SHRI. SUNIL KUMAR SHARMA,BENGALURU V. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(4), BENGALURU

ITA 196/BANG/2022

AI Insights

The case involves three appeals by Shri Sunil Kumar Sharma against the orders of the Deputy Commissioner of Income Tax, CPC / Central Circle 1(4), Bangalore, concerning the assessment year 2018-19. The appeals were consolidated due to their relatedness. The primary issues revolved around the treatment of cash seized during a search operation and the disallowance of employees' contributions to PF & ESI. The Tribunal's decision was significantly influenced by the High Court's earlier rulings, which quashed the assessment order and related proceedings, leading to the allowance of the appeal concerning the seized cash and the dismissal of the other two appeals based on procedural and substantive grounds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37678 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Other Referred Cases: Checkmate Civil Appeal number 143 taxman.com 178(SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LAKSHMI S.
• Keywords: Set aside; Opportunity of being heard; TDS; Search and seizure
• Section: 143(2); 154; 143(1); 153C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER ITA Nos.105, 196 & 736/Bang/2022 Assessment year : 2018-19 Shri Sunil Kumar Sharma, No.328, Sangeetha Bhavan, Tippu Sultan Palace Road, Kalasipalyam, Bengaluru – 560 002. PAN: ABXPS 2039K Vs. The Deputy Commissioner of Income Tax, CPC / Central Circle 1(4), Bangalore. APPELLANT RESPONDENT Appellant by : Ms. Lakshmi S., Advocate Respondent by : Shri D.K. Mishra, Pr.CIT(DR)(ITAT), Bengaluru. Date of hearing : 10.01.2025 Date of Pronouncement : 31.01.2025 O R D E R Per Bench All these 3 appeals are related to the same assessee for the same AY 2018-19 arising out of the orders of the CIT(Appeals)-11, Bangalore as follows:- ITA No. A.Y. CIT(A) Order dated DIN 105/B/2022 2018-19 22.12.2021 ITBA/APL/M/250/2021-22/1038022328(1) 196/B/2022 2018-19 28.01.2022 ITBA/APL/M/250/2021-22/1039143713(1) 736/B/2022 2018-19 24.06.2022 ITBA/REC/M/154/2022-23/1043555424(1) ITA Nos.105, 196 & 736/Bang/2022 Page 2 of 10 2. For the sake of convenience, the above appeals are decided by way of this consolidated order since. ITA No.196/Bang/2022- Facts which are relevant for the appeal- 3. The brief facts as coming out from the order of the authorities below are that a search and seizure action was initiated in the case of Shri D.K. Shivakumar on 2.8.2017. Consequently, the premises of the assessee was also searched on the same day, during which certain incriminating documents pertaining to the present assessee were found. The case of the assessee was thereafter centralized with DCIT, Central Circle 1(4), Bengaluru by order dated 7.3.2018 of the PCIT, Bengaluru. It is pertinent to note here that during the course of search certain cash amounting to Rs 6.68 Crore was unearthed, by the department. Explaining the ownership of the cash the assessee initially disposed that the same was pertaining to Mr. D.K. Shivkumar. 4. Thereafter the assessee filed his return of income on 14.6.2018 declaring total income of Rs.15,88,07,660. It is pertinent to note that while filing the ROI the assessee offered the amount of cash seized as his income. Thereafter, various notices were issued by the AO at the time of assessment proceedings. In response to the notices of the AO, the counsel for the assessee had appeared on 19.11.2019, 22.11.2019, 03.12.2019, 09.12.2019 & 16.12.2019 and made submissions and filed replies with the AO. It is also pertinent to note that satisfaction note on the basis of which the proceedings were initiated were also provided to the assessee by the AO vide letter dated 29.11.2019. 5. The objections filed by the assessee with respect to assumption of jurisdiction were also disposed of by the AO by way of separate ITA Nos.105, 196 & 736/Bang/2022 Page 3 of 10 order. It is observed by the AO that the assessee is an individual and running business of transport under the name & style of Sharma Transport. Thereafter, the AO framed assessment after making various additions as mentioned in the assessment order dated 31.12.2019. So far issue of cash seizure is concerned the AO taxed this amount on protective basis in the hands of the present assessee vide his order dated 31.12.2019. Against this order assessee preferred an appeal before the CIT(A) who confirmed the order of AO under section 143(3) vide order dated 03.05.2022. And thereafter the assessee went before the Hon’ble High Court in writ and assailed the order of AO dated 31.12.2019 and CIT(A) order dated 03.05.2022. 6. After completion of the assessment proceedings, the assessee filed a rectification application before the AO on 31.01.2020. The same was decided by the AO on 20.02.2020 (Appeal Set Page Number- 125). The AO dismissed the request of assessee regarding the assessment of cash in the hands of assessee on substantive basis and levy of interest under section 234A of the Act. 7. Subsequently the AO issued a notice u/s. 154 dated 7.9.2020 wherein it has been pointed out that the assessee has wrongly been given credit of advance tax to the tune of Rs.6.68 crores. The revenue also proposed to disallow TDS & TCS claim of the assessee. In response to this notice, the assessee filed a reply vide letter dated 10.9.2020. However, the AO could not find force in the reply of the assessee and passed an order on 17.9.2020 and disallowed the credit of TDS as well as credit of advance tax. The present proceedings are ITA Nos.105, 196 & 736/Bang/2022 Page 4 of 10 emanating against the action of 154 vide order dated 17.09.2020 (Page Number – 129 of appeal set). 8. Aggrieved with the order of the AO, the assessee preferred an appeal before the ld. CIT(Appeals) and contended that 154 order dated 17.9.2020 is not sustainable because there was no mistake apparent from record in the earlier order u/s. 154 dated 20.2.2020. However, the ld. CIT(A) could not find any force in the argument of the assessee and hence dismissed the appeal of the assessee. 9. Aggrieved with the order of the CIT(A), the assessee has come up in appeals before the Tribunal challenging the orders of the ld. CIT(A). 10. The ld. DR relied on the order of the lower authorities. Finding of the Bench on ITA Number 196/Ban/2022 11. We have considered the rival submissions and perused the material on record. When the impugned proceedings before the Tribunal were pending, the assessee filed Writ Petitions before the Hon’ble High Court of Karnataka pertaining to AYs 2015-16 to 2018- 19 inter alia challenging various legal issues such as validity of notice u/s. 153C, etc. The Hon’ble jurisdictional High Court vide order dated 17.8.2022 has observed as under :- “27. Taking into the account the law enunciated by the Hon'ble Apex Court referred to above, the points for determination is answered in favour of petitioner. In the result, I pass the following: ORDER (1) Writ Petitions No. 9937, 9938 and 9939 of 2022 are allowed and impugned Notices dated 21st August, 2019 and further proceedings thereof are quashed by remanding the ITA Nos.105, 196 & 736/Bang/2022 Page 5 of 10 matter to the respondent-Revenue to reconsider the issue afresh in terms of the discussion made above; (2) Writ petition No. 9945 of 2022 is allowed and Order dated 03rd May, 2022 passed in Appeal No. CIT (A)- 11/BNG-10701/2019-20 is quashed. The Respondent No. 1 shall reconsider the Appeal filed by the petitioner referred to above and to dispose of the same in accordance with law after providing an opportunity of hearing to both the sides, considering the observation made above; (3) Writ Petition No. 9946 of 2022 is allowed and proceedings initiated under section 153C of the Act culminating in issuance of Notice dated 22nd August, 2019 are quashed and further proceedings thereof are quashed by remanding the matter to the respondent-Revenue to reconsider the issue afresh in terms of the discussion made above.” ( Relates to the impugned year) 12. The above order of the Hon’ble Single Judge of the jurisdictional High Court in WP Nos.9337 to 9939, 9945 & 9946 of 2022 has been challenged by the Revenue in appeal before the Hon’ble Division Bench of jurisdictional High Court and the Hon’ble Division Bench dismissed the appeal of the revenue and confirmed the order of the Hon’ble Single Judge vide order dated 22.1.2024 by observing as under:- “55. In the totality of circumstances, and also on dwelling in detail with the materials, it reveals that the learned Single Judge has considered all the points and has gone through the reliances facilitated on both sides and has rendered the impugned order, which has been challenged by filing the present appeals. The grounds urged in the appeals preferred by the appellant/Revenue, do not have any substance and the impugned order rendered by the learned Single Judge do not suffer from any infirmity and further, no warranting circumstances arise for interference. Consequently, these appeals deserve to be rejected as being devoid of merits. 56. In the light of the above said Apex court Decisions and the Panchanama provided herein, it is deemed appropriate to ITA Nos.105, 196 & 736/Bang/2022 Page 6 of 10 conclude that the notice provided under section 153C is bad in law. We are therefore clearly of the opinion that the learned Single Judge is right in allowing the Writ petitions. Accordingly, we proceed to pass the following: ORDER The appeals preferred by the appellant/Revenue are hereby rejected. Consequently, the order passed by the learned Single Judge in W.P.Nos.9937/2022 C/w. W.P.Nos.9938/2022, 9939/ 2022, 9945/2022 and 9946/2022 is hereby confirmed.” 13. Perusal of the above findings of the Hon’ble jurisdictional High Court would show that the Hon’ble High Court was please to hold that notices u/s. 153C is bad in law. However, in WP No.9946/2022 which is related to the impugned assessment year, the Hon’ble High Court after quashing the earlier order has remanded the matter to the revenue for deciding it afresh in view of the judgment rendered by the Hon’ble High Court. 14. Perusal of the above findings would prove beyond doubt that the impugned order of the AO dated 31.12.2019 is no more in existence, as the Hon’ble High Court has already quashed the assessment order. Therefore, the 154 orders passed by the revenue vide order dated 17.9.2020 & 20.2.2020 are also non-est as the same are passed in consequence to an order which is already set aside by the Hon’ble jurisdictional High Court. 15. Now coming to the next issue i.e., treatment of cash seized from the premises of the assessee, we would like to mention the following ITA Nos.105, 196 & 736/Bang/2022 Page 7 of 10 observations of the Division Bench of the Hon’ble High Court wherein in para 52 of its order is as follows:- “52. Insofar as the contention as regards cash of Rs. 6.68 having been found in Premises No. B5/201, Safdarjang Enclave, New Delhi during search, as per Section 292C of the IT Act, the presumption in law is that the cash seized belongs to the owner of the house from where it was seized. However, as regards the said cash which was found, the respondent/assessee had filed his Income-tax Return including the said cash as advance tax, and the same was also accepted by the Income-tax Department. Even the cross-examination of all the parties involved also proves that clearly the cash found belonged to Shri Sunil Kumar Sharma.” 16. It is the categorical finding of the Hon’ble jurisdictional High Court that the cash found was belonging to the assessee only and the revenue has also accepted the said cash as payment of advance tax. It is further worthy to note that the assessee vide letter dated 18.11.2019 has categorically stated that cash seized from the premises of the assessee may be adjusted against the outstanding tax liability. Therefore, we are of the view that the cash found from the premises of the assessee was actually belonging to the assessee and hence in terms of the request of the assessee, the same cash shall be treated as payment of advance tax by the assessee. Therefore, the appeal of the assessee for AY 2018-19 in ITA No.196/Bang/2022 is allowed as indicated above. ITA No.105/Bang/2022- arising from the order of 143(1) dated 29.11.2019 17. This appeal of the assessee is arising from the order of the ld. CIT(Appeals) dated 22.12.2021 and relates to AY 2018-19. In this case the issue is disallowance of Rs.26,86,554 representing employees ITA Nos.105, 196 & 736/Bang/2022 Page 8 of 10 contribution to PF & ESI. It is admitted position of fact that assessee has deposited this amount beyond the due date specified under PF & ESI regulations. Observing this, the CPC vide order dated 29.11.2019 disallowed the claim of assessee vis-à-vis payment of ESI & PF. 18. Aggrieved from the order of the CPC, the assessee filed appeal before the ld. CIT(A) inter alia challenging the disallowance of employees contribution of ESI & PF. The main contention of the assessee is that amounts were deposited before the due date of filing of income tax return as well as the CPC does not have any power to disallow these expenses u/s. 143(1) proceedings. It worthy to note that proceedings of 143(1) were not before the Hon’ble High Court in writ petitions. 19. However, the ld. CIT(A) has dismissed the appeal in limine on the ground that the assessee failed to pay the admitted tax before the filing of the present appeal. 20. Now the assessee has come up in appeal inter alia contending that the ld. CIT(A) is not correct in dismissing the appeal of the assessee. 21. The ld. DR relied on the orders of authorities below. 22. We have heard the rival submissions and perused the material on record. In ITA No.196/Bang/2022 (supra), we have already held that the cash seized from the premises of assessee is to be adjusted against ITA Nos.105, 196 & 736/Bang/2022 Page 9 of 10 the tax liability of the assessee and hence we are of the view that the ld. CIT(A) was not correct in dismissing the appeal of the assessee for want of deposit of tax. 23. However, even if we condone the mistake committed by the ld. CIT(A), the fact of the matter is that whether the assessee is entitled to deduction of employees contribution of PF & ESI amount paid beyond the due date specified under the relevant regulations, is no more res integra in view of the judgment of the Hon’ble Supreme Court in the case of Checkmate Civil Appeal number 143 taxman.com 178(SC). Therefore, there is no merit in restoring the matter back to the file of the ld. CIT(Appeals) and opportunity of being heard to the assessee. Before parting we would like to deal with the legal contention of the assessee that the AO could not have issued 143(1) intimation on 17.11.2019 after the issuance of notice under section 143(2) of the Act, we would like to observe that the provisions of section 143(1D) which debars the AO from processing a return of income after the issuance of 143(2) notice are not applicable for the impugned year as evident from the provisions of section 143(1D), which provides that provisions of this sub section would not be applicable for the assessment year commencing on or after 1st April 2017. Here we are dealing with AY 2018-19 which is obviously out of the purview of section 143(1D) of the Act. 24. Hence the appeal of the assessee is dismissed on merits. ITA No.736/Bang/2022 25. This appeal of the assessee is arising from the order of the ld. CIT(A) dated 24.6.2022. Assessee has filed a rectification application ITA Nos.105, 196 & 736/Bang/2022 Page 10 of 10 before the ld. CIT(A) on 24.1.2022 against the ld. CIT(A)’s order dated 22.12.2021. However, the ld. CIT(A) dismissed the rectification application of the assessee on the ground that there was no mistake apparent in his order dated 22.12.2021. 26. Now the assessee has come up in appeal before us. 27. The ld. DR relied upon the orders of the lower authorities. 28. After considering the rival submissions, we are of the view that the present appeal has become academic as we have already adjudicated the issue regarding allowability of PF & ESI contribution on merits in ITA No.105/Bang/2022, therefore we dismiss this appeal as infructuous. 29. In the result, the appeals of the assessee in ITA No.196/B/2022 is allowed. And ITA No.105/Bang/2022 and ITA No.736/Bang/2022 are dismissed. Pronounced in the open court on this 31st day of January, 2025. Sd/- Sd/- ( LAXMI PRASAD SAHU ) ( PRAKASH CHAND YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore, Dated, the 31st January, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. "