Smt. Shelly Mehta, Amritsar V. Deputy Commissioner of Income tax, Amritsar

ITA 58/ASR/2010

• Counselvise Citation: 5820914 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Gift; Search and seizure
• Section: 153A; 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AMRITSAR BENC H: AMRITSAR BEFORE SHRI H L KARWA, VP AND SHRI D K SRIVASTAVA, AM ITA NO. 57/ASR/2010 AY: 2007-08 SMT. KAMLA MEHTA C/O V. DCIT, CENTRAL CIRCLE, AMRITSAR M/S S.K. TRADING CO 94-LAWRENCE ROAD, AMRITSAR PAN: ACEPM 1028 L ITA NO. 58/ASR/2010 AY: 2007-08 SMT. SHELLY MEHTA C/O V. DCIT, CENTRAL CIRCLE, AMRITSAR M/S S.K. TRADING CO 94-LAWRENCE ROAD, AMRITSAR PAN: ACEPM 1029 M APPELLANTS BY: SHRI P.N. ARORA RESPONDENT BY: SHRI TARSEM LAL, DR DATE OF HEARING: 12.12.2011 DATE OF PRONOUNCEMENT: 16.12.2011 ORDER D K SRIVASTAVA : WHILE THE APPEAL BEARING ITA NO. 57/ASR/2010 FILE D BY SMT. KAMLA MEHTA IS DIRECTED AGAINST THE ORDER P ASSED BY THE LD. CIT(A) ON 17.11.2009, THE OTHER APPEAL BEARING ITA NO. 58/ASR /2010 FILED BY SMT. SHELLY MEHTA IS DIRECTED AGAINST THE ORDER PASSED BY THE C IT(A) ON THE SAME DATE, NAMELY, 17.11.2009. AT THE TIME OF HEARING, IT WAS SUBMITTED BY BOTH THE PARTIES THAT THE FACTS AND THE GROUNDS OF APPEAL IN BOTH THE CASES ARE IDENTICAL AND THEREFORE THEY SHOULD BE DISPOSED OFF BY A CONS OLIDATED ORDER. FOR THE SAKE OF CONVENIENCE, A CONSOLIDATED ORDER IS THEREFORE B EING PASSED TO DISPOSE OFF BOTH THE APPEALS. 2. IN ITA NO. 57/ASR/2010 THE ASSESSEE, NAMELY, SMT . KAMLA MEHTA HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS MATERIALLY ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B OF THE INCOME-TAX ACT, 1961 BY THE AO BY HOLDING THE A PPELLANT IN DEFAULT SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 2 AND BEING LIABLE TO PAY ADVANCE-TAX ON THE AMOUNT S URRENDERED AND SETTLEMENT MADE DURING THE COURSE OF SEARCH OPERATI ONS U/S 132 OF THE ACT, EVEN THOUGH AFTER THE CLOSE OF THE PREVIOUS YE AR, ON 17.7.2007. THAT BOTH THE AUTHORITIES BELOW HAVE GRIEVOUSLY ER RED IN NOT FOLLOWING THE ORDERS OF ITAT AMRITSAR BENCH IN T CA SE OF BRIJ PRINTING WORKS, AMRITSAR (ITA NO. 329/ASR/1996) AS POINTED O UT BY THE APPELLANT BEING DIRECTLY ON THE ISSUE. 2. THAT THE LD. CIT(A) HAS FURTHER ERRED IN AFFIRMI NG AOS ACTION FOR LEVY OF INTEREST U/S 234B FOR THE PERIOD OF 25 MONT HS FROM 1.4.2007 TO 28.4.2009 (DATE OF ASSESSMENT ORDER U/S 143(3)) AND NOT GIVING CREDIT OF THE AMOUNT RECOVERED BY THE DEPARTMENT ON 28.7.2007 AMOUNTING TO RS. 21,89,136/- WHICH HAS BEEN LYING IDLE WITH THE DEPARTMENT, THEREBY QUIETLY IGNORING APPELLANTS SEVERAL REQUEST LETTER S FILED WITH THE DEPARTMENT FOR ADJUSTMENT OF CASH SEIZED BY IT ON T HE SAID DATE AGAINST THE INCOME-TAX LIABILITY DUE CONSEQUENT TO THE ADMI SSION OF INCOME Y THE APPELLANT DURING THE COURSE OF SEARCH U/S 132. IN ADDITION TO ABOVE, BOTH THE DEPARTMENTAL AUTHOR ITIES BELOW HAVE IGNORED THE INCOME TAX RETURN FILED BY THE APP ELLANT ON 18.2.2008 SHOWING THE UNDISCLOSED INCOME ADMITTED DURING THE SEARCH PROCEEDINGS. AS PER THE SAID RETURN, THE APPELLANT WAS LIABLE TO PAY THE CONSEQUENT INCOME TAX LIABILITY U/S 140A, AGAINST W HICH SET OFF OF AMOUNT RECOVERED ON 28.7.2007 HAD BEEN CLAIMED, AND BALANCE SELF ASSESSMENT TAX WAS DEPOSITED INTO THE GOVERNMENT TR EASURY. 3. THAT THE LD. CIT(A) HAS ERRED IN PLACING A VERY NARROW AND RESTRICTED INTERPRETATION TO THE TERM EXISTING LIA BILITY U/S 132B OF THE ACT, WHICH IS UNREASONABLE AND UNWORKABLE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT SINCE THE APPE LLANT HAD HERSELF REQUESTED THE DEPARTMENT FOR ADJUSTING THE CASH SEI ZED AS THE TAX PAID BY HER, THERE IS NO NECESSITY OF APPLICATION OF SEC TION 132B OF THE ACT. 5. THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN NOT FOLLO WING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THIS REGARD REPORTE D AT 145 ITR 1, 145 SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 3 ITR 7, 145 ITR 11, 59 ITR 767, 69 ITR 864 HOLDING T HAT THE INCOME TAX LIABILITY ACCRUES AND ARISES AND DOES CRYSTALLIZE B EFORE THE END OF THE ACCOUNTING YEAR AND WHATEVER IS QUANTIFIED SUBSEQUE NTLY BY PROCEEDINGS IN ASSESSMENT RELATE BACK TO THE LAST DAY OF THE RE LEVANT ACCOUNTING YEAR. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, AND ON PROPER CONSTRUCTION OF THE EXPRESS PROVISIONS OF SE CTION 234B AND THE SCHEME OF THE INCOME-TAX ACT, 1961 THE ORDER OF LD. CIT(A) UPHOLDING AOS ACTION OF LEVYING INTEREST U/S234B IS NOT LEGA LLY JUSTIFIED AND SUSTAINABLE. 3. IN ITA NO. 58/ASR/2010, THE ASSESSEE, NAMELY, SM T. SHELLY MEHTA HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS MATERIALLY ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B OF THE INCOME-TAX ACT, 1961 BY THE AO BY HOLDING THE A PPELLANT IN DEFAULT AND BEING LIABLE TO PAY ADVANCE-TAX ON THE AMOUNT S URRENDERED AND SETTLEMENT MADE DURING THE COURSE OF SEARCH OPERATI ONS U/S 132 OF THE ACT, EVEN THOUGH AFTER THE CLOSE OF THE PREVIOUS YE AR, ON 17.7.2007. THAT BOTH THE AUTHORITIES BELOW HAVE GRIEVOUSLY ER RED IN NOT FOLLOWING THE ORDERS OF ITAT AMRITSAR BENCH IN T CA SE OF BRIJ PRINTING WORKS, AMRITSAR (ITA NO. 329/ASR/1996) AS POINTED O UT BY THE APPELLANT BEING DIRECTLY ON THE ISSUE. 2. THAT THE LD. CIT(A) HAS FURTHER ERRED IN AFFIRMI NG AOS ACTION FOR LEVY OF INTEREST U/S 234B FOR THE PERIOD OF 25 MONT HS FROM 1.4.2007 TO 28.4.2009 (DATE OF ASSESSMENT ORDER U/S 143(3)) AND NOT GIVING CREDIT OF THE AMOUNT RECOVERED BY THE DEPARTMENT ON 28.7.2007 AMOUNTING TO RS. 21,89,136/- WHICH HAS BEEN LYING IDLE WITH THE DEPARTMENT, THEREBY QUIETLY IGNORING APPELLANTS SEVERAL REQUEST LETTER S FILED WITH THE DEPARTMENT FOR ADJUSTMENT OF CASH SEIZED BY IT ON T HE SAID DATE AGAINST THE INCOME-TAX LIABILITY DUE CONSEQUENT TO THE ADMI SSION OF INCOME Y THE APPELLANT DURING THE COURSE OF SEARCH U/S 132. SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 4 IN ADDITION TO ABOVE, BOTH THE DEPARTMENTAL AUTHOR ITIES BELOW HAVE IGNORED THE INCOME TAX RETURN FILED BY THE APP ELLANT ON 18.2.2008 SHOWING THE UNDISCLOSED INCOME ADMITTED DURING THE SEARCH PROCEEDINGS. AS PER THE SAID RETURN, THE APPELLANT WAS LIABLE TO PAY THE CONSEQUENT INCOME TAX LIABILITY U/S 140A, AGAINST W HICH SET OFF OF AMOUNT RECOVERED ON 28.7.2007 HAD BEEN CLAIMED, AND BALANCE SELF ASSESSMENT TAX WAS DEPOSITED INTO THE GOVERNMENT TR EASURY. 3. THAT THE LD. CIT(A) HAS ERRED IN PLACING A VERY NARROW AND RESTRICTED INTERPRETATION TO THE TERM EXISTING LIA BILITY U/S 132B OF THE ACT, WHICH IS UNREASONABLE AND UNWORKABLE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT SINCE THE APPE LLANT HAD HERSELF REQUESTED THE DEPARTMENT FOR ADJUSTING THE CASH SEI ZED AS THE TAX PAID BY HER, THERE IS NO NECESSITY OF APPLICATION OF SEC TION 132B OF THE ACT. 5. THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN NOT FOLLO WING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THIS REGARD REPORTE D AT 145 ITR 1, 145 ITR 7, 145 ITR 11, 59 ITR 767, 69 ITR 864 HOLDING T HAT THE INCOME TAX LIABILITY ACCRUES AND ARISES AND DOES CRYSTALLIZE B EFORE THE END OF THE ACCOUNTING YEAR AND WHATEVER IS QUANTIFIED SUBSEQUE NTLY BY PROCEEDINGS IN ASSESSMENT RELATE BACK TO THE LAST DAY OF THE RE LEVANT ACCOUNTING YEAR. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, AND ON PROPER CONSTRUCTION OF THE EXPRESS PROVISIONS OF SE CTION 234B AND THE SCHEME OF THE INCOME-TAX ACT, 1961 THE ORDER OF LD. CIT(A) UPHOLDING AOS ACTION OF LEVYING INTEREST U/S234B IS NOT LEGA LLY JUSTIFIED AND SUSTAINABLE. 4. AS STATED EARLIER, FACTS AS WELL AS THE GROUNDS OF APPEAL TAKEN BY BOTH THE ASSESSEES ARE COMMON. FOR THE SAKE OF CONVENIEN CE, THE FACTS ARE BEING EXTRACTED FROM THE RECORD OF SMT. KAMLA MEHTA. 5. AT THE TIME OF HEARING GROUNDS NO.1,3,4,5 AND 6 WERE NOT PRESSED BY BOTH THE ASSESSEES. THEY ARE THEREFORE DISMISSED AS NOT PRESSED. WE ARE NOW SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 5 LEFT WITH ONLY ONE GROUND OF APPEAL, I.E., GROUND N O. 2 IN BOTH THE APPEALS, FOR DISPOSAL. 6. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT SE ARCH AND SEIZURE OPERATIONS WERE CARRIED OUT BY THE INCOME-TAX DEPAR TMENT ON 17.7.2007 AT THE PREMISES OF BOTH THE ASSESSEES. IN ADDITION, SEARCH WAS ALSO CARRIED OUT IN THE CASE OF SHRI SARUP CHAND DURING WHICH A SUM OF RS. 43,73,136/- FOUND DEPOSITED IN THE BANK ACCOUNT OF SHRI SARUP CHAND I N STANDARD CHARTERED BANK, WAS SEIZED. THE AMOUNT SO SEIZED FROM THE BAN K ACCOUNT OF SHRI SARUP CHAND WAS LATER DEPOSITED IN THE PERSONAL DEPOSIT A CCOUNT OF CIT-I, AMRITSAR. A NOTE WAS APPENDED IN THE RETURN OF INCOME FILED BY BOTH THE ASSESSEES, NAMELY, SMT. KAMLA MEHTA AND SMT. SHELLY MEHTA THAT THE AMOUNT SEIZED FROM SARUP CHAND, WHICH WAS LYING IN THE PERSONAL DEPOSI T ACCOUNT OF CIT-I, AMRITSAR, SHOULD BE ADJUSTED AGAINST SELF ASSESSMEN T TAX PAYABLE BY BOTH THE ASSESSEES. AFFIDAVIT OF SARUP CHAND CLAIMING THAT T HE MONEY SEIZED FROM HIM BELONGED TO BOTH THE AFORESAID ASSESSES, WAS ALSO F ILED. BOTH THE ASSESSEES ALSO WROTE TO THE AO FOR ADJUSTMENT OF THE CASH SEI ZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND AGAINST THE TAX LIABILITY OF BO TH THE ASSESSEES. THE AO APPRISED THE CIT-I, AMRITSAR OF THE AFORESAID FACTS UPON WHICH HE WAS INFORMED THAT THE ADJUSTMENT OF CASH SEIZED FROM THE BANK AC COUNT OF SARUP CHAND AGAINST THE DEMAND/LIABILITY OF BOTH THE ASSESSEES SHOULD BE SOUGHT AFTER CREATION OF DEMAND. THE ASSESSMENT WAS FRAMED IN DU E COURSE NOT ONLY IN THE CASES OF BOTH THE ASSESSEES BUT ALSO IN THE CASE OF SHRI SARUP CHAND. A COPY OF THE ASSESSMENT ORDER PASSED BY THE AO ON 28.4.2009 IN THE CASE OF SHRI SARUP CHAND HAS BEEN PLACED BY THE ASSESSEE IN THE PAPER BOOK FILED BEFORE US. PERUSAL OF THE ASSESSMENT ORDER PASSED IN THE CASE OF SHRI SARUP CHAND SHOWS THAT SHRI SARUP CHAND HAS NOT BEEN ASSESSED WITH RE GARD TO THE AMOUNT SEIZED FROM HIS BANK ACCOUNT. THE AO THEREFORE AGAIN APPRO ACHED THE CIT FOR ADJUSTMENT OF THE AMOUNT SEIZED FROM THE BANK ACCOU NT OF SHRI SARUP CHAND AND LYING IN THE PERSONAL DEPOSIT ACCOUNT OF CIT-I, AMRITSAR FOR ADJUSTMENT AGAINST DEMAND DUE FROM BOTH THE ASSESSEES UPON WHI CH THE CIT-I, AMRITSAR ALLOWED THE AO TO ADJUST THE CASH SEIZED FROM THE B ANK ACCOUNT OF SHRI SARUP CHAND AGAINST THE DEMAND DUE FROM BOTH THE ASSESSEE S, VIDE HIS LETTER DATED 26.6.2009. THE ADJUSTMENT WAS ACCORDINGLY ALLOWED B Y THE AO. HOWEVER, PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE AO SH OWS THAT HE HAS CHARGED SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 6 INTEREST U/S 234B IN THE CASES OF BOTH THE ASSESSEE S. THE GRIEVANCE OF THE ASSESSEE IS THAT THE AO SHOULD HAVE ADJUSTED THE CA SH SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND AGAINST THE SELF ASSESS MENT TAX DUE U/S 140A FROM BOTH THE ASSESSEES IN TERMS OF SECTION 132B AN D CHARGED INTEREST U/S 234B ACCORDINGLY. THE CASE OF THE DEPARTMENT, ON TH E OTHER HAND, IS THAT THE CASH WAS NOT SEIZED FROM THE POSSESSION OR THE PREM ISES OF EITHER SMT. KAMLA MEHTA OR SMT. SHELLY MEHTA AND THEREFORE THE AO WAS JUSTIFIED IN NOT ADJUSTING THE CASH SEIZED FROM SHRI SARUP CHAND AGAINST THE S ELF ASSESSMENT TAX DUE FROM BOTH THE ASSESSEES. 7. AGGRIEVED BY THE ORDER PASSED BY THE AO CHARGING INTEREST U/S 234B, BOTH THE ASSESSEES FILED APPEAL BEFORE THE LD. CIT( A) . THE LD. CIT(A) HOWEVER DISMISSED THE APPEAL FILED BY THE ASSESSEES WITH TH E FOLLOWING OBSERVATIONS (EXTRACTED FROM THE APPELLATE ORDER OF THE CIT(A) I N THE CASE OF SMT.KAMLA MEHTA):- THE MOOT POINT TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER SEIZED CASH COULD HAVE BEEN ADJUSTED TOWARDS THE ADVANCE T AX LIABILITY OF THE ASSESSEE. THERE ARE DIVERGENT DECISIONS OF THE COUR TS AS REGARDS THE APPLICATION OF SEIZED CASH TOWARDS THE ADVANCE TAX LIABILITY. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. K.K. MARKETI NG 278 ITR 596 HAS HELD THAT THERE IS NOTHING TO PROHIBIT THE ASSESSEE FROM MAKING A REQUEST FROM ADJUSTMENT OF THE CASH SEIZED AGAINST THE ADVANCE TAX LIABILITY. IN THIS CASE HE ASSESSEE HAD REQUESTED T HE AO TO ADJUST THE SEIZED CASH TOWARDS THE TAX LIABILITY. HOWEVER, ON THE OTHER HAND HON'BLE MADHYA PRADESH HIGH COURT IN RAMJILAL JAGAN NATH V. ACIT, 241 ITR 758 HELD THAT UNLESS THE AO MAKES AN ENQUIRY, T HE OCCASION TO RETAIN THE ASSETS OR TO ADJUST THE ASSETS SHALL COM E INTO EXISTENCE ONLY AFTER A FINAL ORDER IS MADE U/S 132(5) OF THE ACT. ALSO, IN GIAN CHAND V. DCIT (2002) 80 TD 548, THE DELHI BENCH OF THE TRIBU NAL HELD THAT SEIZED CASH CAN BE ADJUSTED AGAINST THE EXISTING LIABILITI ES AND NOT TOWARDS ADVANCE TAX. IN THIS CONNECTION, IT WILL BE USEFUL TO REFER TO THE PROVISIONS OF SECTION 132B OF THE ACT. CLAUSE (I) O F SUB SECTION (1) OF SECTION 132B PRESCRIBES THE PROCEDURE FOR APPLICATI ON OF THE SEIZED OR REQUISITIONED ASSETS THE PROVISIONS OF CLAUSE (I) O F SUB SECTION (1) OF SECTION 132B READS AS UNDER:- SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 7 132B. APPLICATION OF SEIZED OR REQUISITIONED ASSTS (1) THE ASSET SEIZED U/S 132 OR REQUISITIONED U/S 132A MAY BE DEA LTL 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 T AX ACT, 1987 (35 OF 1987), THE GIFT-TAX ACT, 1958 (18 OF 1958) A ND THE INTEREST TAX ACT, 1974 (45 OF 1974) AND THE AMOUNT OF THE TA X LIABILITY DETERMINED ON COMPLETION OF THE ASSESSMENT U/S 153A AND THE ASSESSMENT OF THE YEAR RELEVANT TO THE PREVIOUS YEA R IN WHICH SEARCH IS INITIATED OR REQUISITION IF MADE OR THE A MOUNT OF LIABILITY DETERMINED ON COMPLETION OF THE ASSESSMENT UNDER CH APTER XIV- B FOR THE BLOCK PERIOD, AS THE CASE MAY BE (INCLUDI NG ANY PENALTY OR INTEREST PAYABLE IN CONNECTION WITH SUCH ASSESSM ENT) AND IN RESPECT OF WHICH SUCH PERSON IS IN DEFAULT OR IS DE EMED TO BE IN DEFAULT, MAY BE RECOVERED OUT OF SUCH ASSETS. THE PROVISIONS OF CLAUSE (I) CAN BE SPLIT TO UNDERS TAND AS TO HOW THE SEIZED ASSTS HAVE TO BE APPLIED AND THIS WILL S HOW THAT ASSETS SEIZED CAN BE APPLIED:- (I) TOWARDS THE AMOUNT OF AY EXISTING LIABILITY UND ER INCOME- TAX ACT, 1961; (II) TOWARDS THE EXISTING LIABILITY UNDER THE WEALT H-TAX ACT, 1957; (III) TOWARDS THE EXISTING LIABILITY UNDER THE EXPE NDITURE TAX ACT, 1987; (IV) TOWARDS THE EXISTING LIABILITY UNDER THE GIVT TAX ACT, 1958; (V) TOWARDS THE EXISTING LIABILITY UNDER THE INTERE ST TAX AC, 1974; AND (B) (I) TOWARDS THE LIABILITY DETERMINED ON COMPLET ION OF ASSESSMENT U/S 153A; (II) TOWARDS THE LIABILITY DETERMINED ON COMPLETION OF THE ASSESSMENT OF THE YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH TOOK PLACE OR REQUISITIONED WAS MADE; (III) TOWARDS THE LIABILITY DETERMINED ON ASSESSMEN T UNDER CHAPTER XIV-B FOR THE BLOCK PERIOD; AND SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 8 (IV) TOWARDS THE PENALTY OR INTEREST PAYABLE AND PERTAINING TO ABOVE ASSESSMENT DONE UNDER INCOME-TA X ACT. IT WOULD, THUS, BE SEEN THAT CONTROVERSY THAT ARISE S IS ABOUT THE ISSUE WHETHER ADVANCE TAX LIABILITY CAN BE SAID TO BE COVERED BY THE PHRASE EXISTING LIABILITY AS USED U/S 132B (1)(I) OF THE INCOME-TAX ACT. A MOOT QUESTION THAT ARISES IS WHETHER ADVANCE TAX IS AN EXISTING LIABILITY? ANALYSIS OF CLAUSE (I) OF SECTION 132B(1 ) WOULD SHOW THAT U/S 132B THE PHRASE EXISTING LIABILITY IS USED IN REF ERENCE TO THE INCOME-TAX ACT, 1961, THE GIFT-TAX ACT, WEALTH-TAX ACT, THE EX PENDITURE-TAX AND THE INTEREST-TAX ACT WHICH IMPLIEDLY MEANS THAT THE INT ERPRETATION OF THIS PHRASE HAS TO BE THE SAME UNDER ALL THESE ACTS REFE RRED TO. THAT IS, IT CANNOT HOLD DIFFERENT MEANINGS UNDER DIFFERENT ACTS . NORMAL RULE OF INTERPRETATION IS THAT GENERAL WORDS AND PHRASES IN A STATUTE RECEIVE GENERAL CONSTRUCTION UNLESS THERE IS SOMETHING IN THE ACT ITSELF TO INDICATE THAT THEY SHOULD BE GIVEN RE STRICTIVE OR SPECIAL MEANING. IF RULE/DOCTRINE OF NOSCITUR A SOCIIS WH ICH REQUIRES THAT ASSOCIATED WORDS TAKE THEIR MEANING FROM ONE ANOTHE R IS APPLIED TO INTERPRET, THE WORD EXISTING HAS TO BE UNDERSTOOD IN ITS COGNATE SENSE WHEREBY IT WOULD BECOME CLEAR THAT IT CANNOT BE INT ERPRETED DIFFERENTLY IN REFERENCE TO INCOME-TAX ACT. UNDER THE GIFT-TAX ACT, THE WEALTH-TAX ACT, THE EXP ENDITURE-TAX AND THE INTEREST-TAX ACT, THE CONCEPT OF ADVANCE P AYMENT OF TAX IS NOT APPLICABLE. THE WORDS EXISTING LIABILITY CANNOT M EAN ADVANCE TAX UNDER THE INCOME-TAX ACT. UNDER ALL THESE ACTS INCLUDING THE INCOME-TAX ACT THE MEANING WHICH WILL HOLD GOOD WITH EQUAL FORCE I S THAT IT MEANS A LIABILITY WHICH IS CRYSTALLIZED BY WAY OF ASSESSMEN T AND WHICH IS STILL NOT PAID AS ON THE DATE OF SEIZURE. 8. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A), BOTH THE ASSESSEES ARE NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF A PPEAL, IT WAS SUBMITTED THAT THE AO OUGHT TO HAVE ADJUSTED THE CASH SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND AGAINST SELF ASSESSMENT TAX DUE U/S 140 A IN THE CASES OF BOTH THE ASSESSEES IN TERMS OF SECTION 132B AND INTEREST U/S 234B CHARGED ACCORDINGLY. SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 9 9. IN REPLY, THE LD. DEPARTMENTAL REPRESENTATIVE HA S FILED WRITTEN SUBMISSIONS, WHICH READ AS UNDER: IT IS SUBMITTED THAT THE ASSESSEES APPEAL DESERVE S TO BE DISMISSED ON THE FOLLOWING GROUNDS: 1. IN NONE OF ITS GROUNDS OF APPEAL, THE ASSESSEE H AS CHALLENGED THE HOLDING OF THE LD. CIT(A) THAT THERE IS CONFLICT IN JUDICIAL OPINION AS TO WHETHER ADVANCE TAX LIABILITY CAN BE ADJUSTED AGAIN ST THE ASSETS RETAINED U/S 132B OF THE INCOME-TAX ACT, 1961 BUT W.E.F. 1.6 .2002 WITH THE SUBSTITUTION OF THE SAID SECTION BY THE FINANCEACT, 2002,THE PROVISIONS; OF SUBSTITUTED SECTION ARE VERY CLEAR AND DO NOT PERMI T APPLICATION OF ADJUSTMENT OF SEIZED ASSET LIKE CASH, BULLION, JEWE LLERY ETC. TOWARDS THE ADVANCE TAX LIABILITY. SINCE THE, ASSESSEE HAS NOT CHALLENGED THIS SOLE FINDING OF THE LD. CIT(A) ,ITS APPEAL IS NOT MAINTA INABLE. 2. THE CASH OF WHICH THE ASSESSEE DEMANDED ADJUSTME NT WAS FOUND DEPOSITED IN THE NAME OF SHRI SARUP CHAND, AN EMPLO YEE OF THE HUSBAND OF THE ASSESSEE. SHRI SARUP CHAND ADMITTEDL Y HAD GIVEN AN AFFIDAVIT WHICH THE ASSESSEE HAD FILED ALONGWITH TH E RETURN BUT THE SAID AFFIDAVIT NEEDED TO BE SCRUTINIZED AND THE REQUEST OF SHRI SARUP CHAND FOR ADJUSTMENT; OF THE CASH RETAINED AGAINST THE LI ABILITY OF THE ASSESSEE COULD NOT ACCEPTED AS PROCEEDINGS IN HIS OWN CASE H AD BEEN INITIATED BY THE AO UNDER SECTION 153A VIDE NOTICE ISSUED ON 25. 1.2008. SHRI SARUP CHANDS REQUEST FOR ADJUSTMENT OF TAX COULD BE ACCE PTED ONLY AFTER COMPLETING HIS ASSESSMENT AND REACHING A CONCLUSION THAT THE CASH FOUND DEPOSITED IN HIS NAME IN THE BANK DID NOT FOR M PART OF HIS TOTAL INCOME. ASSESSMENT IN THE CASE OF SHRI SARUP CHAND AS LAWFULLY INITIATED U/S 153A WAS COMPLETED BY THE AO 28.4.2009 I.E. SIM ULTANEOUSLY WITH THE ASSESSMENT OF THE ASSESSMENT. A COPY OF ASSESSM ENT ORDER OF SHRI SARUP CHAND IS AVAILABLE AT 34 AND 35 OF THE PAPER BOOK FILED BY THE ASSESSEE. THUS,TILL 28.4.2009, NO ADJUSTMENT OF THE CASH RETAINED AS FOUND FROM THE BANK ACCOUNT OF SHRI SARUP CHAND COU LD BE ADJUSTED AGAINST THE DEMAND OF THE ASSESSEE. 3 THE ASSESSEE HAS DEMANDED THE ADJUSTMENT OF THE C ASH AGAINST THE SELF TAX ASSESSMENT TAX LIABILITY VIDE NOTE APP ENDED ALONG WITH SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 10 RETURN AND ALSO IN LETTER ADDRESSED TO THE CIT. IT MAY BE MENTIONED HERE THAT IN THE CHARGING OF INTEREST U/S234B, CREDIT FO R TAX PAID U/S 140A IS NOT GIVEN AS IS OBVIOUS FROM THE EXPLANATION TO SEC TION 234B EXPLAINING THE MEANING OF ASSESSED TAX ON WHICH INTEREST U/S 234B IS CHARGED. 4 WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, IT MA Y BE MENTIONED THAT THE ASSESSEE HAS NEVER MADE ANY REQUEST FOR AD JUSTMENT OF THE CASH RETAINED AGAINST THE ADVANCE TAX LIABILITY AND HE RAISED THIS ISSUE ONLY BEFORE THE LD. CIT(A) AND NEVER BEFORE THE AO. BEFORE THE AO, THE ASSESSEE WAS ONLY DEMANDING ADJUSTMENT AGAINST THE SELF ASSESSMENT TAX. 5 THE ASSESSEES CLAIM THAT H AMOUNT RETAINED IN RE SPECT OF CASH FOUND IN THE ACCOUNT OF SHRI SARUP CHAND DURING SEA RCH ON 17.7.2007 BE ADJUSTED AGAINST THE ADVANCE TAX LIABILITY IS ALSO NOT TENABLE AS THE AMOUNT WAS RETAINED ON 17.7.2007 AND AFTER THE ACCO UNTING PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . IT IS, THEREFORE, PRAYED THAT THE ASSESSEES APPEAL MAY KINDLY BE DISMISSED. 10. THE LD. COUNSEL FOR THE ASSESSEE HAS FILED HIS REJOINDER SUBMISSIONS IN BOTH THE CASES. THE WRITTEN SUBMISSIONS FILED IN TH E CASE OF SMT. KAMLA MEHTA ARE REPRODUCED BELOW FOR THE SAKE OF BETTER APPRECI ATION OF THE CASE:- THIS WRITTEN SUBMISSION IS SUBMITTED IN RESPONSE T O THE SUBMISSIONS GIVEN BY THE DEPARTMENTAL REPRESENTATIVE ON 8.2.201 1 (THOUGH IT IS DATED 8.6.2011), WAS HANDED OVER FOR THE FIRST TIME TO THE TRIBUNAL. THE SUBMISSIONS HAVE GOT NO BASIS AND JUSTIFICATION FOR THE FOLLOWING REASONS:- THAT IT IS ABSOLUTELY WRONG THAT THE ASSESSEE HAS N OT CHALLENGED THE FINDING OF THE LD. CIT(A) IN APPEAL. IT IS RELEVANT TO POINT OUT THAT THIS POINT HAS BEEN EMPHATICALLY RAISED IN GROUND OF APP EAL NO 2, BEFORE THE TRIBUNAL, WHICH IS REPRODUCED AS UNDER:- 2. THAT THE LD. CIT(A) HAS FURTHER ERRED IN AFFIRM ING AOS ACTION FOR LEVY OF INTEREST U/S 234B FOR THE PERIOD OF 25 MONT HS FROM 1.4.2007 TO SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 11 28.4.2009 (DATE OF ASSESSMENT ORDER U/S 143(3). AND NOT GIVING CREDIT OF THE AMOUNT RECOVERED BY THE DEPARTMENT ON 28.7.2007 , AMOUNTING TO RS. 21,89,136/- WHICH HAS BEEN LYING WITH THE DEPAR TMENT, THEREBY QUIETLY IGNORING APPELLANTS SEVERAL REQUEST LETTER S FILED WITH THE DEPARTMENT FOR ADJUSTMENT OF CASH SEIZED BY IT ON T HE SAID DATE AGAINST THE INCOME TAX LIABILITY DUE CONSEQUENT TO THE ADMI SSION OF INCOME BY THE APPELLANT DURING THE COURT OF SEARCH U/S 132. IN ADDITION TO THE ABOVE, BOTH THE DEPARTMENTAL AUT HORITIES BELOW HAVE IGNORED THE INCOME TAX RETURN FILED BY THE APPELLAN T ON 18.2.2008 SHOWING THE UNDISCLOSED INCOME ADMITTED DURING THE SEARCH PROCEEDINGS. AS PER THE SAID RETURN, THE APPELLANT WAS LIABLE TO PAY THE CONSEQUENT INCOME TAX LIABILITY U/S140A, AGAINST WH ICH SET OFF OF AMOUNT RECOVERED ON 28.7.2007 HAD BEEN CLAIMED AND BALANCE SELF ASSESSMENT TAX WAS DEPOSITED INTO THE GOVT TREASURY. THUS THIS OBJECTION OF THE DEPARTMENTAL REPRESENTAT IVE STANDS REBUTTED. THAT AS FAR AS THE ADJUSTMENT OF THE AMOUNT WHICH W AS RETAINED IN THE NAME OF SHRI SARUP CHAND, AN EMPLOYEE OF THE HUSBAN D OF THE ASSESSEE, IT IS AN ADMITTED FACT THAT ON PAGE NO.26 OF THE PAPER BOOK, THE ASSESSEE REPLIED TO THE A.D.I (INV) ON 3.8.2007 , IN WHICH A REFERENCE WAS MADE TO THE LETTER ADDRESSED TO SHRI SARUP CHAN D, BY THE A.D.I. (INV) AND THE APPELLANT HAS REQUESTED FOR TRANSFERR ING THE AMOUNT WITH THE INCOME-TAX DEPARTMENT IN THE PERSONAL ACCOUNT O F THE APPELLANT. A LETTER WAS ALSO ADDRESSED TO SHRI SARUP CHAND TO TH E A.D.I.(INV) WHICH WAS FILED ON 6.8.2007 (REFER PAGE NOS. 27 AND 28 OF THE PAPER BOOK) IN WHICH IT WAS CATEGORICALLY STATED BY SHRI SARUP CHA ND THAT HE IS ENCLOSING HEREWITH AN AFFIDAVIT EXECUTED ON 3.8.200 7, STATING FULL FACTS AND HE HAS ALSO REQUESTED TO TRANSFER THE AMOUNT FR OM THE STANDARD CHARTERED BANK TO THE INCOME-TAX DEPARTMENT AS THE SAME BELONGS TO THE FAMILY MEMBERS OF THE APPELLANT AND AN AFFIDAVI T IN THIS REGARD IS ALSO AVAILABLE AT PAGE NOS. 29 TO 31 OF THE PAPER B OOK, IN WHICH SHRI SARUP CHAND HAS DEPOSED ALL THE MATERIAL FACTS AND HE HAS MENTIONED THAT HE HAS GOT NOTHING TO DO WITH THE BANK ACCOUNT S AND THEY BELONG TO THE FAMILY MEMBERS OF SMT. KAMLA MEHTA AND SMT. SHE LLY MEHTA. SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 12 AGAIN, A LETTER DATED 2.2.2008, FILED ON 15.2.2008, WAS ADDRESSED TO THE DY CIT, BY SHRI SARUP CHAND, IN WHICH IT WAS POINTE D OUT THAT THE AMOUNT OF RS. 21,89,136/- (1/2 OF RS. 43,78,272/-) MAY BE ADJUSTED AGAINST THE DEMAND ARISING AGAINST THE UNDISCLOSED INCOME OF SMT. KAMLA MEHTA AND SMT. SHELLY MEHTA AND HE AGAIN REFE RRED IN THE SAID LETTER ABOUT THE REPLY SUBMITTED TO THE A.D.I (INV) ON 30.8.2007 (REFER PAGE NO.L32 OF THE PAPER BOOK). IT IS RELEVANT TO POINT OUT THAT SMT. KAMLA MEHTA A ND SMT. SHELLY MEHTA, HAVE OFFERED THIS AMOUNT RELATING TO AY 2007-08, AS THEIR UNDISCLOSED INCOME. IT IS RELEVANT TO POINT OUT THAT THE ASSESSMENT IN THE CASE OF SHRI SARUP CHAND WAS COMPLETED BY THE SAME AO AND THE RETURNED INCOME HAS BEEN ACCEPTED AND THE ASSESSMENT ORDER IS AVAILABLE AT PAGE NOS. 36 & 37 OF THE PAPER BOOK, WHEREIN NO ADDITIONS ON ACCOU NT OF THESE TWO AMOUNTS VIZ., RS. 34,03,087/- AN RS. 9,75,202/- RES PECTIVELY HAVE BEEN MADE WHICH BELONGS TO SMT. KAMLA MEHTA AND SMT. SHE LLY MEHTA AND THE AO HAS COMPLETED THE ASSESSMENT OF SHRI SARUP C HAND ON THE BASIS OF HIS REPLY WHICH IS REPRODUCED AS UNDER:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF MONEY LYING THE ABOV E SAID ACCOUNTS. THE ASSESSEE SUBMITTED THE FOLLOWING REPLY: COPY OF AFFIDAVIT OF MR. SARUP CHAND DATED 3.8.200 7, FILED IN THE OFFICE OF DI(INV) AMRITSAR SUBMITTED THAT THE MONEY SEIZED FROM BANK ACCOUNT S I.E. (I) BANK ACCOUNT NO 54305030887 AND (II) BANK ACCOUNT NO. 54310182894, WITH STANDARD CHARTERED BANK, THE MALL, AMRITSAR HAVING CREDIT BALANCE OF RS. 34,03,087.75 AND RS. 9 ,75,202.91 RESPECTIVELY BELONGING TO SMT. KAMLA MEHTA AND SHEL LY MEHTA WHO HAVE SOLD THE HOUSE AT 56, PALM GROOVE, AMRITSAR AND THE SAME IS SURRENDERED AT THE TIME OF SEARCH ON 17.7.2007. THIS FACT HAS ALSO BEEN ADMITTED BY SHRI SUNIL KUM AR MEHTA, SMT. KAMLA MEHTA AND SMT. SHELLY MEHTA DURING THE COURSE OF SEARCH SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 13 PROCEEDINGS AS WELL AS DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, HENCE NO ADVERSE INFERENCE IS DRAWN. IT IS RELEVANT TO POINT OUT THAT WHEN THE AMOUNT I S LYING WITH THE DEPARTMENT, WHY THE DEPARTMENT SHOULD NOT GIVE CRED IT FOR THE SAME ESPECIALLY WHEN THEY HAVE NOT ALLOWED ANY INTEREST ON THE AMOUNT SEIZED AND LYING WITH THE DEPARTMENT. IT IS RELEVAN T TO POINT OUT THAT YOUR KIND ATTENTION IS INVITED TO THE LETTER ISSUED BY THE STANDARD CHARTERED BANK ON 31.7.2007, IN WHICH THEY HAVE CAT EGORICALLY STATED THAT THEY HAVE TRANSFERRED THE AMOUNT OF RS. 9,75,2 02/- AND RS. 34,03,069/- ON 28.7.2007, TOTALING RS. 43,78,272/- IN THE ACCOUNT OF THE INCOME-TAX DEPARTMENT (REFER PAGE NOS. 71 OF THE PA PER BOOK). WHEN THE DEPARTMENT HAS PREPARED AN INVENTORY OF THESE T WO PAY ORDERS WHICH ARE AVAILABLE AT PAGE NOS. 67 AND 70 OF THE P APER BOOK. THESE TWO PAY ORDERS WERE RECEIVED BY THE DEPARTMENT ON 2 8.7.2007. THUS THE CREDIT SHOULD HAVE BEEN ALLOWED TO THE APPELLAN T ON THE SAME DATE WHEN IT WAS RECEIVED BY THE DEPARTMENT. IT IS FURTHER RELEVANT TO POINT OUT THAT THE DEPAR TMENT HAS MAINLY RELIED ON THE ORDER OF THE LD. CIT(A) , ACCORDING T O HIM DEDUCTION ON SEIZED AMOUNT IS HOT ALLOWABLE FOR WORKING OUT INTE REST U/S 234B OF THE INCOME-TAX ACT, 1961. BUT THE SAME SHOULD HAVE BEEN ALLOWED AS THIS VIEW FINDS SUPPORT FROM THE DECISION OF THE ITAT,MUMBAI J BENCH IN T HE CASE OF SUDHAKAR M. SHETTY V. ACT, REPORTED IN (2008) 10 DTR (MUMBAI ) (TRIB) PAGE 173. (REFER PAGE NOS. 99 TO104 OF THE PAPER BOOK). AGAIN, YOUR KIND ATTENTION IS INVITED TO THE DECIS ION OF INCOME-TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A IN THE CAS E OF NIKKA MAL BABU MAL REPORTED IN (2010) 41 SOT 407 (CHD). IF WE GO T HROUGH THE JUDGMENTS, IT IS CRYSTAL CLEAR THAT UNDER THE AMEND ED PROVISIONS, WE ARE ENTITLED FOR ADJUSTMENT AND IT IS AN EXISTING LIABI LITY WHICH HAS TO BE CONSIDERED WHILE WORKING OUT INTEREST U/S 234B OF T HE INCOME-TAX ACT, 1961. EVEN, HON'BLE PUNJAB & HARYANA HIGH COURT HAS EXPLAINED IN THE CASE OF CIT V. ARUN KAPOOR REPORTED IN 334 ITR 351, IN WHICH THEIR LORDSHIPS WERE PLEASED TO OBSERVE THAT WHENEVER A R EQUEST IS MADE FOR SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 14 ADJUSTMENT OF THE SEIZED AGAINST THE RETAINED ASSET S, THE SAME HAS TO BE ALLOWED). EARLIER EVEN THE ITAT AMRITSAR BENCH, AMR ITSAR IN THE CASES OF ACIT V. SHRI AJAY KAPOOR, SHRI DEEPAK KUMAR KAPOOR, SHRI CHUNI LAL KAPUR, SHRI ARUN KUMAR KAPUR AND SHRI RAVI KUMAR PR OP. M/S SHREE CHENAB TEXTILES, AMRITSAR IN ITA NOS. 330, 331, 332 , 333 AND 335 (AAR/1996 VIDE ORDER DATED 29.11.2002 (REFER PAGE N OS. 55 TO 61 OF THE PAPER BOOK) IN WHICH THEY HAVE HELD THAT THE AMOUNT IS WITH THE DEPARTMENT, THE ASSESSEE IS ENTITLED FOR CLAIM OF T HE SAME AMOUNT AND FOR WHICH THE ASSESSEE AS WELL AS SHRI SARUP CHAND HAD MADE SEVERAL WRITTEN REQUESTS. IT MAY BE FURTHER POINTED OUT THAT IN THE CONCLUDI NG PARA NO. 2.2 OF PAGE NO. 4 OF THE ASSESSMENT ORDER, IT WAS OBSER VED BY THE DCIT, AS UNDER, WHICH IS REPRODUCED AS UNDER:- 2.2 SEARCH AND SEIZURE OPERATION U/S 132(4) WAS CO NDUCTED ON 17.7.2007, AND CASH AMOUNTING TO RS. 43,73,136/- WA S SEIZED FROM THE ABOVE BANK ACCOUNTS IN THE NAME OF SHRI SA RUP CHAND IN STANDARD CHARTERED BANK WHICH WAS DEPOSITED IN P .D. ACCOUNT OF CIT, AMRITSAR. THE ASSESSEE SMT. KAMLA MEHTA AND SMT. SHELLY MEHTRA HAS APPENDED A NOTE IN THE INCOME-TAX RETURN S FOR THE AY 2007-08 ALONG WITH AFFIDAVIT OF SHRI SARUP CHAND TH AT THE AMOUNT LYING IN P.D ACCOUNT OF CIT-I, MAY BE ADJUSTED AS S ELF ASSESSMENT TAX PAID ON 31.7.2007. THE ASSESSEE HAS WRITTEN LET TERS TO THIS OFFICE AND CIT-I, AMRITSAR TO ADJUST THIS AMOUNT AG AINST THE SELF ASSESSMENT TAX LIABILITY. FURTHERMORE, IT MAY BE POINTED OUT THAT U/S 140A OF THE INCOME- TAX ACT, 1961 THE CREDIT HAS TO BE ALLOWED FOR THE AMOUNT OF TAX IF ANY ALREADY PAID UNDER THE PROVISIONS OF THE ACT., AS T HE AMOUNT/TAX RETAINED BY THE DEPARTMENT IS U/S 132B, AND WHILE W ORKING OUT INTEREST U/S 234B OF THE ACT, THE SAME HAS TO BE CONSIDERED AND ALLOWED AS SELF- ASSESSMENT TAX PAID ON 31.7.2007, WHILE WORKING OUT THE CALCULATIONS OF INTEREST U/S 234B. IT IS RELEVANT TO POINT THAT DEPARTMENTAL AUTHORITI ES DID NOT APPRECIATE THAT THIS AN EXISTING LIABILITY WHICH HA S TO BE CONSIDERED WHILE SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 15 WORKING OUT INTEREST U/S 234B OF THE INCOME-TAX ACT , 1961 IN VIEW OF THE FOLLOWING DECISIONS:- HOUSE OF LORDS IN WHITNEY V. IRC(1926) 10 TAX CASES 88 (HL) BY THE FEDERAL COURT IN CHATTURAM V. CIT (1947) 15 ITR 320 (FC) AND AGAINST EMPHASIZED BY THE HON'BLE SUPREME COURT IN GOODYEAR (I) LTD V. STATE OF HARYANA &ORS, AIR 1990 SC 781. THE HON'BLE SUPREME COURTS JUDGMENT IN KESHORAM IN DUSTRIES & COTTON MILLS LTD V. CWT(1966) 59 ITR 767 (SC) AND H .H. SETHU PARVATHI BAVI V. CWT (1968) 69 ITR 864 (SC) ARE ALSO THE DIR ECT AUTHORITIES FOR THE PROPOSITION THAT THE TAX LIABILITY UNDER THE IN COME-TAX, WEALTH-TAX AND GIFT-TAX LAWS ACCRUED AND ARISES AND CRYSTALLIZ E BEFORE THE END OF THE ACCOUNTING YEAR AND WHATEVER IS QUANTIFIED SUBS EQUENTLY BY PROCEEDINGS IN ASSESSMENT, REASSESSMENT, APPEAL, RE VISION, RECTIFICATION, REFERENCE ETC. WOULD NECESSARILY RELATE BACK TO THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR. THIS IS ALSO REITERATED BY THE HON'BLE SUPREME COUR T IN CWT V. K.S.N. BHATT (1983) 37 CTR (SC) 273: (1984) 145 ITR 1 (SC), CSWT V. VIMLA BEN VADILAL MEHTA (1983) 37 CTR (SC) 280: (19 84) 145 ITR 11 (SC) AND CWT V. VADILAL LALLUBHAI (1983) 37 CTR 277 : (1984) 145 ITR 7 (SC). THEREFORE, THE LIABILITY TO TAX ON SEIZED ASSETS CA NNOT BE REGARDED AS NOT BEING AN EXISTING LIABILITY ON THE DATE OF S EIZURE AND BEFORE THE LAST DAY OF THE ACCOUNTING YEAR NOT CAN IT BE REGAR DED AS LIABILITY ARISING ON THE DAY OF THE ORDER OF ASSESSMENT MADE ON THE T AXPAYER. IT IS RELEVANT TO POINT OUT THAT U/S 234B OF THE IN COME-TAX ACT, 1961 WHILE COMPLETING THE ASSESSMENT, TAX PAID U/S 140A FROM 28.7.2007 HAS TO BE DEDUCTED WHILE CHARGING INTERES T UNDER THIS SECTION. IT IS NOW CRYSTAL CLEAR THAT NO INTEREST CAN BE CHA RGED U/S 234B OF THE ACT, AS THE AMOUNT IS LYING WITH THE DEPARTMENT SIN CE 28.7.2007, AND THE REQUEST FOR ADJUSTMENT HAS ALSO BEEN MADE AND A FTER 28.7.2007, NO INTEREST CAN BE CHARGED U/S 234B OF THE INCOME-TAX ACT, 1961. SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 16 IT IS RELEVANT TO POINT OUT FOR YOUR KIND INFORMATI ON THAT IN PARA - 4, THE LD. DR IN HIS WRITTEN SUBMISSIONS HAS WRONGL Y MENTIONED THAT THE ASSESSEE HAS NEVER MADE ANY REQUEST FOR ADJUSTMENT OF THE CASH RETAINED AGAINST THE ADVANCE TAX LIABILITY AND HE H AS RAISED THIS ISSUE BEFORE THE LD. CIT(A) AND NEVER BEFORE THE AO. IN THIS CONNECTION, LD. DR HAS FAILED TO APPRECIATE THAT IN THE COMPUTATION OF INCOME AT PAGE NOS. 2 AND 3, IT WAS CLEARLY REQUESTED TO ADJUST THE AMOUNT. AFTERWARDS SEVERAL LETTERS WERE FURNISHED IN THIS CONNECTION, WHICH ARE AVAILABLE AT PAGE NOS. 26,27, 28,29,30,31 & 32. THUS THE CONTENTION OF THE LD. DR IS INCONSISTENT W ITH FACTS OF THE CASE. IN VIEW OF THESE CIRCUMSTANCES, IT IS VERY RESPECTF ULLY PRAYED THAT NO INTEREST SHOULD BE CHARGED U/S 234B OF THE INCOM E-TAX ACT, 1961 AFTER ALLOWING THE CREDIT OF THE RETAINED AMOUNT FR OM 28.7.2007. 11. APART FROM THE AFORESAID WRITTEN SUBMISSIONS, T HE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON SEVERAL JUDGMENTS WHICH AR E AS UNDER:- 1 S.M. WAHI V. ASSISTANT DIRECTOR OF INCOME TAX (IN TERNATIONAL TAXATION) (2010) 47 DTR (DEL) (TRIB) 241 2 VINOD PODDAR AND ANOTHER (1994) 208 ITR 722 (PAT) 3 CIT V. KKESR KIMAM KARYALAYA (2005) 278 ITR 596 ( DEL) 4 GIAN CHAND GUPTA V. DCIT (2001) 72 TTJ (DEL) 665. 5 SUDHAKAKR M SHETTY V. ACIT(2008) 10 DTR (MUM)(TRI B) 173 6 ACIT-AMRITSAR V. SHRI AJAY KAPOOR C/O M/S BRIJ PR INTING WORKS, AMRITSAR IN ITA NO. 330/ASR/1996 ORDERDATED29.11.20 02, AY 1994-95. 12. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CO NSIDERED THEIR ORAL AS WELL AS WRITTEN SUBMISSIONS INCLUDING THE AUTHORITI ES REFERRED TO BY THEM. THE SHORT ISSUE IS WHETHER THE CASH SEIZED FROM THE BAN K ACCOUNT OF SHRI SARUP CHAND CAN AT ALL BE ADJUSTED AGAINST THE SELF ASSES SMENT TAX DUE U/S 140A IN THE CASES OF BOTH THE ASSESSEES, NAMELY, SMT. KAMLA MEHTA AND SMT. SHELLY MEHTA U/S 132B EVEN WITHOUT ASCERTAINING THE TAX LI ABILITY OF SARUP CHAND UPON ASSESSMENT. IT IS NOT IN DISPUTE THAT ALL THE THREE PERSONS ARE INCOME-TAX ASSESSEES AND THAT THEY HAVE BEEN ASSESSED INDIVIDU ALLY TO TAX IN THE SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 17 ASSESSMENT YEAR UNDER APPEAL. IT IS ALSO NOT IN DIS PUTE THAT THE CASH WAS SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND AN D NOT FROM THE POSSESSION OR THE PREMISES OF EITHER OF THE ASSESSEES BEFORE U S. THE CLAIM OF BOTH THE ASSESSEES IS THAT THEY HAVE FILED AFFIDAVIT IN WHIC H IT HAS BEEN CLAIMED THAT THE CASH SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHA ND BELONGS TO BOTH THE ASSESSEES AND THEREFORE THEY SHOULD BE ADJUSTED AGA INST THE SELF ASSESSMENT DUE FROM BOTH THE ASSESSEES. IN OUR VIEW, THE MERE FILING OF AFFIDAVIT IS NOT SUFFICIENT TO ESTABLISH THE OWNERSHIP OF CASH. APPA RENT IS CONSIDERED TO BE REAL UNLESS PROVED OTHERWISE. IN THE PRESENT CASE, THE C ASH WAS SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND. FILING OF MERE AF FIDAVIT OF SHRI SARUP CHAND DOES NOT BY ITSELF ESTABLISH THAT THE CASH SEIZED F ROM HIS BANK ACCOUNT BELONGED TO BOTH THE ASSESSEES AND NOT TO THE PERSO N FROM WHOSE POSSESSION IT WAS SEIZED. THE AFFIDAVITS SO FILED BEFORE THE A O WAS THE SUBJECT MATTER OF ENQUIRY BY THE AO AND IT WAS ONLY WHEN THE ASSESSME NT ORDER WAS PASSED THAT THE CASH SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND WAS NOT ASSESSED IN HIS HAND AND THEREAFTER THE CASH SO SEIZED WAS ADJU STED AGAINST THE DEMAND DUE FROM BOTH THE ASSESSEES. IT CANNOT THEREFORE BE SAID THAT THE CASH SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND BELONGED TO BOTH THE ASSESSEES TILL A DECISION WAS TAKEN BY THE AO IN THIS BEHALF IN TH E ASSESSMENT ORDER PASSED IN THE CASE OF SHRI SARUP CHAND ON 28.4.2009. SINCE THE ASSESSMENT ORDER IN THE CASE OF SHRI SARUP CHAND WAS PASSED ON 28.4.200 9, THE AO HAS RIGHTLY ADJUSTED THE CASH SEIZED FROM THE BANK ACCOUNT OF S HRI SARUP CHAND AGAINST THE LIABILITY OF BOTH THE ASSESSEES AFTER 28.4.2009 . 13. THE CLAIM OF THE ASSESSEE THAT CASH SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND SHOULD HAVE BEEN ADJUSTED BY THE A O AGAINST SELF ASSESSMENT TAX DUE U/S 140A FROM BOTH THE ASSESSEES IN TERMS OF SECTION 132B HAS NO LEGS TO STAND. SECTION 132B PERMITS ADJUSTME NT OF SEIZED ASSETS INCLUDING CASH AGAINST THE EXISTING LIABILITY OF TH E PERSON FROM WHOM IT IS SEIZED AND NOT AGAINST THE EXISTING LIABILITY OF OTHERS. I N THE PRESENT CASE, CASH WAS SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND AN D NOT FROM THE POSSESSION OR PREMISES OF EITHER KAMLA MEHTA OR SHELLY MEHTA. THEREFORE NEITHER KAMLA MEHTA NOR SHELLY MEHTA WAS ENTITLED TO SEEK ADJUSTM ENT OF CASH SEIZED FROM THE BANK ACCOUNT OF SHRI SARUP CHAND AGAINST THEIR LIABILITIES U/S 132B ON THE BASIS OF MERE AFFIDAVIT OF SARUP CHAND. IN FACT, SU CH TYPES OF SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 18 CLAIMS/ADJUSTMENTS ARE COMPLETELY OUTSIDE THE SCOPE OF SECTION 132B. TILL THE ASSESSMENT IN THE CASE OF SARUP CHAND WAS COMPLETED , THE AO WAS NOT IN A POSITION TO KNOW AS TO WHETHER THERE WOULD BE ANY L IABILITY AGAINST SARUP CHAND FOR THE SATISFACTION OF WHICH THE SEIZED CASH WOULD BE REQUIRED. IT IS ONLY AFTER THE ASSESSMENT IN THE CASE OF SHRI SARUP CHAN D WAS COMPLETED THAT THE AO COULD KNOW THAT THE SEIZED CASH WAS NOT REQUIRED TO BE APPLIED TO SATISFY ANY DEMAND DUE FROM SARUP CHAND AS THERE WAS NO DEM AND FOUND DUE AGAINST HIM UPON THE ASSESSMENT. IT WAS THEREFORE N OT OPEN TO THE AO TO ADJUST THE CASH SEIZED FROM THE BANK ACCOUNT OF SAR UP CHAND AGAINST THE SELF ASSESSMENT TAX DUE U/S 140A FROM BOTH THE ASSESSEES WITHOUT COMPLETING THE ASSESSMENT IN THE CASE OF SHRI SARUP CHAND. IT WAS ONLY AFTER THE ASSESSMENT OF SHRI SARUP CHAND WAS COMPLETED BY THE AO THAT TH E AO COULD KNOW THAT THE CASH SEIZED FROM HIM WOULD NOT BE REQUIRED IN HIS C ASE AND THEREFORE ADJUSTED THE CASH SO SEIZED FROM HIM AGAINST THE DEMAND DUE FROM BOTH THE ASSESSEES. IN THIS VIEW OF THE MATTER, THE AO, IN OUR CONSIDER ED VIEW, HAS RIGHTLY ADJUSTED THE AMOUNT OF CASH SEIZED AGAINST THE DEMANDS DUE F ROM BOTH THE ASSESSEES AFTER COMPLETING THE ASSESSMENT IN THE CASE OF SARU P CHAND. 14. THE LD. COUNSEL FOR THE ASSESSEES HAS RELIED UP ON SEVERAL JUDGMENTS. HOWEVER, NONE OF THEM IS RELEVANT ON THE FACTS OF T HE CASE BEFORE US. 15. IN VIEW OF THE FOREGOING, THE ORDER PASSED BY T HE LD. CIT(A) IN BOTH THE CASES IS CONFIRMED. RESULTANTLY THE APPEAL FILED BY BOTH THE ASSESSEES IS DISMISSED. ORDER PRONOUNCED ON 16.12.2011 SD/- SD/- (H L KARWA) ( D K SRIVASTAVA) VICE PRESIDENT ACCOUNTANT MEMBER AMRITSAR, 16.12.2011 SURESH COPY TO:- 1. THE APPELLANT, SMT. KAMLA MEHTA AND SMT. SHELLY MEHTA 2. THE RESPONDENT, DY CIT 3. THE CIT(A)-I, LUDHIANA 4. THE LD. CIT, LUDHIANA 5. THE D.R., INCOME TAX DEPARTMENT, AMRITSAR SMT. KAMLA MEHTA AND SHELLY MEHTA V. DY CIT ITAS NO. 57 AND 58/ASR/2000 19