2014 (10) TMI 615 - AT - Income Tax

Order for adjustment towards advance tax liability - Whether the CIT(A) was right in law in holding and directing that the amount seized from the assessee be adjusted towards the advance tax liability without appreciating that the provision of section 132B of the IT Act do not provide for the same Held that - Following the decision in CIT vs. Shelly Products and Ors. 2003 (5) TMI 4 - SUPREME Court - the clarificatory and declaratory provisions which were inserted to clarify the law so as to remove doubts are of retrospective effect even if the same provisions are stated to be applicable from a particular assessment year or date - in a Memorandum of Explanation the provisions of Finance Act 2013 it has been stated that the amendment for insertion of Explanation-1 and Explantion-2 to the provisions of section 132B of the Act are propose to amend the section was as to clarify the existing liability does not include advance tax payable in accordance with the provisions of part C of Chapter XVII of the Act - Therefore the Explanation 2 to section 132B of the Act is a clarificatory provision which was inserted to clarify the intention of the legislature that the existing liability does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII of the Act revenue rightly contended that the Explanation 2 attached to section 132B of the Act is a clarificatory provision which is of retrospective effect even if the same was stated to be applicable from a particular date - Explanation 2 to section 132B of the Act is retrospectively effective from the date of insertion of provision of section 132B of the Act w.e.f. 1.6.2002. The assets or cash seized u/s 132 of the Act is adjustable against the amount of any existing liability under the Act which does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII of the Act as per section 208 of the Act the amount of cash seized could not be adjusted as advance tax for the A.Y. 2008-09 the assessee has shown advance tax paid besides self-assessment tax paid and cash seized - the assessee himself has not treated the amount of cash seized as an advance tax. The assessment was framed u/s 153A/143(3) of the Act on 24.12.2010 on total income therefore the application of assets u/s 132B of the Act r/w Explanation 2 would be possible only on conclusion of assessment proceedings i.e. 24.12.2010 - the AO was wrongly granted adjustment of seized cash from 23.2.2011 and the CIT(A) was also grossly erred in holding that the assessee was entitled to adjustment of seized cash from 01.07.2008 - the AO is directed that the adjustment of cash seized be given for the assessee from the date of completion of assessment proceedings u/s 153A /143(3) of the Act i.e. from 24.12.2010 as per provisions of Explanation 2 to section 132B of the Act. Non-credit of seized cash before levy of interest u/s 234A Held that - The CIT(A) has not specifically granted any relief for the assessee on the issue of levy of interest u/s 234A and 234B of the Act but the CIT(A) has directed the AO to adjudicate the issues while giving appeal effect to the main grounds and the AO is also directed by the CIT(A) to take consideration of the decisions of Commissioner of Income-tax Versus Ashok Kumar 2010 (9) TMI 771 - Punjab and Haryana High Court - the adjustment of seized cash is to be given for the assessee from the date of completion of assessment which was 24.12.2010 therefore levy of interest u/s 234A of the Act being consequential is also restored to the file of the AO with a direction that the issue of levy of interest u/s 234A of the Act shall be decided in view of our findings on the main issue and in accordance with calculation of adjustment of seized cash u/s 132B r/w Explanation 2 of the Act Decided in favour of revenue. Admission of additional grounds Held that - The letters dated 30.06.2008 and 18.08.2008 were submitted before the AO and the AO gave detail deliberations and findings thereon - However during first appellate proceedings the CIT(A) considered the letters and relief was granted for the assessee relying on the same letters but this contention of the Revenue is not acceptable that the CIT(A) admitted additional evidence without confronting the same to the AO in contravention of Rule 46A of the Rules - Hence additional grounds based on this legal contentions are not admissible Decided against revenue.

Summary

Issues Involved:
1. Adjustment of seized cash towards advance tax liability.
2. Admission of additional evidence and grounds by CIT(A).
3. Levy of interest under sections 234A and 234B of the IT Act.
4. Applicability and interpretation of Section 132B and related provisions.

Detailed Analysis:

Issue 1: Adjustment of Seized Cash Towards Advance Tax Liability
The Revenue contested the CIT(A)'s decision to adjust the seized amount towards the assessee's advance tax liability, arguing that Section 132B does not allow such adjustments. The Revenue emphasized that "existing liability" under Section 132B does not include advance tax, as clarified by Explanation 2, which was inserted by the Finance Act, 2013, with retrospective effect from 01.06.2002. The assessee countered that the seized cash should be adjusted from the date of seizure (29.04.2008) against the tax liability for A.Y. 2008-09. The Tribunal held that the seized cash could not be adjusted as advance tax for A.Y. 2008-09, as per Section 208, which mandates advance tax liability during the financial year. The Tribunal concluded that the adjustment should be given from the date of assessment completion (24.12.2010), not from the date of seizure or any other date.

Issue 2: Admission of Additional Evidence and Grounds by CIT(A)
The Revenue argued that the CIT(A) admitted additional evidence (letters dated 30.06.2008 and 18.08.2008) without following Rule 46A of the IT Rules, which requires comments from the Assessing Officer (AO). The assessee contended that these letters were already submitted during the assessment proceedings. The Tribunal found that the letters were indeed submitted to the AO, and the CIT(A) did not contravene Rule 46A. Therefore, the additional grounds based on this legal contention were dismissed.

Issue 3: Levy of Interest Under Sections 234A and 234B of the IT Act
The Revenue argued that CIT(A) admitted an additional ground regarding non-credit of seized cash before the levy of interest under Section 234A without seeking comments from the AO. The Tribunal noted that CIT(A) did not grant specific relief regarding the levy of interest under Sections 234A and 234B but left it open for the AO to consider in light of the decisions of the Punjab and Haryana High Court. The Tribunal directed the AO to decide the issue of levy of interest under Section 234A in accordance with the Tribunal's findings on the main issue and the calculation of adjustment of seized cash under Section 132B.

Issue 4: Applicability and Interpretation of Section 132B and Related Provisions
The Tribunal examined Section 132B and its Explanation 2, which clarifies that "existing liability" does not include advance tax. The Tribunal held that Explanation 2 is a clarificatory provision with retrospective effect from 01.06.2002. The Tribunal also reviewed various case laws cited by both parties and concluded that the benefit of the decisions of the Punjab and Haryana High Court in the cases of Arun Kapoor and Ashok Kumar was not applicable to the assessee's case, as they pertained to assessment years before the insertion of Section 132B.

Conclusion:
The Tribunal partly allowed the Revenue's appeal on the first ground, directing the AO to adjust the seized cash from the date of assessment completion (24.12.2010). The second ground was deemed allowed for statistical purposes, with directions to the AO to decide the issue of levy of interest under Section 234A in accordance with the Tribunal's findings. The assessee's cross-objections were also deemed allowed for statistical purposes with directions to the AO. The Tribunal's order was pronounced on 17/10/2014.