R. /DATE OF HEARING : 10.02.2017 /DATE OF PRONOUNCEMENT : 25.04.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 ARISES AGAINST THE CIT(A)-I, AHMEDABADS ORDER DATED 19.03.2013, PASS ED IN APPEAL NO. ITA NO. 1415/AHD/2013 (SHEETAL INFRASTRUCTURE PVT. LTD. VS. ACIT) A.Y. 2009-10 - 2 - CIT(A)-I/CC.1(1)/38/2012-13, IN PROCEEDINGS UNDER S ECTION 154 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE ASSESSEE RAISES THE FOLLOWING SUBSTANTIVE GR OUNDS IN THE INSTANT APPEAL. 1 THE ORDER PASSED U/S.250 ON 19.3.13 FOR A.Y.200 9-10 BY CIT(A)-I, ABAD UPHOLDING THE ORDER PASSED U/S.154 BY AO ON 9.3.12 IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUST ICE. 1.2 THE LD. C1T(A) HAS GRIEVOUSLY ERRED IN LAW A ND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT. 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND O N FACTS IN REJECTING THE RECTIFICATION APPLICATION U/S.154 OF THE APPELLANT TO TREAT THE ADVANCE TAX PAYABLE FOR A.Y.2009-10 AS 'EXISTING LIABILITY' U/S .132B(L)(I) AND CHARGE INTEREST U/S.234B AND 234C ACCORDINGLY. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT TO HAVE TREATED THE ADVANCE TAX PAY ABLE FOR A.Y.2009- 10 AS 'EXISTING LIABILITY' AND COMPUTED INTEREST U/ S.234B AND 234C ACCORDINGLY. 3.1 WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALT ERNATIVE, THE COMPUTATION OF INTEREST U/S.234B AND 234C IS HIGHLY EXCESSIVE AND CALLS FOR REDUCTION. 3. THIS ASSESSEE IS A CLOSELY HELD COMPANY ENGAGED IN REAL ESTATE DEVELOPMENT BUSINESS. THE DEPARTMENT CARRIED OUT A SEARCH IN ITS CASE ON 29.09.2008 LEADING TO SEIZURE OF CASH AMOUNT OF RS. 40LACS. THE ASSESSEE APPEARS TO HAVE DECLARED UNDISCLOSED INCOME OF RS.7 .2CRORES IN COURSE OF THE ABOVE SEARCH. THE SAME CULMINATING IN INITIATION O F SECTION 153A PROCEEDINGS. THE ASSESSEE FILED ITS RETURN ON 29.0 9.2009 STATING INCOME OF RS.2,10,23,030/-. THE ASSESSING OFFICER THEREAFTER FRAMED SECTION 153A ASSESSMENT ON 08.09.2010 COMPUTING TOTAL INCOME AS RS.5,09,85,016/-. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) APPEARS TO H AVE PARTLY AGREED WITH ITS GRIEVANCE. THE ASSESSING OFFICER THEN FRAMED CONSE QUENTIAL ASSESSMENT ON ITA NO. 1415/AHD/2013 (SHEETAL INFRASTRUCTURE PVT. LTD. VS. ACIT) A.Y. 2009-10 - 3 - 17.10.2011 RECOMPUTING THE ABOVE TAXABLE INCOME TO RS.2,92,83,090/-. THE ASSESSEE FILED SECTION 154 RECTIFICATION PLEADING T HEREIN THAT IT HAD NOT BEEN GIVEN CREDIT OF PRE-PAID TAXES QUA THE ABOVE SEIZED CASH. THE ASSESSING OFFICER DECLINED THE SAME ON 09.03.2012. 4. THE CIT(A) HAS ISSUED THE FOLLOWING DIRECTIONS T O THE ASSESSING OFFICER IN ASSESSEES APPEAL: 4. I HAVE CONSIDERED THE ORDER PASSED BY THE AO AN D THE SUBMISSIONS OF THE APPELLANT FILED IN THE STATEMENT OF FACTS CAREFULLY . THE PROCEDURE OF TREATMENT OF SEIZED CASH IS DESCRIBED IN SECTION 132B OF THE IT ACT. THE SEIZED CASH MAY REPRESENT THE INCOME OF THE APPELLANT BUT IT CANNOT BE APPROPRIATED TOWARDS ANY TAX LIABILITY. THE SEIZED CASH CAN BE APPROPRIA TED AGAINST ANY EXISTING LIABILITY UNDER THE IT, WT ACT ETC. AND THE AMOUNT OF LIABILITY DETERMINED ON COMPLETION OF ASSESSMENT IN TERMS OF 132B(1) OF THE ACT. THE ISSUE THAT NEEDS TO BE DECIDED IS AS TO WHETHER ANY TAX LIABILITY CAN B E SAID TO BE EXISTING BEFORE THE DETERMINATION OF SUCH LIABILITY BY THE AO IN TH E ASSESSMENT ORDER. 5. SO FAR AS THE LIABILITY FOR ADVANCE TAX IS CONC ERNED, IT IS NOTED THAT AS INTERPRETED BY A FEW COURTS, THE EXPRESSION 'EXISTI NG LIABILITY' IN SECTION 132B(1)(I) CANNOT BE READ TO EXCLUDE A PARTICULAR T AX LIABILITY, IF IT CAN BE SHOWN TO HAVE EXISTED ON A PARTICULAR DATE. SECTION 132B(1)(I) OF THE ACT DOES NOT PROHIBIT UTILIZATION OF THE AMOUNT SEIZED DURIN G THE COURSE OF SEARCH TOWARDS THE ADVANCE TAX PAYABLE ON THE AMOUNT OF UN DISCLOSED INCOME DECLARED DURING THE COURSE OF SEARCH. ON THE OTHER HAND, IN THE CASE OF RAMJILAL JAGANNATH & OTHERS [2000] 241 ITR 758 (MP), IT HAS BEEN HELD THAT IRRESPECTIVE OF THE SEIZURE OF THE AMOUNT, THE ASSE SSEE IS OBLIGED TO PAY THE ADVANCE TAX IN ACCORDANCE WITH LAW AND IF HE HAD NO T PAID THE ADVANCE TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, HE COULD NOT AVOID THE LIABILITY EITHER UNDER SECTION 234B OR SECTION 234C. THE REQUEST OF THE ASSESSEE FOR ADJUSTMENT OF SEIZED CASH CANNOT BE MADE AGAINST ADVANCE TAX. 6. HOWEVER, EVEN IF 'ADVANCE TAX LIABILITY' IS ACC EPTED AS AN 'EXISTING LIABILITY' FOR THE PURPOSES OF SECTION 132 B (1)(I) OF THE ACT, THE SAME NEEDS TO BE DETERMINED SO AS TO ALLOW THE AO TO MAKE THE NECESS ARY ADJUSTMENT. IT IS AN UNDISPUTED FACT THAT PAYMENT OF ADVANCE TAX IS VOLU NTARY ONE. THE ASSESSEE WHO IS LIABLE TO MAKE PAYMENT OF ADVANCE TAX IN TERMS O F SECTION 208 OF THE ACT, IS REQUIRED TO MAKE PAYMENT OF ADVANCE TAX ON HIS OWN ACCORD ON HIS ESTIMATED CURRENT INCOME IN APPROPRIATE INSTALLMENTS AS PRESC RIBED. THE AO MAY ALSO DETERMINE THE ADVANCE TAX LIABILITY OF THE APPELLAN T U/S 210(3) / 210(4) READ WITH SECTION 209(1)(B) AND 209(1)(C) OF THE ACT. HO WEVER, DETERMINATION OF SUCH ADVANCE TAX LIABILITY BY THE AO IS NOT MANDATO RY. FURTHER, EVEN OTHERWISE, FOR THE PURPOSES OF DETERMINING THE ADVANCE TAX LIA BILITY BY THE AO, SUCH ITA NO. 1415/AHD/2013 (SHEETAL INFRASTRUCTURE PVT. LTD. VS. ACIT) A.Y. 2009-10 - 4 - DETERMINATION CANNOT EXCEED THE TAX LIABILITY AS PE R LATEST ASSESSED INCOME OF THE APPELLANT OR SUBSEQUENTLY FILED RETURNED INCOME , WHICHEVER IS HIGHER. IN A SEARCH RELATED CASE, THE DETERMINATION OF ADVANCE T AX LIABILITY BY THE AO MAY NOT SERVE ANY PURPOSE SINCE HE CAN DETERMINE SUCH L IABILITY ONLY ON THE BASIS OF LATEST ASSESSED INCOME / RETURNED INCOME SUBSEQUENT LY FILED IN TERMS OF SECTION 210(3) / 210(4) OF THE ACT. THE AO CANNOT, THEREFOR E, DETERMINE THE CORRECT ADVANCE TAX LIABILITY OF THE APPELLANT IN A SEARCH RELATED CASE SINCE DISCLOSED INCOME DURING THE COURSE OF SEARCH OR UNDISCLOSED I NCOME UNEARTHED DURING THE COURSE OF SEARCH CANNOT BE TAKEN INTO ACCOUNT B Y THE AO FOR THE PURPOSE OF DETERMINATION OF ADVANCE TAX LIABILITY. 7. SO FAR AS THE APPELLANT IS CONCERNED, THE APPELL ANT HAS ALSO NOT DETERMINED THE ADVANCE TAX LIABILITY ON ITS CURRENT ESTIMATED INCOME. THE APPELLANT HAS ALSO NOT BROUGHT ANY EVIDENCE ON RECO RD TO SHOW THAT IT HAD REQUESTED EITHER THE AO OR ANY OTHER AUTHORITY, TO ADJUST THE SEIZED CASH AGAINST TAX LIABILITY IN ACCORDANCE WITH THE PROVIS IONS OF SECTION 132B OF THE ACT. NO QUANTIFICATION FOR THE ACTUAL ADVANCE .LIAB ILITY HAS BEEN MADE BY THE APPELLANTS AT ALL. THE UNQUANTIFIED / UNDETERMINED ADVANCE TAX LIABILITY CANNOT BE SAID TO BE AN EXISTING LIABILITY AND THE ONUS TO DETERMINE / QUANTIFY SUCH LIABILITY FOR THE PURPOSE OF ADJUSTMENT AGAINST SEI ZED CASH IN TERMS OF SECTION 132B OF THE ACT AS PER APPROPRIATE INSTALLMENTS IS ON THE APPELLANTS ONLY. FURTHER, NO REQUEST FOR ADJUSTMENT OF SEIZED CASH O F RS. 6,66,300/- HAS BEEN MADE IN THE CASE OF THE APPELLANT. THEREFORE, THE A DVANCE TAX LIABILITY HAS NOT BEEN DETERMINED BY THE APPELLANT AT ALL ON ITS CURR ENT ESTIMATED INCOME. THE APPELLANT HAD FILED THE RETURN OF INCOME U/S 153A W HEREIN IT HAD CLAIMED THE SEIZED CASH TO BE ADVANCE TAX. 8. THE ADVANCE TAX LIABILITY CAN BE SAID TO BE AN ' EXISTING LIABILITY' ONLY IF THE APPELLANT \ DETERMINES THE ADVANCE TAX LIABILIT Y BASED ON ITS CURRENT ESTIMATED INCOME INCLUDING THE DISCLOSED INCOME DUR ING THE COURSE OF SEARCH AND MAKES SPECIFIC REQUEST TO THE AO TO MAKE NECESS ARY ADJUSTMENT AS PER THE APPROPRIATE INSTALLMENTS BEFORE THE INSTALLMENTS BE COME DUE. THIS IS THE CRUX OF THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT . 9. THE AO CAN RECOVER THE AMOUNT OF TAX FROM THE SE IZED CASH OF THE APPELLANTS ONLY IF THE TAX LIABILITY OF THE APPELLA NTS EXISTS AT THE TIME OF SUCH RECOVERY. IN THE PRESENT CASE, THE AO HAS NOT DETER MINED THE ADVANCE TAX LIABILITY OF THE APPELLANTS U/S 210(3) / 210(4) R.W .S 209(1)(B) AND 209(1)(C) OF THE ACT. THE APPELLANT HAD ALSO NOT QUANTIFIED / DE TERMINED THEIR TAX LIABILITY BASED ON ITS CURRENT ESTIMATED INCOME. THEREFORE, N O ADVANCE TAX LIABILITY CAN BE SAID TO BE EXISTENT U/S 218 OF THE ACT WHICH COU LD BE RECOVERED OUT OF THE SEIZED CASH. IN VIEW OF THIS, THE SEIZURE OF CASH B Y THE DEPARTMENT CANNOT BECOME PAYMENT FOR ADVANCE TAX BY THE APPELLANT ALL BY ITSELF ON THE DATE OF SEIZURE OF CASH. 10. THE APPELLANT HAS CLAIMED FOR THE ADJUSTMENT OF THE SEIZED CASH AGAINST THE TAX PAYABLE AS PER RETURNS OF INCOME. THUS, THE TAX LIABILITY OF THE APPELLANTS HAS COME INTO EXISTENCE AS PER SECTION 1 40A(3) OF THE ACT FROM THE ITA NO. 1415/AHD/2013 (SHEETAL INFRASTRUCTURE PVT. LTD. VS. ACIT) A.Y. 2009-10 - 5 - DATE OF FILING THE RETURNS OF INCOME. IN MY OPINION , THE AO SHOULD HAVE ADJUSTED THE SEIZED CASH AGAINST TAX LIABILITY OF THE APPELL ANTS WHICH CAME INTO EXISTENCE U/S 140A(3) OF THE ACT W.E.F. DATE OF FILING OF RET URNS OF INCOME. THE NON- ADJUSTMENT OF THE SEIZED CASH AGAINST THE TAX LIABI LITY U/S 140A(3) OF THE ACT, ON THE PART OF THE AO, AND CHARGING OF INTEREST FOR NO N-PAYMENT OF SELF-ASSESSMENT TAX WHEN THE CORRESPONDING AMOUNT OF SEIZED CASH IS IN POSSESSION OF DEPARTMENT, IS AGAINST THE PRINCIPLES OF NATURAL JU STICE. 11. IN VIEW OF THE ABOVE AND CONSIDERING THE FACT T HAT THE TAX LIABILITY U/S 140A(3) CAME INTO EXISTENCE WITH EFFECT FROM THE DA TE OF FILING OF RETURN OF INCOME, THE AO IS DIRECTED TO VERIFY IF ANY REQUEST OF ADJUSTMENT OF SEIZED CASH AGAINST ADVANCE TAX WAS MADE OR NOT. IF THE APPELLA NT HAD MADE A REQUEST FOR THE ADJUSTMENT OF SEIZED CASH AGAINST ADVANCE TAX T HEN THE AO IS DIRECTED TO GIVE CREDIT TO THE APPELLANTS FOR THE PAYMENT OF SE LF ASSESSMENT TAX U/S 140A(3) OUT OF THE SEIZED WITH EFFECT FROM THE DATE OF FILI NG OF RETURN OF INCOME BY THE APPELLANT . THE AO IS DIRECTED TO CHARGE INTEREST U /S 234B & 234C OF THE ACT AFTER MAKING ABOVE ADJUSTMENTS. ACCORDINGLY, THIS G ROUND OF APPEAL IS PARTLY ALLOWED SUBJECT TO ABOVE FINDINGS. 5. HEARD BOTH THE PARTIES STRONGLY REITERATING THEI R RESPECTIVE STANDS. CASE FILE PERUSED. THE ASSESSEE STRONGLY SEEKS CREDIT O F THE ABOVE SEIZED CASH OF RS.40LACS ADVANCE TAX IN THE IMPUGNED ASSESSMENT YE AR 2009-10 AS WELL AS IN RESPECT OF INTEREST LIABILITY U/S.234B & C OF THE A CT. THE CASE FILE INDICATES THAT BOTH THE PARTIES HAVE PLACED ON RECORD A PLETH ORA OF JUDGMENTS IN SUPPORT OF THEIR RESPECTIVE ARGUMENTS. THE LEAD ONE APPEAR S TO BE HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN TAX APPEAL NO.55/2002 KAMLESH BHOGILAL KANDOI VS. ACIT DECIDED ON 26.11.2014. TH EIR LORDSHIPS THEREIN ACCEPT A SIMILAR CLAIM OF ADJUSTMENT OF ADVANCE TAX AND INTEREST. WE HOWEVER NOTICE THAT THE SAID ASSESSEE HAD SUBMITTED ITS APPLICATION WELL IN TIME SEEKING CREDIT OF THE CASH SUM SEIZED AGAINST THE ABOVE LIABILITIES. WE DO NOT SEE ANY SUCH EVIDENCE AT THE APPELLANTS BEHEST INTIMATING THE REVENUE AUTHORITIES TO GRANT CREDIT OF THE SEIZED CASH AS A DVANCE TAX. SHRI DIVATIA IS FAIR ENOUGH IN REFERRING TO ASSESSEES RETURN DATED 29-30/09/2009 SEEKING TO CLAIM THE ABOVE SEIZED CASH AS ADVANCE TAX. WE THE REFORE QUOTE THIS TRIBUNALS DECISION IN KANISHKA PRINTS PVT. LTD. VS . ACIT (2013) 143 ITD 716 (AHD) AND DIRECT THE ASSESSING OFFICER TO GRANT THE ASSESSEE THE CREDIT PRAYED ITA NO. 1415/AHD/2013 (SHEETAL INFRASTRUCTURE PVT. LTD. VS. ACIT) A.Y. 2009-10 - 6 - FOR FROM THE DATE OF FILING OF ITS RETURN ONLY WITH ALL CONSEQUENTIAL BENEFITS. THE ASSESSEES GRIEVANCE STANDS PARTLY ACCEPTED IN VIEW OF OUR ABOVE DISCUSSIONS. 6. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 25 TH DAY OF APRIL, 2017.] SD/- SD/- ( N. K. BILLAIYA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 25/04/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0