The Dy. Commissioner Income-tax, Amritsar. V. Sh Surinder Kumar Khindri, Amritsar.

ITA 185/ASR/2015

• Counselvise Citation: 18520914 RSA 2015
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-06-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 09-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARSEM LAL
• Assessee Lawyers: SALIL KAPOOR
• Keywords: Gift; Search and seizure; Retrospective amendment
• Section: 153A; 234B

Judgement Text

I.T.A. NO. 185/ASR/2015 ASSESSMENT YEAR: 2011 - 12 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL A MRITSAR BENCH, A MRITSAR. [CORAM: PRAMOD KUMAR AM AND A. D. JAIN, JM ] I.T.A. NO.: 185/ASR/2015 ASSESSMENT YEAR: 2011 - 12 DY. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE, AMRITSAR . ......... ...... .... APPEL LANT VS. SH. SURINDER KUMAR KHINDRI, 86, SHAKTI NAGAR, AMRITSAR . . RESPONDENT PAN AAXPK 1809L APPEARANCES BY: TARSEM LAL,....... FOR THE APPELLANT SALIL KAPOOR,..... F OR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 11/6/2015 D ATE OF PRONOUNCING THE ORDER : 31/8/ 201 5 O R D E R PER PRAMOD KUMAR , AM : BY WAY OF THIS APPEAL THE ASSESSING OFFICER HAS CHALLENGED THE CORRECTNESS OF THE ORDER DATED 27 TH JANUARY, 2015, IN THE MATTER OF PENALTY UNDER SECTION 271AAA OF THE INCOME - TA X ACT, 1961, FOR THE ASSESSMENT YEAR 2011 - 12 ON THE FOLLOWING GROUNDS : - 1. WHETHER THE DECISION OF CIT(A) - 5, LUDHIANA IS RIGHT IN DELETING THE PENALTY IMPOSED AT RS.30,00,000 U/S 271AAA BY THE A.O. BY IGNORING THE DETAILED FACTS & FINDINGS GIVEN BY THE A.O. IN PENALTY ORDER. 2. WHETHER THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE SECTION 132B(1) IS VERY CLEAR THAT THE SEIZED OR REQUISITIONED ASSETS MAY BE I.T.A. NO. 185/ASR/2015 ASSESSMENT YEAR: 2011 - 12 PAGE 2 OF 5 DEALT WITH AGAINST EXISTING LIABILITY UNDER THE INCOME - TAX ACT, AND NOT AGAINST THE ADVANCE T AX OR SELF ASSESSMENT TAX AND IN DOING SO LOST SIGHT OF THE VERY PURPOSE OF THE LEGISLATION OF SECTION 132B(1) OF THE INCOME - TAX ACT. 3. WHETHER THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT SINCE THERE WAS A SHORT FALL IN THE PAYMENT OF TAX ON THE RETURNED INCOME, THE INCIDENCE OF INTEREST U/S 234B AND 234C WAS AUTOMATIC AND IN ACCORDANCE WITH THE INCOME - TAX ACT. 4. WHETHER THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT AMENDMENT MADE TO SECTION 132B IN FINANCE ACT, 2013 HAS RETROSPECTIVE EFFEC T AS IT IS ONLY A CLARIFICATION OF SECTION 132B WHICH IS ALREADY IN EXISTENCE. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE WAS SUBJECTED TO A SEARCH AND SEIZURE OPERATION ON 9 TH SEPTEMBER, 2010. DURING THIS OPERATION, UNACCOUNTED CASH OF RS.99,00,000 AND UNACCOUNTED STOCK OF RS.1,01,00,000 WAS FOUND IN THE PREMISES OF THE ASSESSEE. IT WAS IN THIS BACKDROP THAT THE ASSESSEE MADE A DECLARATION OF RS.3,00,00,000 UNDER SECTION 132(4) OF THE ACT. WHILE THE A SSESSEE FILED A RETURN OF INCOME DISCLOSING INCOME OF RS.3,04,23,555/ - THOUGH THE ASSESSEE DID NOT PAY TAX UNDER SECTION 140A IN RESPECT OF THE SAME. THERE SEEMS TO BE NO DISPUTE ON THE ASSESSEE S STAND THAT REPEATED REQUESTS WERE MADE TO THE ASSESSING OFF ICER TO ADJUST THE CASH SEIZED AGAINST THE ADVANCE TAX LIABILITY. A NOTICE UNDER SECTION 210 WAS RECEIVED BY THE ASSESSEE ON 30.9.2010 AND IT WAS SUBMITTED THAT DEMAND SO RAISED HAD BECOME AN EXISTING LIABILITY AND SHOULD HAVE BEEN ADJUSTED OUT OF SEIZED C ASH. THAT WAS, HOWEVER, NOT DONE. 3. IT WAS IN THIS BACKDROP THAT PROCEEDINGS UNDER SECTION 271AAA WERE INITIATED AGAINST THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS NOT PAID TAX ON THE INCOME DECLARED BY THE ASSESSEE I.T.A. NO. 185/ASR/2015 ASSESSMENT YEAR: 2011 - 12 PAGE 3 OF 5 H IMSELF, THE BENEFIT OF EXCLUSION UNDER SECTION 271AAA(2)(I) IS NOT AVAILABLE. AS FOR THE ASSESSEE S CLAIM OF SETTING OFF THE ADVANCE TAX LIABILITY AGAINST SEIZED CASH, THE ASSESSING OFFICER DECLINED THE SAME BY OBSERVING AS FOLLOWS: - RELIANCE HAS BEEN SOUGHT TO BE PLACED ON VARIOUS CASE LAWS ON WHICH IT HAS BEEN HELD THAT INTEREST U/S 234A AND 234B MAY NOT BE LEVIED BY TREATING THE ASSESSEE IN DEFAULT FOR NON - PAYMENT OF ADVANCE TAX IN CASES WHERE CASH SEIZED FROM THE ASSESSEE WAS LYING IN CUSTODY OF THE DEPARTMENT. IT IS FURTHER CONTENDED THAT A SIMILAR PENALTY LEVIED IN THE CASE OF SH. PARVINDER SINGH PROP. M/S MAHINDER SINGH JEWELLERS, AMRITSAR WAS DELETED BY THE CIT(A), LUDHIANA AND THE ORDER HAS BEEN UPHELD BY THE ITAT, AMRITSAR VIDE ITS ORDER DATED 4.10.2012. HOWEVER, THE ABOVE ARGUMENTS OF THE ASSESSEE CANNOT BE ACCEPTED FOR THE REASONS THAT IT IS CLEARLY MENTIONED IN SECTION 132B OF THE INCOME - TAX AC6T, 1961 THAT THE SEIZED ASSETS HAVE TO BE ADJUSTED AGAINST : - THE AMOUNT OF ANY EXISTING LIAB ILITY UNDER THIS ACT, THE WEALTH TAX ACT, 1957 EXPENDITURE TAX, 1987, GIFT TAX ACT, 1958 AND THE INTEREST TAX ACT, 1974 AND THE AMOUNT OF THE TAX LIABILITY DETERMINED ON THE COMPLETION OF THE ASSESSMENT UNDER SECTION 153A AND THE ASSESSMENT OF THE YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS INITIATE OR REQUISITION IS MADE, OR THE AMOUNT OF LIABILITY DETERMINED ON COMPLETION OF THE ASSESSMENT UNDER CHAPTER XIV - B FOR THE PERIOD AS THE CASE MAY BE (INCLUDING ANY PENALTY AND INTEREST PAYABLE IN CONNEC TION WITH SUCH ASSESSMENT AND IN RESPECT OF WHICH SUCH PERSONS IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT MAY BE RECOVERED OUT OF SEARCH ASSETS. IT WAS VERY MUCH CLEAR FROM A PLAIN READING OF THIS SECTION THAT THE LEGISLATIVE INTENT ALWAYS HAD BEEN THA T THE AMOUNT OF SEIZED CASH WILL BE ADJUSTED ONLY AGAINST REGULAR DEMAND AFTER ASSESSMENT AND NOT AGAINST ADVANCE TAX LIABILITY. HOWEVER, DIFFERENT COURTS HAD INTERPRETED IT IN DIVERGENT MANNERS LEADING TO SOME CONFUSION ON THIS ACCOUNT. THEREFORE, EXPLANA TION 2 HAD TO BE INSERTED BY FINANCE ACT, 2013 IN THE FORM OF CLARIFICATION FOR THE REMOVAL OF DOUBTS AND IT CLEARLY STATES AS UNDER : - EXPLANATION - 2 FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE EXISTING LIABILITY DOES NOT INCLU DE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART C OF CHAPTER XVII. AFTER THE INSERTION OF THE ABOVE EXPLANATION THE DEPARTMENTAL CASE IS FURTHER STRENGTHENED THAT THE SEIZED CASH CANNOT BE ADJUSTED AGAINST I.T.A. NO. 185/ASR/2015 ASSESSMENT YEAR: 2011 - 12 PAGE 4 OF 5 THE ADVANCE TAX. WITH THE INS ERTION OF THIS EXPLANATION THE JUDICIAL PRONOUNCEMENTS GIVEN BY THE ASSESSEE ALSO STAND OVER RULED. IN VIEW OF THE ABOVE IT IS CLEAR THAT THE ASSESSEE IS IN DEFAULT OF HAVING FAILED TO PAY THE ADVANCE TAX IN RESPECT OF THE INCOME DISCLOSED U/S 132(4) AND HENCE I AM CONVINCED THAT PENALTY U/S 271AAA IS LEVIABLE AND IT IS A FIT CASE FOR LEVY OF PENALTY UNDER THE SAID SECTION. THE QUANTUM OF SUCH PENALTY LEVIABLE BEING 10% ON UNDISCLOSED INCOME IS WORKED OUT AS UNDER : - TOTAL AMOUNT OF UNDISCLOSED INCOME RS.3,00,00,000 PENALTY LEVIABLE @ 10% OF ABOVE RS.30,00,000 THUS I HEREBY IMPOSE A PENALTY OF RS.30,00,000 IN THIS CASE U/S 271AA OF THE INCOME - TAX ACT, 1961. ISSUE REQUISITE DOCUMENTS. 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THE PENALTY BY OBSERVING THAT EXPLANATION 2 TO SECTION 132B INSERTED BY FINANCE ACT, 2013 IS PROSPECTIVE IN NATURE AND, ACCORDINGLY, SET OFF SHOULD HAVE BEEN GRANTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER IS AGGRIEVED, AND I S IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 6. WE FIND THAT THE EXPLANATION 2 TO SECTION 132B, AS FINANCE ACT, 2013 CLE ARLY STATES IS EFFECTIVE FROM 1 ST JUNE, 2013. WHEN THE LAW SO SPECIFICALLY STATES, THERE IS NO SCOPE OF HOLDING THAT IT IS RETROSPECTIVE IN EFFECT. THIS PROVISION RESTRICTS THE SCOPE OF ADJUSTMENT OF SEIZED CASH, AND, THEREFORE, IS TO BE TREATED AS ADVANCE TO THE ASSESSEE. AS HELD BY HON BLE SUPREME COURT IN THE CASE OF CIT VS. VATIKA TOWNSHIP PVT. LTD. (2014) 367 ITR 466 (SC) THE I.T.A. NO. 185/ASR/2015 ASSESSMENT YEAR: 2011 - 12 PAGE 5 OF 5 LEGISLATION WHICH MODIFIES ACCRUED RIGHTS OR WHICH IMPOSES OBLIGATIONS OR IMPOSE NEW DUTIES OR ATTACH A NEW DISABILITY HAVE TO BE TREATED AS PROSPECTIVE, UNLESS THE LEGISLATIVE INTENT IS CLEARLY TO GIVE THE ENACTMENT A RETROSPECTIVE EFFECT. IN VIEW OF THESE DISCUSSIONS AND CONSISTENT WITH THE STAND TAKEN BY THE CO - ORDINATE BENCH, WE APPROVE THE REASONING ADOPTED BY THE CIT(A). AC CORDINGLY, WE APPROVE THE ORDER OF THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED TODAY ON 31 ST DAY OF AUGUST 2015 UNDER PROVISO TO RULE 34(4) OF THE APPELLATE TRIBUNAL (INCOME - TAX) RULES, 1963 . SD/XX SD/XX A. D. JAIN PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AMRITSAR, THE 31 ST DAY OF AUGUST 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT ( 3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL A MRITSAR BENCH AMRITSAR