2015 (8) TMI 1385 - AT - Income Tax

Penalty u/s 271AAA - seized or requisitioned assets against existing liability - AO was of the view that since the assessee has not paid tax on the income declared by the assessee himself the benefit of exclusion under section 271AAA(2)(i) is not available - Held that - Explanation 2 to section 132B as Finance Act 2013 clearly states is effective from 1st June 2013. When the law so specifically states there is no scope of holding that it is retrospective in effect - This provision restricts the scope of adjustment of seized cash and therefore is to be treated as advance to the assessee - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Challenge to the correctness of the penalty under section 271AAA of the Income-tax Act, 1961 for the assessment year 2011-12.

Detailed Analysis:

Issue 1:
The Assessing Officer challenged the penalty imposed under section 271AAA, questioning the decision of the CIT(A) in deleting the penalty. The main contention was whether the penalty was rightly deleted despite detailed facts and findings provided by the Assessing Officer in the penalty order. The CIT(A) had to consider various aspects, including the adjustment of seized assets against existing liabilities under the Income-tax Act, the applicability of interest under sections 234B and 234C due to a shortfall in tax payment, and the retrospective effect of an amendment made to section 132B in the Finance Act, 2013.

Issue 2:
The core of the dispute revolved around the adjustment of seized cash against advance tax liability. The Assessing Officer argued that the legislative intent, as per section 132B of the Income-tax Act, was to adjust seized assets only against regular demands after assessment and not against advance tax liability. The insertion of Explanation 2 by the Finance Act, 2013 clarified that advance tax payable should not be included in existing liabilities for adjustment against seized cash. This clarification overturned previous judicial interpretations that allowed such adjustments, leading to the conclusion that the assessee was in default for failing to pay advance tax on the disclosed income under section 132(4).

Issue 3:
The CIT(A) deleted the penalty by interpreting the prospective nature of Explanation 2 to section 132B, inserted by the Finance Act, 2013. The Tribunal, after considering the legal position and relevant case law, upheld the CIT(A)'s decision. It emphasized that when a law specifies the effective date of a provision, it should be treated as prospective unless there is a clear legislative intent for retrospective application. Citing the Hon'ble Supreme Court's ruling in a similar context, the Tribunal affirmed that modifications affecting accrued rights or imposing new obligations are generally prospective unless explicitly stated otherwise.

In conclusion, the Tribunal dismissed the appeal, affirming the CIT(A)'s decision to delete the penalty under section 271AAA based on the interpretation of the legislative provisions and relevant legal principles.