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2023 (10) TMI 543 - AT - Income TaxValidity of order passed u/s 154 - adjustment of cash seized against the advance tax denied - Scope of Expl Explanation 2 to Section 132B of the Act was inserted by the Finance Act, 2013 w. e. f. 01-06-2013 - HELD THAT - This provision restricts the scope of adjustment of seized cash, and, therefore, is to be treated as advance to the assessee - HELD THAT - The issue of adjustment of cash seized against the advance tax stands covered by the judgment of Hon ble Punjab Haryana High Court in the case of PCIT Vs. Surinder Kumar Khindri 2017 (4) TMI 1104 - PUNJAB HARYANA HIGH COURT held Explanation 2 to Section 132B of the Act was inserted by the Finance Act, 2013 w. e. f. 01-06-2013, clarifying that existing liability does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII of the Act. However, the dispute continued on the issue as to whether the amendment was clarificatory in nature having retrospective applicability or it has only prospective applicability. Several Courts have held that the insertion of Explanation 2 to section 132 B of the Act, is prospective in nature and not applicable to cases prior to 01.06.2013. Accordingly, it has now been settled that insertion of Explanation 2 to Section 132 B of the Act shall have a prospective application and so, appeals may not befiled by the Department on this issue for the cases prior to 01.06.2013 and those already filed may be withdrawn/ not pressed upon. We hereby hold that the order u/s 154 passed by the AO is against the Circular of the CBDT and the order of the Hon ble High Court. Suffice to say that we are unable to appreciate the hyper technicalities embarked upon by the AO as well as the ld. CIT(A) while dealing with the issue.
Issues Involved:
1. Adjustment of cash seized during a search against advance tax liability. 2. Retrospective application of Explanation 2 to Section 132B of the Income-tax Act, 1961. Summary: The present appeal was filed by the assessee against the order of CIT(A)-16, New Delhi dated 26.07.2019. The primary issues involved were the adjustment of cash seized during a search against advance tax liability and the retrospective application of Explanation 2 to Section 132B of the Income-tax Act, 1961. Issue 1: Adjustment of Cash Seized Against Advance Tax Liability The assessee contended that the Commissioner of Income Tax (A) erred in not allowing the credit of cash seized during the search as advance tax. The issue of adjustment of cash seized against advance tax was covered by the judgment of the Punjab & Haryana High Court in the case of PCIT Vs. Surinder Kumar Khindri 393 ITR 479, which held that Explanation 2 to Section 132B, inserted with effect from 1-6-2013, is not retrospective in nature. Therefore, the assessee was entitled to the adjustment of seized cash against the advance-tax liability for the assessment year 2011-12. Issue 2: Retrospective Application of Explanation 2 to Section 132B The revenue argued that Explanation 2 to Section 132B, which restricts the scope of adjustment of seized cash, should be applied retrospectively. However, the Tribunal upheld the decision that the Explanation is prospective in nature. This position was supported by multiple court rulings, including CIT v. Ashok Kumar and CIT v. Cosmos Builders and Promoters Ltd., where it was held that the Explanation does not have retrospective effect. The CBDT Circular No. 20/2017 also clarified that Explanation 2 to Section 132B is prospective and should not be applied to cases prior to 01.06.2013. Conclusion The Tribunal found the order u/s 154 passed by the AO to be against the Circular of the CBDT and the order of the Hon'ble High Court. The appeal of the assessee was allowed, and the Tribunal held that the hyper technicalities embarked upon by the AO and CIT(A) were not appreciated. The order was pronounced in the open court on 20/06/2023.
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