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2012 (10) TMI 324 - HC - Income TaxUnaccounted capital gains on sale of the plots - search - Instruction issued by Board dated 09.02.2001 that the tax effect does not exceed the monetary limit is prospective or retrospective? - Held that - considering Clause 11 of the instruction No.3/11 dated 09.02.2011 issued by the Board, specifically says that it will be applicable to the cases filed on or after 9.2.2011, the courts holding that it is applicable to the pending cases is against the provision under Section 268A. Therefore upholding the contention of the revenue that the Instruction No.3 dated 09.02.2011 has no retrospective effect and issue decided in favour of the Revenue. Credit of Rs. 10,00,000/- to Smt.Sumangala Devi, assessee, seized from late B.B.Swamy,close associate which was also adjusted against the tax liability of B B Swamy - Held that - The money seized was already adjusted towards tax liability of Sri. B.B.Swamy and there is no material on record to show that the money seized in the hands of B.B.Swamy belongs to the assessee. Further, there is no finding by the First Appellate authority that the money seized in the hands of Sri. B.B.Swamy belongs to the Assessee and under such circumstances the direction issued by the CIT(Appeals) to give credit to the assessee to the extent of Rs. 10,00,000/- which was seized from late Sri.B.B.Swamy is not sustainable in law - in favour of the Revenue.
Issues Involved:
1. Applicability of Board's Instruction No.3/2011 dated 09.02.2011 to pending cases. 2. Legality of ITAT's upholding of CIT(A)'s direction to credit Rs. 10,00,000/- seized from B.B. Swamy to the tax liability of the assessee. Issue-wise Detailed Analysis: 1. Applicability of Board's Instruction No.3/2011 to Pending Cases: The Revenue contended that the Instruction No.3/2011, issued by the Board on 09.02.2011, is not applicable to pending cases. The court examined various High Court rulings on the matter. High Courts such as Madras, Kerala, and Chhattisgarh have held that such instructions are prospective, while Bombay, Madhya Pradesh, and Delhi High Courts have held them applicable to pending cases. The Karnataka High Court, in re Ranka and Ranka, had previously ruled that the instruction is applicable to pending appeals where the tax effect is below Rs. 10 lakhs. However, the court noted that Clause 11 of Instruction No.3/2011 explicitly states its applicability to appeals filed on or after 09.02.2011, and thus, applying it to pending cases contradicts Section 268A of the Act, public interest, and public policy. Consequently, the court upheld the Revenue's contention and ruled that Instruction No.3/2011 does not have retrospective effect, making the appeal by the Revenue maintainable. 2. Legality of ITAT's Upholding of CIT(A)'s Direction: The second issue involved the direction by the CIT(A) to adjust Rs. 10,00,000/- seized from B.B. Swamy towards the tax liability of the assessee. The court referred to Section 132B of the Income Tax Act, which deals with the disposal of seized assets. The money seized from B.B. Swamy had already been adjusted towards his tax liability, and there was no evidence to show that the money belonged to the assessee. The First Appellate Authority did not find that the money seized from B.B. Swamy belonged to the assessee. Therefore, the direction by the CIT(A) to give credit to the assessee was deemed unsustainable in law. The Tribunal erred in confirming this order. The court thus ruled in favor of the Revenue, setting aside the directions given by the CIT(A) and confirmed by the ITAT. Conclusion: The court allowed the appeal, setting aside the impugned orders of the first appellate authority and the Tribunal concerning the adjustment of the seized amount towards the assessee's tax liability. The court also made suggestions to the Union Government to broaden the tax base and reduce the tax burden on existing taxpayers. The Registry was directed to send a copy of the order to the Secretary to Union Finance Department and the Secretary to the Law Commission for necessary action.
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