Rahul Agarwal, New Delhi V. ACIT Circle-46(1), New Delhi

ITA 7956/DEL/2019

AI Insights

The case revolves around the dispute concerning the adjustment of cash seized during a search operation against the advance tax liability of the assessee, Rahul Agarwal, for the assessment year 2012-13. The Income Tax Department had seized Rs. 2,00,00,000 from the assessee and rejected his request to adjust this amount against his advance tax liabilities. The lower authorities, including the CIT(A), upheld this rejection, leading to the filing of an appeal by the assessee before the Income Tax Appellate Tribunal. The Tribunal, referencing the judgments of the Punjab & Haryana High Court and the CBDT Circular No. 20/2017, ruled in favor of the assessee, allowing the adjustment of the seized cash against the advance tax.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131641 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 13-06-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 29-09-2019
• Other Referred Cases: PCIT Vs. Surinder Kumar Khindri, CIT v. Ashok Kumar, CIT v. Cosmos Builders & Promoters Ltd., CIT v. Vatika Township (P.) Ltd., CIT v. Arun Kapoor, CIT v. Spaze Towers Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Retrospective amendment; Question of law
• Section: 154; 2; 143(3); 153A; 234B; 260A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 7956/Del/2019 : Asstt. Year: 2012-13 Rahul Agarwal, 1241, FF, Kucha Bagh, Chandni Chowk, New Delhi-110006 Vs. ACIT, Circle-46(1), New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AGCPA0708P Assessee by : Sh. Salil Agarwal, Adv. Revenue by : Ms. Indu Bala Saini, Sr. DR Date of Hearing: 14.06.2023 Date of Pronouncement: 20.06.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-16, New Delhi dated 26.07.2019. 2. Following grounds have been raised by the assessee: “1. The learned Commissioner of Income Tax (A) erred in dismissing the appeal against the order passed u/s 154 without going through the facts of the case and is against the statutory provisions of Income Tax Act and has erred in not allowing the credit of cash seized during search of Rs.2,00,00,000/- as advance tax. 2. The learned Commissioner of Income Tax (A) erred in dismissing the appeal on the ground that no response to letter dated 12.07.2018 have been submitted and have erred in dismissing the claim of cash seized advance tax on the basis of theoretical assumptions and allegations and assertions, and is therefore not in accordance with law.” ITA No. 7956/Del/2019 Rahul Agarwal 2 3. The issue of adjustment of cash seized against the advance tax stands covered by the judgment of Hon’ble Punjab & Haryana High Court in the case of PCIT Vs. Surinder Kumar Khindri 393 ITR 479. The entire order of the Hon’ble Court is as under: “Section 132B of the Income-tax Act, 1961 - Search & seizure - Retained assets, application of Assessment year 2011-12 - Explanation 2 to section 132B inserted with effect from 1-6-2013 which restricts scope of adjustment of seized cash is not retrospective in effect [In favour of assessee] The assessee requested the Assessing Officer to adjust the cash seized during search against his excepted advance tax liability. The Assessing Officer rejected the assessee's request holding that seized cash could not be adjusted against advance tax liability as the same was not existing liability. Held that Explanation 2 to section 132B inserted with effect from 1- 6-2013 which restricts scope of adjustment of seized cash is not retrospective in nature; therefore the assessee was entitled to adjustment of seized cash against the advance-tax liability for assessment year 2011-12. CASES REFERRED TO Ramjilal Jagannath v. Asstt. CH [20001 241 ITR 758 (MP) (para 3), C1T v. Ashok Kumar [2012) 20 taxniann.com 432/[20111 334 ITR 355 (Punj. & liar. ) (para 5) and C1T v. Cosmos Builders K Promoters Lid. [2016] 76 taxmann.com 374 (Punj. & liar.) (para 6). Denesh Goyal, Adv for the Appellant. Salil Kapoor, Sumit Lal Chandani, Nitin Mehra, Ms. Ananya Kapoor and Saurabh Kapoor, Advs. for the Respondent. ITA No. 7956/Del/2019 Rahul Agarwal 3 JUDGMENT Ajay Kumar Mittal, J. - This appeal has been preferred by the appellant-Revenue under section 260A of the Income-tax Act, 1961 (in short, "the Act") against the order dated August 3 I, 2015. annexure A.3, passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, "the Tribunal") in I.T.A No. 185/Asr/2015, for the assessment year 2011 -12, claiming the following substantial question of law. "(i) Whether the hon'ble Income-tax Appellate Tribunal committed an error on facts and in law by ignoring the fact that penalty under section 271 AAA of the Income-tax Act, 1961 was imposed due to non payment of taxes on surrendered income under section 132(4) of the Income-tax Act, 1961 in the event of the Department not responding to the assessee's request for adjustment of cash seized against advance tax liability without appreciating the fact that the advance tax does not constitute the existing liability as per specific provision of section 132B of the Income-tax Act, 1961 ? (ii) Whether the hon’ble Income-tax Appellate Tribunal is correct on facts and in law by not treating the Explanation 2 to Section 132B of the Income-tax Act, 1961 inserted by the Finance Act, 2013 with effect from June 1, 2013 which has clarified that the "existing liability' does not include advance tax payable in accordance with the provision of Part C of Chapter XVII ? (iii) Whether the Explanation 2 to section 132B of the Income-tax Act, 1961 though inserted by the Finance Act, 2013, with effect from June 1, 2013 being clarificatory in nature, make explicit what was implicit in the provision before the insertion of the said Explanation?" ITA No. 7956/Del/2019 Rahul Agarwal 4 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. On September 9, 2010, during the course of search, cash of Rs. 99,00,000/- was seized from the residence and bank lockers of the respondent- assessee. Vide letter dated September 15, 2010, the assessee requested the Assessing Officer to adjust the cash seized during search against his expected advance tax liability. The request of the assessee was not accepted by the Assessing Officer as the Assessing Officer was of the view that seized cash could not be adjusted against advance tax liability as the same was not existing liability. The assessee filed returned income of Rs. 3,04,23,555/- on March 30, 2012 in which Rs. 3,00,00,000/- was shown as undisclosed income. The assessee did not pay any tax as according to him, his liability to pay tax and interest on returned income was less than the amount of cash seized during search. Returned income was accepted by the Assessing Officer vide order dated February 28, 2013 under section 143(3) of the Act. Seized cash of the assessee was adjusted against the regular taxes and interest payable. Liability determined on completion of assessment order was higher than the amount of cash seized due to charging of interest under sections 234B and 234C of the Act. The Assessing Officer initiated proceedings under section 271AAA of the Act as all the conditions specified for non application of penalty under the said provision were not fulfilled. The assessee pleaded that he had paid all the taxes and interest in relation to undisclosed income and hence no penalty could be levied. The Assessing Officer did not accept the plea of the assessee to the effect that seized cash could be adjusted towards existing tax liability and not against advance tax. The Assessing Officer further held that Explanation 2 to section 132B of the Act which states that the existing liability does not include advance tax payable in accordance with the provisions of Part 'C of Chapter XVII is clarificatory’ in nature and hence applies to all pending proceedings. It was concluded that the assessee was in default for having failed to ITA No. 7956/Del/2019 Rahul Agarwal 5 pay the taxes and interest in relation to undisclosed income declared and levied penalty under section 271 AAA of the Act vide order dated August 26, 2013, annexure A. I. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) (CIT(A)). Vide order dated January 27, 2015, annexure A.2, the Commissioner of Income-tax (Appeals) held that Explanation 2 to section 132B of the Act inserted by the Finance Act, 2013 was clarificatory in nature. It was further held that the said amendment did not have retrospective effect. Thus, the Commissioner of Income- tax (Appeals) allowed the relief to the assessee. Not satisfied with the order, the Department filed an appeal before the Tribunal. Vide order dated August 31, 2015, annexure A.3, the Tribunal upheld the decision taken by the Commissioner of Income-tax (Appeals) and dismissed the appeal filed by the Department. Hence, the instant appeal by the Revenue. We have heard learned counsel for the parties. 3. Learned counsel for the appellant-Revenue relied upon a Single Bench judgment of the Madhya Pradesh High Court in Ramjilal Jagannath v. Asstt. CIT [2000] 241 ITR 758 to contend that the amount seized could not be adjusted towards the advance tax. Reliance was also placed on Explanation 2 to section 132B of the Act introduced with effect from June 1, 2013 by urging that it was clarificatory and would operate retrospectively. 4. On the other hand, learned counsel for the respondent- assessee supported the impugned order. 5. We do not find any merit in the submission made by the learned counsel for the appellant-Revenue. The issue has already been decided by this court against the Revenue in Income Tax Appeal No. 36 of 2004 CIT v. Ashok Kumar [2012] 20 taxmann.com ITA No. 7956/Del/2019 Rahul Agarwal 6 432/(2011] 334 ITR 355 (Punj. & Har.) wherein it was recorded as under (page 357): "In CIT Vs. Arun Kapoor, I.T.A. No. 149 of 2003 decided on July 27 2010— [2011] 334 ITR 351 (P&H), this court had occasion to consider similar issue where it has been held that the assessee is entitled to adjustment of seized amount towards advance tax liability from the date of making the application in that regard. In the present case, the assessee had made request for adjustment of the advance tax liability of Rs. 3,14,312/- against the seized amount of Rs. 5,90,000/- on August 28 1989. Since the first installment of advance tax was payable on September 15, 1989 and the request for adjustment having been made on August 28, 1989 and reminder on September 12, 1989, no interest was exigible under sections 234A and 234B of the Act. The Tribunal has rightly held that the assessee was entitled to adjustment of the said amount and no interest could be charged on that basis. Therefore, no fault could be found with the approach adopted by the Tribunal." 6. Similarly, CIT v. Cosmos Builders and Promoters Ltd. [2016] 76 taxmann.com 374 (Punj. & Har.) the issue was adjudicated against the revenue. The assessee has been held entitled to adjustment of cash seized against its advance tax dues. It has further been held that the Explanation 2 to section 132B of the Act is not retrospective in nature. The SLP against the said judgment has already been dismissed by the apex court vide order dated May 6, 2016. Moreover, Explanation 2 to section 132B of the Act came into force on June 1, 2013 whereas the present case relates to the assessment year 2011- 12. Further, the relevant findings recorded by the Tribunal read thus: 'We find that Explanation 2 to section 132B, as Finance Act, 2013 clearly states is effective from June 1, 2013. When the law so specifically states, there is no scope of holding that it is ITA No. 7956/Del/2019 Rahul Agarwal 7 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 the hon'ble Supreme Court in the case of CIT v. Vatika Township (P.) Ltd. [20141.367 ITR 466, the 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 Commissioner of Income-tax (Appeals). Accordingly we approve the order of the Commissioner of Income-tax (Appeals) and decline to interfere in the matter." 7. In view of the above, we do not find any ground to interfere with the impugned order dated August 31, 2015, annexure A.3, passed by the Tribunal. The judgment of learned Single Bench of the Madhya Pradesh High Court in Ramjilal Jagannath's case (supra) does not come to the rescue of the Revenue in view of binding decisions of the Division Benches of this court as noticed hereinbefore. Consequently, no substantial question of law arises and the appeal stands dismissed.” 4. Further, we find that we have examined the Circular No. 20/2017 of CBDT which is as under: F. No. 279/Misc./140/2015/ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated 12th June, 2017 ITA No. 7956/Del/2019 Rahul Agarwal 8 “Subject: Applicability of Explanation 2 to Section 132B of the I.T. Act, 1961- reg. - Section 132B of the Income Tax Act 1961, provides for adjustment of seized assets/requisitioned assets against the amount of any existing liability under the Income Tax Act, 1961, (the Act), the Wealth-tax Act, 1957, the Expenditure-tax Act, 1987, the Gift-tax Act, 1958 and the Interest-tax Act, 1974, and the amount of the liability determined on completion of the assessment under section 153A of the Act and the assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is deemed to be in default, or the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C of the Act. 2. Dispute arose between the Department and the assessees with regard to adjustment of such seized/requisitioned cash against advance tax liability etc. Several Courts held that on an application made by the assessee, the seized money is to be adjusted against the advance tax liability of the assessee. Subsequently, Explanation 2 to Section 132B of the Act was inserted by the Finance Act, 2013 w.e.f. 01-06-2013, clarifying that "existing liability» does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII of the Act. However, the dispute continued on the issue as to whether the amendment was clarificatory in nature having retrospective applicability or it has only prospective applicability. 3. Several Courts have held that the insertion of Explanation 2 to section 132B of the Act, is prospective in nature and not applicable to cases prior to 01.06.2013.The SLPs filed by the Department against the judgment of the Hon'ble Punjab and Haryana High Court in the case of Cosmos Builders and Promoters Ltd. and the Hon'ble Allahabad High Court in the case of Sunil Chandra Gupta2, have been dismissed. Subsequently, the CBDT has also accepted the judgment of the Hon'ble Punjab & Haryana ITA No. 7956/Del/2019 Rahul Agarwal 9 High Court in the case of Spaze Towers Pvt. Ltd. dated 17.11.2016, wherein it was held that the Explanation 2 to Section 132B of the Act is prospective in nature. 4. Accordingly, it has now been settled that insertion of Explanation 2 to Section 132B of the Act shall have a prospective application and so, appeals may not be filed by the Department on this issue for the cases prior to 01.06.2013 and those already filed may be withdrawn/ not pressed upon. 5. The above may be brought to the notice of all concerned. 6. Hindi version follows.” Sd/- (Neetika Bansal) Deputy Secretary to Government of India 5. Hence, we hereby hold that the order u/s 154 passed by the AO is against the Circular of the CBDT and the order of the Hon’ble High Court. Suffice to say that we are unable to appreciate the hyper technicalities embarked upon by the AO as well as the ld. CIT(A) while dealing with the issue. 6. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 20/06/2023. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 20/06/2023 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR