M/S. RAMNARAIN & CO., MUMBAI V. THE DCIT CEN CIR-43, MUMBAI

ITA 7477/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7800 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 21-01-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 14-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJIT SINHA
• Keywords: Difference of opinion; Change of opinion; TDS
• Section: 234B; 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI R.K. PANDA, AM & SMT. ASHA VIJAYARAGHAVAN, JM I.T.A. NO. 7477/MUM/2007 (ASSESSMENT YEAR 2004-05) M/S. RAMNARAIN & CO. 76/78, DHANJI STREET, GROUND FLOOR, MUMBAI-400 003 PAN: AAAFR8451Q VS. DCIT, CENT. CIR. 43 6 TH FLOOR, AAYAKAR BHAVAN MUMBAI APPELLANT RESPONDENT APPELLANT BY: MR. RAKESH JOSHI RESPONDENT BY: MR. AJIT SINHA O R D E R DATE OF HEARING: 21.01.2010 DATE OF ORDER: 03.02.2009 PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 19.11.2007 OF THE CIT(A), CENTRAL-I I, MUMBAI RELATING TO ASSESSMENT YEAR 2004-05. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE LEARNED ASSESSING OFFICER PASSED U/S. 154 OF THE INCOME-TAX ACT, 1961 WHEREIN HE HAD CHARGED THE INTEREST U/S. 234B OF THE INCOME-TAX ACT, 1961 UP TO THE DATE OF THE ACTUAL ADJUSTMENT OF THE SEIZED CASH AND NOT UP TO THE DATE OF THE SEIZURE, BEING THE DATE SINCE WHEN THE CASH HAS BEEN LYING WITH THE INCOME TAX DEPARTMENT. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE INTEREST WAS BEING CHARGED @ 12% P.A. WHEREAS THE INTEREST ON THE SEIZED CASH THAT WOULD BE AVAILABLE TO THE APPELLANT WAS ONLY @ 6% P.A. I.T.A. NO. 7477/MUM/2007 M/S. RAMNARAIN & CO.. =================== 2 3. FACTS OF THE CASE, IN BRIEF, ARE THAT AN ACTION U/S . 132 OF THE INCOME-TAX ACT, 1961 (THE ACT) WAS CONDU CTED AT THE ASSESSEE FIRM ON 24 TH JUNE, 2004 AND THEREAFTER ASSESSMENT WAS COMPLETED U/S. 143(3)/153A OF THE AC T ON 26.12.2006. IN THE ORIGINAL ASSESSMENT, THE ASSESS ING OFFICER HAD CHARGED INTEREST U/S. 234B INCORRECTLY AND THEREFORE, HE ISSUED NOTICE U/S. 154 OF THE ACT TO THE ASSESSEE CALLING FOR HIS OBJECTION, IF ANY, TO RECT IFY THE MISTAKE. THE ASSESSEE FILED HIS OBJECTION STATING THAT THE RETURN OF INCOME WAS FILED ON 29 TH OCTOBER, 2004 DECLARING TOTAL INCOME OF RS.93,30,000. THE ASSESSEE HAD PAI D THE ADVANCE TAX OF RS.1,50,000 AND TDS WAS RS.2,094. I T WAS SUBMITTED THAT THE CASH SEIZED DURING THE COURSE OF SEARCH AMOUNTING TO RS.35 LAKHS WILL HAVE TO BE TREATED AS SELF ASSESSMENT TAX AND, THEREFORE, THE INTEREST U/S. 23 4B OF THE ACT SHOULD BE CALCULATED ACCORDINGLY. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE CONTENTI ON OF THE ASSESSEE AND CONCLUDED THAT AS PER THE PROVISIONS O F SECTION 234B INTEREST HAS TO BE CORRECTLY CHARGED. HE ACCORDINGLY LEVIED INTEREST OF RS.3,95,268 U/S. 234 B IN HIS ORDER PASSED ON 16.11.2006 U/S. 154 OF THE ACT. 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE DEPARTMENT HAS SEIZED CASH AMOUNTING TO RS.2,38,90, 000 AS A RESULT OF THE SEARCH CARRIED OUT IN THE PREMIS ES OF THE ASSESSEE. SHRI NAVEEN GUPTA, PARTNER OF ASSESSEE F IRM VIDE HIS LETTER DATED 28.1.2005 HAD REQUESTED THE ASSESS ING OFFICER TO ADJUST THE SEIZED CASH AGAINST THE TAX L IABILITY OF THEIR GROUP FOR VARIOUS YEARS AND AN AMOUNT OF RS.35,00,000 WAS REQUESTED TO BE ADJUSTED AGAINST T HE ASSESSEE FIRM FOR THE A.Y. 2004-05. HOWEVER, THE A SSESSING OFFICER HAS NOT ADJUSTED THIS CASH FOR WHICH THE AS SESSEE HAD TO PAY THE SELF ASSESSMENT TAX OF RS.35 LAKHS O NLY AT I.T.A. NO. 7477/MUM/2007 M/S. RAMNARAIN & CO.. =================== 3 THE TIME OF FILING OF THE RETURN ON 28 TH OCTOBER, 2004. SINCE THE CASH BELONGING TO THE ASSESSEE FIRM WAS SEIZED BY THE DEPARTMENT ON 25 TH JUNE, 2004, THEREFORE, IT SHOULD BE CONSIDERED AS PAYMENT OF TAX ON 25 TH JUNE, 2004 AND, THEREFORE, THE INTEREST U/S. 234B OF THE ACT SHOULD BE CALCULATED ACCORDINGLY. 5. HOWEVER, THE CIT(A) WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE. HE OBSERVED THAT AS PER THE PROVISIONS O F ADVANCE TAX SCHEME AS ENVISAGED IN THE INCOME-TAX A CT VIDE CHAPTER XXVIIC, THE ASSESSEE WAS LIABLE TO PAY ADVANCE TAX ON HIS INCOME IRRESPECTIVE OF THE FACT OF SEIZURE OF CASH AMOUNT FROM IT IN THE YEAR AT THE TIME OF S EIZURE OR NOT. HE OBSERVED THAT IN THE INSTANT CASE THE SEAR CH HAS TAKEN PLACE ON 24 TH /25 TH JUNE, 2004 I.E., MUCH AFTER THE FINANCIAL YEAR 2003-04 DURING THE PERIOD OF WHICH T HE ASSESSEE OUGHT TO HAVE PAID THE ADVANCE TAX. SINCE THE ASSESSEE HAD NOT PAID THE ADVANCE TAX ON THE ACTUAL INCOME OF THE ASSESSEE, HE IS LIABLE TO BE CHARGED WITH INTEREST U/S. 234B OF THE ACT. AS FAR AS FOR THE P URPOSE OF CALCULATION OF QUANTUM OF INTEREST, HE OBSERVED THA T THE DATE OF PAYMENT OF SELF ASSESSMENT TAX HAD TO BE RE CKONED. ONLY HERE COMES THE REQUEST OF ADJUSTING THE CASH T OWARDS TAX LIABILITY. AS REGARDS THE CONTENTION OF THE AS SESSEE THAT THE PAYMENT OF RS. 35 LAKHS SHOULD BE RECKONED AS O N THE DATE OF SEIZURE I.E., 25 TH JUNE, 2004 AND NOT ON THE ACTUAL PAYMENT OF THE SAID AMOUNT BY THE ASSESSEE, HE OBSE RVED THAT THERE IS NO STATUTORY PROVISION TO DEEM IT SO AS REQUESTED BY THE ASSESSEE. THE SEIZED CASH CANNOT BE CONSTRUED AS PAYMENT OF ADVANCE TAX BY THE ASSESSEE NOR IT CAN BE TREATED AS SELF ASSESSMENT TAX PAYMENT. HE OBSERVED THAT SECTION 132B OF THE ACT MANDATES THAT THE I.T.A. NO. 7477/MUM/2007 M/S. RAMNARAIN & CO.. =================== 4 SEIZED CASH SHALL BE ADJUSTED AGAINST ANY EXISTING LIABILITY I.E., THE LIABILITIES ALREADY QUANTIFIED BY STATUTO RY ORDER AND THE LIABILITIES SUBSEQUENTLY DETERMINED BY WAY OF ASSESSMENT BASED ON THE INCOME RELEVANT TO THE PERI OD COVERED BY THE SEARCH. THERE IS NO MANDATORY PRESC RIPTION U/S. 132B TO ADJUST THE SEIZED CASH AGAINST ADVANCE TAX PAYMENT OR PAYMENT OF SELF ASSESSMENT TAX. ALTHOUG H HE HAD SYMPATHY FOR THE ASSESSEE, HE COULD NOT ACCEDE TO THE REQUEST OF THE ASSESSEE TO REVOKE THE ORDER PASSED U/S. 154 OF THE ACT. HE OBSERVED THAT THIS IS A CASE WHERE THE ASSESSEE CAN APPROACH THE HIGHER AUTHORITIES FOR WA IVER OF INTEREST U/S. 119(2) OF THE ACT. AGGRIEVED WITH SU CH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERAT ING THE SAME SUBMISSIONS AS MADE BEFORE THE ASSESSING O FFICER AND THE CIT(A), SUBMITTED THAT A REQUEST HAD BEEN M ADE TO THE ASSESSING OFFICER TO ADJUST THE SEIZED CASH OF RS.35 LAKHS ON 24 TH /25 TH JUNE, 2004 AS SELF ASSESSMENT TAX. NOW THE ASSESSING OFFICER IN AN ORDER PASSED U/S. 154 I S TRYING TO REVISE THE COMPUTATION OF INTEREST U/S. 234B U/S . 154 OF THE ACT. HE SUBMITTED THAT SUCH REVISED COMPUTATIO N CANNOT BE DONE U/S. 154 OF THE ACT ON AN ISSUE WHIC H IS HIGHLY DEBATABLE. FOR THIS PROPOSITION HE RELIED O N THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F ITO VS. VOLKART BROS. REPORTED IN 82 ITR 50 REFERRING T O THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ME PCO INDUSTRIES VS. CIT REPORTED IN 319 ITR 208, HE SUB MITTED THAT RECTIFICATION MADE ONLY ON THE BASIS OF CHANGE OF OPINION IS NOT PERMISSIBLE. ON MERIT HE REFERRED T O THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. K.K. MARKETING REPORTED IN 278 ITR 596 AND SUBM ITTED THAT THE HONBLE HIGH COURT IN THE SAID ORDER HAS H ELD THAT I.T.A. NO. 7477/MUM/2007 M/S. RAMNARAIN & CO.. =================== 5 WHEN A REQUEST BY THE PARTNER TO ADJUST THE SEIZED CASH AGAINST PAYMENT OF ADVANCE TAX WAS MADE AND SUBSEQU ENT ASSESSMENT SHOWED THAT NO ADVANCE TAX WAS DUE, INT EREST CANNOT BE CHARGED U/S. 234B AND 234C OF THE ACT. REFERRING TO THE DECISION OF THE NAGPUR BENCH OF TH E TRIBUNAL REPORTED IN 75 TTJ 405, HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT THE CAS H SEIZED ON THE DATE OF SEARCH HAS TO BE TREATED AS PAYMENT OF TAX ON THAT DAY ONCE A REQUEST HAS BEEN MADE BY THE ASS ESSEE. HE ACCORDINGLY SUBMITTED THAT THE INTEREST U/S. 234 B CAN AT BEST BE CHARGED UP TO 24 TH /25 TH OF JUNE, 2004. 7. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT CHARGING OF INTEREST U/S. 234 IS MANDATORY. REFERR ING TO PROVISIONS OF SECTION 132B, HE SUBMITTED THAT UNLES S AND UNTIL A LIABILITY ARISES THE SEIZED CASH CANNOT BE ADJUSTED FROM P.D. ACCOUNT. HE SUBMITTED THAT THE DATE OF S EARCH IN THE INSTANT CASE WAS ON 24 TH JUNE, 2004 AND THE ADVANCE TAX LIABILITY HAD ALREADY CRYSTALLISED BY 31 ST MARCH, 2004. HE SUBMITTED THAT THE VARIOUS DECISIONS CITED BY TH E LEARNED COUNSEL FOR THE ASSESSEE RELATE TO THE BLOC K ASSESSMENT UNDER THE OLD PROVISIONS WHICH ARE NO LO NGER IN FORCE. HE ACCORDINGLY SUPPORTED THE ORDER OF THE C IT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF O F THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT T HAT ON THE DATE OF SEARCH CASH AMOUNTING TO RS.2,38,90,000 WAS SEIZED OUT OF WHICH AN AMOUNT OF RS.35 LAKHS WAS SO UGHT TO BE ADJUSTED AGAINST THE TAX LIABILITY OF THE ASS ESSEE FIRM FOR THE A.Y. 2004-05. IT IS THE SUBMISSION OF THE LEARNED I.T.A. NO. 7477/MUM/2007 M/S. RAMNARAIN & CO.. =================== 6 COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.35 L AKHS SHOULD BE TREATED AS PAID ON ACCOUNT OF SELF ASSESS MENT TAX ON 24 TH JUNE, 2004 AND THE TAX LIABILITY U/S. 234B SHOULD BE CALCULATED ACCORDINGLY. IT IS THE CONTENTION OF THE REVENUE THAT SINCE THE ASSESSEE HAD PAID THE SELF ASSESSMENT TAX OF RS.35 LAKHS ONLY AT THE TIME OF F ILING OF THE RETURN ON 28 TH OCTOBER, 2004, THE AMOUNT OF RS. 35 LAKHS SOUGHT TO BE ADJUSTED BY THE ASSESSEE AS ON 2 4 TH JUNE, 2004 CANNOT BE ACCEPTED. IT HAS JUDICIOUSLY BEEN HELD IN VARIOUS DECISIONS THAT INTEREST IS COMPENSA TORY IN NATURE. AN ASSESSEE HAS TO PAY INTEREST TO THE GOV ERNMENT FOR NOT PAYING THE LEGITIMATE TAXES DUE IN TIME AND UTILISING THE SAME FOR HIS OWN PURPOSE. THEREFORE, WHEN THE AMOUNT WAS SEIZED BY THE DEPARTMENT ON 24.6.2004, I .E., THE DATE OF SEARCH, THE MONEY FROM THE ASSESSEE HAS GONE TO THE ACCOUNT OF THE DEPARTMENT. WE, THEREFORE, F IND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE AS SESSEE THAT NO INTEREST SHOULD BE CHARGED AFTER 24.6.2004. AS REGARDS THE SUB MISSION OF THE LEARNED DR THAT THE ASSESSEE IS GOING TO GET INTEREST FROM THE DEPARTME NT, WE FIND MERIT IN THE SUBMISSION OF THE LEARNED AR THAT THE ASSESSEE HAS TO PAY MORE INTEREST THAN IT WILL GET FROM THE DEPARTMENT. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT SINCE THE MONEY HAS BEEN SE IZED ON 24.6.2004 AND SINCE A REQUEST HAS BEEN MADE BY T HE ASSESSEE TO ADJUST THE SAME TOWARDS PAYMENT OF TAXE S, THEREFORE, THE ASSESSEE SHOULD BE CHARGED INTEREST U/S. 234B UP TO 24/25 TH JUNE, 2004 AND NOT THEREAFTER ON THIS RS.35,00,000/-. WE HOLD AND DIRECT ACCORDINGLY. 9. AS REGARDS THE LEGAL GROUND RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THIS BEING A DEBATABL E ISSUE, THEREFORE, NO RECTIFICATION PROCEEDINGS CAN BE TAKE N U/S. I.T.A. NO. 7477/MUM/2007 M/S. RAMNARAIN & CO.. =================== 7 154 OF THE ACT. WE DO NOT FIND MUCH FORCE IN THE S AME AS THERE WAS AN APPARENT MISTAKE IN CALCULATION OF INT EREST. ACCORDINGLY THIS GROUND BY THE ASSESSEE IS DISMISSE D. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 3 RD FEBRUARY, 2010. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 3 RD FEBRUARY, 2010 COPY TO: (1) THE APPELLANT, (2) THE RESPONDENT, (3) THE CIT(A), CENTRAL-II, MUMBAI, (4) THE CIT, CENTRAL-IV, MUMBAI, (5) THE DR, K BENCH, ITAT, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI TPRAO