Shri. T. A. Ashok Kumar, Mysore V. DCIT, Mysore

ITA 346/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2036 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-10-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: V SRINIVASAN
• Keywords: Question of law
• Section: 234B; 154

Judgement Text

PAGE 1 OF 8 ITA NO.346 /B/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI SHAILENDRAKUMAR YADAV, J.M. AND SHRI N L KALRA, A.M ITA NO.346/BANG/09 (ASST. YEAR 2006-07) SHRI T A ASHOK KUMAR, CASRE THOLASI JEWELLERY MART, 578, ASHOKA ROAD, MYSORE-570 001. - APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MYSORE. - RESPONDENT APPELLANT BY : S HRI V SRINIVASAN RESPONDENT BY : SMT . V S SREELEKHA O R D E R PER N L KALRA : THIS APPEAL IS FILED BY ASSESSEE AG AINST THE ORDER OF LEARNED CIT(A)-VI, BANGALORE DATED 20TH JANUARY, 200 9. 2. THE ASSESSEE FILED RETURN OF INCOM E ON 30TH NOVEMBER, 2006 VIDE WHICH AN INCOME OF RS.23,25,085/- WAS DEC LARED. THE RETURNED INCOME WAS ACCEPTED. THE ASSESSING OFFICE R ADJUSTED THE TAX PAID AS PER INTIMATION DATED 28TH JUNE, 200 7 TO THE EXTENT OF RS.1,30,983/-. THE AO HAS GIVEN CREDIT OF RS.6,4 0,330 IN RESPECT PAGE 2 OF 8 ITA NO.346 /B/2009 2 OF ADJUSTMENT OF SEIZED CASH AGAINST THE DEMAND AND AS PER AO, THE SAME WAS COLLECTED ON 28TH AUGUST, 2007. FOR W ORKING OUT THE INTEREST U/S 234B AND 234C, THE AO HAS TAKEN THE AD JUSTMENT FOR SEIZED CASH AS ON 28TH AUGUST, 2007. 3. THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CI T(A). BEFORE THE LEARNED CIT(A), IT WAS PLEADED THAT THE ASSESSEE PRAYED ADIT(INVS.) AS WELL AS THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS TO TREAT THE SEIZED CASH AS ADVANCE TAX. COPY OF LETTER DATED 25TH APRIL, 2006 ADDRESSED TO A DIT(INV.) AND COPY ENDORSED TO ASSESSING OFFICER WAS FILED BEFORE THE LEARNED CIT(A). BEFORE THE LEARNED CIT(A), THE ASSESSEE RE LIED ON THE DECISIONS OF THE BANGALORE BENCH IN THE CASE OF M C HAMPALAL V ACIT IN IT(SS)A NO.180 & 181/BANG/02 DATED 31ST AUGUST, 2004 AND ACIT V D V RAGHURAM IN IT(SS)A NO.136/BANG/04 DATED 30TH NOVEMBER, 2007 TO SUPPORT HIS CASE THAT THE CHARGIN G OF INTEREST IS NOT CORRECT. RELIANCE WAS ALSO PLACED ON THE DE CISION OF THE APEX COURT IN THE CASE OF CIT V M CHANDRAS SHEKHAR 151 I TR 433 AND GANESH DASS SHREERAM V ITO 169 ITR 221 TO SUPPORT T HE CASE THAT CHARGING OF INTEREST IS COMPENSATORY IN NATURE. THE LEARNED CIT(A) OBSERVED THAT THE PRINCIPLES LAID DOWN BY THE ITAT, BANGALORE ARE NOT APPLICABLE TO THE FACTS OF THE CASE. THE BANGA LORE BENCH HAS DECIDED THE CASE IN RESPECT OF CHARGING OF INTEREST U/S 158BFA(1) IN THE CASE OF CHAMPALAL IN WHICH PAWNED ITEMS WERE SEIZED AND NOT CASH. IN ORDER TO GET THE RELEASE OF PAWNED ITEMS, SHRI CHAMPALAL PAGE 3 OF 8 ITA NO.346 /B/2009 3 PAID THE TAX AS AND WHEN HE DESIRED TO GET THE SEIZ ED ITEMS RELEASED. ON THESE FACTS, THE ITAT GAVE RELIEF TR EATING SUCH TAXES AS PREPAID TAXES. IN THE CASE OF SHRI D V RA GHURAM, THE ASSESSEE PAID TAXES AFTER THE SEARCH BUT BEFORE FIL ING OF THE RETURN. THE AO DID NOT CONSIDER THESE PREPAID TAXE S AND ON APPEAL, THE ITAT GAVE RELIEF. IN THAT CASE, THERE WAS NO S EIZURE OF CASH. THE SEIZED CASH IS CREDITED TO PERSONAL DEPOSITS AC COUNT OF THE CIT. ONLY WHEN TAX IS DETERMINED AFTER THE ASSESSMEN T, THE CIT ON THE REQUEST OF AO RELEASED IT FOR ADJUSTMENT TOWARD S TAX, INTEREST OR PENALTY. SINCE THE GOVERNMENT HAS NOT EARNED INT EREST ON THE SEIZED CASH, THEREFORE, THE AMOUNT CANNOT BE TREATE D AS ADVANCE TAX AS THERE IS NO COMPENSATORY INTEREST RECEIVED BY THE GOVERNMENT. THE LEARNED CIT(A) RELIED ON THE DECIS ION OF THE M.P. HIGH COURT IN THE CASE OF M/S RAMJILAL JAGANNATH & OTHERS V ACIT 241 ITR 758. ACCORDINGLY, THE LEARNED CIT(A) CONFI RMED THE CHARGING OF INTEREST. 4. BEFORE US, THE LEARNED AR SUBMITTED THAT A SUM OF RS. 8 LAKHS WAS SEIZED DURING THE COURSE OF SEARCH ON 31ST JANUARY, 2006. THE ASSESSEE REQUESTED THE SAME TO TREAT AS A DVANCE TAX. THE CHARGING OF INTEREST U/S 158BFA(1) IS SIMILAR T O THE CHARGING OF INTEREST U/S 234B AND 234C AND THEREFORE, THE LEARN ED CIT(A) SHOULD HAVE FOLLOWED THE DECISIONS OF ITAT, BANGALO RE. THE LEARNED AR FURTHER DREW OUR ATTENTION TO THE FACT T HAT THE DECISION OF M P HIGH COURT IN THE CASE OF M/S RAMJI LAL JAGANNATH PAGE 4 OF 8 ITA NO.346 /B/2009 4 AND OTHERS (SUPRA) WAS RENDERED IN THE CONTEXT OF S ECTION 132(5). SECTION 132(5) HAS BEEN OMITTED BY THE FINANCE ACT, 2002 W.E.F. 1.6.2002. HENCE, THAT DECISION CANNOT BE APPLIED I N THE INSTANT CASE. THE LEARNED AR RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V M/S A B KAGE & COMP ANY. THE LEARNED AR HAS FILED COPY OF THIS JUDGEMENT. IN THA T CASE, THE TRIBUNAL HELD THAT CASH SEIZED SHOULD BE ADJUSTED A GAINST ADVANCE TAX AS REQUESTED BY THE ASSESSEE U/S 140A AND CORRE SPONDINGLY INTEREST U/S 234A AND 234B OF THE ACT SHOULD BE RED UCED. THE HON'BLE HIGH COURT DECIDED THE ISSUE AGAINST THE RE VENUE. 5. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE PARTIES. A SUM OF RS.8 LAKHS WAS SEIZED DURING THE SEARCH AS ON 31ST JANUARY, 200 6. THE ASSESSEE FILED A LETTER ON 25TH APRIL, 2006 BEFORE THE ADI(INV.) VIDE WHICH HE REQUESTED TO TREAT THE SUM OF RS.8 LA KHS SEIZED AS ADVANCE TAX FOR THE ASST. YEAR 2006-07. SINCE THE R EQUEST HAS BEEN MADE AFTER THE END OF THE FINANCIAL YEAR RELEV ANT TO THE ASST. YEAR 2006-07, THEREFORE, THE SAME COULD NOT HAVE BEE N TREATED AS ADVANCE TAX AT THE REQUEST OF THE ASSESSEE. THE AS SESSEE FILED HIS RETURN ON 29TH NOVEMBER, 2006. IN THE RETURN FILED ON 29TH NOVEMBER, 2006, THE ASSESSEE REQUESTED THAT CASH SE IZED BY THE DEPARTMENT SHOULD BE TREATED AS ADVANCE TAX. THAT RETURN HAS PAGE 5 OF 8 ITA NO.346 /B/2009 5 BEEN PROCESSED AS IT IS CLEAR FROM THE ASSESSMENT O RDER THAT THE PROCESSING WAS DONE ON 28TH JUNE, 2007. 7. IN THE CASE OF A B KAGE & COMPANY, THE FOLLOWING SUBSTANTIAL QUESTION OF LAW WAS REFERRED TO THE JUR ISDICTIONAL HIGH COURT:- 'WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT CASH SEIZED DURING THE SEARCH SHOULD BE FIRST ADJUSTED TOWARDS ADVANCE TAX AS REQUESTED BY THE ASSESSEE AS PER SECTION 140A OF THE ACT AND CORRESPONDINGLY INTEREST U/S 234A AND 234B OF THE ACT SHOULD BE REDUCED? THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DA TED 23RD JUNE, 2008 IN ITA NO.28/2003 ANSWERED THE ABOVE QUESTION OF LAW AGAINST THE REVENUE BY FOLLOWING THEIR OWN JUDGEMENT IN ITRC NOS.4 TO 10/2003. WE HAVE GONE THROUGH THE DECISION OF THE JURISDICTIONAL HIGH COURT IN ITRC NOS.4 TO 10/2003. IN THAT CASE, THE ASSESSING OFFICER ADJUSTED THE SEIZED CASH WHIL E ISSUING INTIMATION U/S 143(1)(A). SUBSEQUENTLY, THE ASSESSI NG OFFICER PASSED AN ORDER U/S 154 AND WITHDREW THE ADJUSTMENT OF TAX LIABILITY MADE EARLIER. THE HON'BLE JURISDICTIONAL HIGH COURT OBSERVED THAT IT WAS HIGHLY UNETHICAL ON THE PART OF THE ASSESSING OFFICER TO HAVE INVOKED POWERS U/S 154 OF THE ACT T O RECTIFY A MISTAKE WHICH WAS NOT EVEN THERE IN THE ORDER PASSE D U/S 143(1)(A) OF THE ACT. THE AMOUNT SEIZED WAS VERY MUCH AVAILA BLE WITH THE PAGE 6 OF 8 ITA NO.346 /B/2009 6 DEPARTMENT AND IT WAS THE AMOUNT WHICH WERE ADJUSTE D TOWARDS THE TAX LIABILITY WHEN AN ORDER U/S 143(1)(A) OF THE AC T WAS PASSED BY THE ASSESSING OFFICER. THE 8. THE HON'BLE JURISDICTIONAL HIGH COURT VIDE THE IR ORDER DATED 29TH MARCH, 2005 IN ITRC NOS.4-10/2003 ALSO O BSERVED AS UNDER:- 'WE THINK THAT THE FIRST APPELLATE AUTHORITY WHILE ALLOWING THE APPEALS FILED BY THE ASSESSEE, IN ITS ORDER HAS SUMMARIZED THE WHOLE ISSUE BY SAYING 'IT IS NOT PROPER FOR THE DEPARTMENT TO KEEP THE APPELLANT'S CASH WITH ITSELF AND THEN ASK HIM TO PAY TAXES THROUGH SOME OTHER SOURCES'. 9. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF UNION HOME PRODUCTS LTD. V UNION OF INDIA 215 ITR 7 58 HAS HELD THAT INTEREST LEVIED U/S 234A, 234B AND 234C IS COM PENSATORY IN NATURE. THIS IS MEANT ON PRODUCTS WHICH THE REVENU E SUFFERS ON ACCOUNT OF NON-PAYMENT OF TAX. 10. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT TH E SEIZED CASH WAS TO BE ADJUSTED AGAINST THE TAX PAYABLE ATLE AST ON THE DATE WHEN THE ASSESSEE HAS FILED THE RETURN. WE HAVE AL SO GONE THROUGH THE COPY OF THE INTIMATION AVAILABLE AT PAGE 15 OF T HE PAPER BOOK FILED BY THE LEARNED AR. NO INTEREST U/S 234B HAS B EEN CHARGED. AFTER ADJUSTMENT OF PREPAID TAX, THE AMOUNT PAYABLE BY THE ASSESSEE HAS BEEN DETERMINED AT RS.7,38,011/-. INT EREST PAYABLE PAGE 7 OF 8 ITA NO.346 /B/2009 7 TO ASSESSEE HAS BEEN DETERMINED AT RS.1,06,983/-. BALANCEDEMAND WAS MADE AT RS.6,31,028/-. HOWEVER, THERE IS A NOT E THAT FOR ADVANCE TAX CHALLANS FOR RS.24,000/- DATED 8TH DECE MBER, 2005 AND RS.8 LAKHS DATED 31ST JANUARY, 2006, THE ASSESSI NG OFFICER HAS NOT GIVEN CREDIT BECAUSE THE SAME IS NOT TREATED AS COLLECTED IN THE SYSTEM. THUS, THE CREDIT WAS NOT GIVEN BECAUSE THE SYSTEM HAS NOT SHOWN THE COLLECTION. NATURALLY, THE SYSTEM WOULD NO T HAVE BEEN SHOWN THE COLLECTION UNTIL AND UNLESS THE ASSESSING OFFICER REQUIRED THE AMOUNT TO BE REFUNDED IN THE NAME OF T HE ASSESSEE FROM THE PD ACCOUNT OF THE CIT. WE THEREFORE FEEL THAT THE AMOUNT, WHICH WAS REQUIRED TO BE PAID AS PER RETURN FILED ON 29TH NOVEMBER, 2006 TO THE EXTENT OF DEMAND SHOULD BE TR EATED TO HAVE BEEN PAID FROM THE SEIZED CASH. THUS, THE INT EREST, IF ANY, REQUIRED TO BE COMPUTED U/S 234B UP TO 29TH NOVEMBE R, 2006. SINCE THE SEIZED CASH COULD NOT HAVE BEEN ADJUSTED AGAINST THE ADVANCE TAX, THEREFORE, THERE WILL BE NO LEVYING OF INTEREST IN RESPECT OF 234C. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 10TH DECEMBER, 2009. SD/- SD/- (SHAILENDRAKUMAR YADAV) (N L KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED :10/12/2009 PAGE 8 OF 8 ITA NO.346 /B/2009 8 COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. MSP/12.11. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.