2015 (8) TMI 876 - AT - Income Tax

Explanation to section 73 - whether the main source of income of the assessee company was share trading and not income from other sources? - CIT(A) held that by virtue of main source of income of the assessee being Income from other sources explanation to section 73 was not applicable - Held that - In the present case, the AO has considered the income of ₹ 30 crores, disclosed u/s. 132(4) by the assessee as income from other sources because such income was declared to buy peace and there is no evidence in the form of seized documents as per the assessment order, to correlate such income with any business transactions. This income is not declared against any undisclosed assets such as cash, jewellery etc. as per the assessment order so that it could be deemed as an income u/s. 69 etc of the Act. It has been held that the income declared u/s. 132(4) is required to be taxed under the head Income from other sources . If the income declared u/s. 132(4) is considered to be Income from other sources , then the main income of assessee would be income from other sources and assessee company would be covered under the first exception to explanation below section 73 and by virtue of main income assessee being the income from other sources , then explanation to Section 73 is not applicable. Accordingly, in the facts and circumstances of the case, we find no infirmity in the impugned order of the ld.CIT(A). We uphold the same. - Decided against revenue. Interest u/s. 234B - whether interest should not be charged from 01/05/2008 because assessee had made a request to adjust the cash so seized from M/s. Shoparna Bros. P.Ltd towards estimated tax liabilities of the assessee in the statement recorded u/s. 132(4) during the course of search on 08-04-08? - CIT(A) accepted the arguments made by the assessee and held that calculation of interest u/s. 234B the AO should have credited the tax of ₹ 10,06,00,000 from 06-08-2008 because subsequent delay in such credit was a delay on part of the AO beyond the time allowed by the Income Tax Act - Held that - No infirmity in the order of the ld. CIT(A), who has rightly held that credit of ₹ 10,06,00,000/- w.e.f 06-08-2008 because subsequent delay in such credit was a delay on the part of the Assessing Officer beyond the time allowed by the Income Tax Act. Interest u/s. 234A is chargeable even on a return filed in time but taxes due remaining unpaid after the due date of filing of return of income. Therefore, in calculation of interest u/s. 234B, Assessing Officer should give credit for tax of ₹ 10,06,00,000/- from 06-08-2008 because subsequent delay in such credit was a delay on part of the Assessing Officer beyond the time allowed by the Income Tax Act. Therefore, CIT(A) correctly directed the Assessing Officer to calculate the interest u/s. 234B accordingly.- Decided against revenue.

Summary

Issues Involved:
1. Applicability of Explanation to Section 73 of the Income Tax Act.
2. Adjustment of seized cash against tax liability and calculation of interest under Section 234B.

Detailed Analysis:

1. Applicability of Explanation to Section 73 of the Income Tax Act

Facts:
- A search under Section 132 of the Income Tax Act was conducted on the assessee's premises on 28-03-2008.
- The assessee filed a return of income on 29-09-2008, declaring a total income of Rs. 29,64,19,690, which included a share trading loss of Rs. 42,21,015 and income from other sources.
- The AO deemed the share trading loss as speculative under Explanation to Section 73, asserting that the principal business of the assessee was not money lending.

Arguments:
- The AO argued that the main source of income was share trading, not income from other sources.
- The assessee contended that the income disclosed under Section 132(4) should be considered as income from other sources, thus falling under the first exception to Explanation to Section 73.

Judgment:
- The Tribunal upheld the CIT(A)'s decision, agreeing that the Explanation to Section 73 was not applicable.
- It was noted that the income disclosed under Section 132(4) was to buy peace and had no correlation with business transactions, thus categorized as income from other sources.
- The Tribunal referenced the case of Godavari Capital Ltd vs. DCIT and Aman Portfolio (P) Ltd vs. DCIT, concluding that if the main income is from other sources, the Explanation to Section 73 does not apply.

2. Adjustment of Seized Cash Against Tax Liability and Calculation of Interest Under Section 234B

Facts:
- The AO issued a notice of demand under Section 156, calculating tax payable by the assessee.
- The assessee requested that the seized cash be adjusted against the tax liability, which the AO initially denied, citing CBDT instructions.

Arguments:
- The assessee argued that the seized cash should be considered as payment of advance tax, referencing several ITAT decisions supporting this view.
- The AO maintained that the seized cash could not be applied against advance tax liability as per CBDT instructions.

Judgment:
- The Tribunal upheld the CIT(A)'s decision that the seized cash should be credited from 06-08-2008, as the delay was on the AO's part.
- It was noted that the AO had adjusted the seized cash towards payment of tax under Section 140A before raising the demand under Section 156, indicating acceptance of the assessee's contention.
- The Tribunal referenced various cases, including DCIT vs. Shri Sitaram Agarwal (HUF) and ACIT vs. Shailesh Natubhai Desai, supporting the adjustment of seized cash towards tax liability.

Conclusion:
The appeals of the revenue in both ITA Nos. 1877/Kol/2010 and 1878/Kol/2010 for the assessment year 2008-09 were dismissed. The Tribunal confirmed that Explanation to Section 73 was not applicable to the assessee's case and that the seized cash should be credited from 06-08-2008 for calculating interest under Section 234B.