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TMI Blog2014 (10) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... catory 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Sh. V. S. Rastogi, Adv. ORDER Per C. M. Garg, JM. This appeal has been preferred by the Revenue against the order of the CIT(Central) Gurgaon dated 30.03.2012 in appeal No. 169F/69/CIT(A)(c)/GGN/2011- 12 for A.Y. 2008-09. On receipt of notice, assessee has filed Cross-objection bearing no. 268/Del/2012. 2. The appellant Revenue has raised following grounds (revised on 07.09.2012) in this appeal: (i) Whether on the facts and in the circumstances of the case, the Ld. 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. (ii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in admitting the additional ground regarding non credit of seized cash before the levy of interest u/s 234A of IT Act without seeking comments from the Assessing Officer as required by Rule 46A of the IT Rules. The Additional Grounds of the Revenue 3. The Revenue department has also submitted following additional ground in this appeal: (iii) Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon. However, during first appellate proceedings the CIT(A) considered these 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 and we dismiss the same. Ground No.1 of the Revenue 7. Apropos ground No.1 the Ld. D.R. submitted following written submissions: 2.2.4. That apart, as also submitted the adjudication by the CIT(A) is not conformity with the requirement of law as contained u/s 132B of the Act as per which assets seized can only be approached towards the existing liabilities and the liabilities as determined on completion of the assessment. It is requested to kindly appreciate that assets seized, as per section 132B can only be applied in the following manner: (a) towards the existing liability under the (i) Income Tax Act: (ii) Wealth Tax Act: (iii) Expenditure Tax Act: (iv) Gift Tax Act; (v) Interest Tax Act; (b) towards liability created (i) on completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to each other yet the equity principles are otherwise inbuilt in section 132B itself which permits assessee to seek release of assets on his explaining the source of acquisition and getting the existing liabilities satisfied. Second proviso to 132B(1)(i) lays down the limitation of 120 days for which assets can be retained after seizure and thereafter clause (b) to section 132B(4) directs the officer for payment of interest if request for release is made. Very clearly since the question about the ownerships, etc. Is complex in most of the cases period of 120 days is not enough to determine; still the Legislature taking care of assessee's interest has in its own wisdom and rightly so fixed up the limitation of 120 days within which these question shave to be decided failing which revenue has been made responsible to compensate by way of interest for the deprivation of the assets seized. 2.2.9 Thus, as prescribed under the law correct approach on the part of the assessee is to lodge claim for payment of interest after the expiry of 120 days instead of claiming that money seized be appropriated towards advance tax. Consequently interest u/s 234B or 234C is leviable on the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignored by the CIT(A). (vi) Signatures appearing on two letters are at variance with the signatures as found on the cheques attached with the undated letter. It is not understood how the ld. CIT(A) had drawn any support from these letters when the relationship of the signatories of these letters with the assessee company was not even disclosed. (vii) Further, the CIT(A) has ignored that from the office of Spaze Towers P Ltd cash of just 1.20 crores was found. When it was so how it was permissible for the assessee to place reliance on certain letters which talk about the seizure of 4.50 crores. Clearly the attempt of the assessee to seek reliance from these letters is malafide and need to be viewed adversely. Bench is requested to kindly appreciate that this is a clear attempt to defraud the Revenue. 2.4.1 While adjudicating the appeal the Id. CIT(A) has drawn support from the judgments of the Punjab and Haryana High Court in the cases of CIT v. Arun Kumar (334 ITR 351) and CIT v. Ashok Kumar (334 ITR 355). In this regard it is submitted that the CIT(A) has ignored the settled principle of interpretation of a court judgment which, as also held by the Supreme Court in Ashwan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and even the High Court has not referred to the applicable provisions. Had the provisions of section 132B been considered the High Court would held otherwise. Very clearly, in view of the Supreme Court judgment in State v. Ratan Lal Arora, (2004) 4 SCC 590 where decision taken without reference to statutory bars, was held to be not having any precedential value and was also held to be treated as having been rendered per incuriam, it is prayed to kindly decide the dispute in view of the bare provisions of section 132B only ignoring the High Court decision in view of Supreme Court judgment in Mukesh K Tripathi v. Senior Divisional Manager, LIC(2004.) 8 SCC 387 (para 23) where it was held that 'once a decision has been rendered per incuriam, it cannot be said that it lays down a good law, even if it has not been expressly overruled. Further, it is to be appreciated that the judgments neither refer section 132B nor refer the arguments of the Counsels and hence the judgments were decisions sub silentio apart from being per incuriam and hence for this reason also the judgments lose the sanctity of binding precedent. 2.5. Notwithstanding what is submitted herein above, it is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility for the A.Y. 2008-09 and also paid first installment of the tax. The ld. counsel for the assessee further drawn our attention towards page nos. 39 40 of the paper book and submitted that another letter dated 18.8.2008 addressed to Additional Director of Investigation, Gurgaon, was also submitted and reiterated the fact that the assessee has discharged its more than 70% of tax liability in the form of seized cash which had been requested to be adjusted towards tax liability and also paid 2nd instalment of the tax. 8.4 The ld. counsel for the assessee further submitted that the assessee filed return u/s 139(1) of the Act on 30.9.2008 disclosing a taxable income of ₹ 25,76,35,593/- including therein such sum which had not yet been entered in the books of accounts including the cash of ₹ 4,43,36,500/- therefore, it should be inferred that the assessee had paid the advance tax and before the due date of filing of return. 8.5 The ld. counsel for the assessee further submitted that in response to notice vide dated 31.08.2009 issued to the assessee u/s 153A of the Act. The assessee filed a return of income on 18.05.2010 disclosing an income of ₹ 27,69,01,087 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no existing liability of A.Y. 2008-09 and therefore the remaining sum ought to have been adjusted against the admitted liability of tax on declared income of ₹ 27 crore. 13. The ld. counsel for the assessee vehemently contended that it is a well settled rule of law that the levy of interest is compensatory in nature and it is not permissible for the Revenue that on one hand the Revenue is holding the amount of cash seized without giving any credit and paying any interest thereon despite the fact that the assessee had prayed that the said sum be adjusted towards the tax liability and further on the other hand, the Revenue charged the interest from the assessee. 14. The ld. counsel for the assessee also submitted that there is no stringent meaning has been assigned to the words advance tax and when it is an admitted fact that on the date of search i.e. 29.4.2008 an amount of ₹ 4,43,36,500/- had been seized and there was no existing liability on the date, therefore, other sum has been reduced while calculating the interest u/s 234B of the Act. 15. The ld. counsel for the assessee further drawn our attention towards provision of section 234B(2) of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-95 1990-91 respectively which deals only with the provisions of section 234A, 234B, 234D and 234C of the Act without considering the provisions of section 132B of the Act which was substituted by the Finance Act, 2002 w.e.f. 1.6.2002 and Explanation 2 attached to provision to section 132B of the Act, which was inserted by Finance Act 2013 with retrospective effect. 18.1 The ld. DR also drawn our attention towards decisions of the Hon'ble Supreme Court in the case of CIT vs. Shelly Products and Others 261 ITR 367 (SC) and CIT vs. Kanji shivji Co. 242 ITR 124 (SC) and submitted that clarificatory provisions inserted to clarify the law so as to remove doubts are always retrospective, even if, stated to be applicable from a particular assessment year or date. 19. On careful consideration of above rival submission and contention, at the outset, we find it appropriate to reproduce section 132B of the Act with Explanation attached to this provision which read as under: [Application of seized or requisitioned assets. 132B. (1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:-- (i) the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner or] Chief Commissioner or [Principal Commissioner or] Commissioner under sub-section (5) of section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act. (3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized. (4) (a) The Central Government shall pay simple interest at the rate of [one-half per cent for every month or part of a month] on the amount by which the aggregate amount of money seized under section 132 or requisitioned under section 132A, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub- section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (i) of sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Explanation 2 attached to this section are applicable to the extant case. 22. The decision of Hon'ble Supreme Court in the case of CIT vs Tulsyan NEC Ltd. (supra) is related to provisions of Minimum Alternate Tax. In this case the Hon'ble Apex Court has held that a form prescribed under the rules can never have any effect on the interpretation or operation of the parent statute. On careful perusal of this decision, we respectfully hold that the benefit of the ratio of this decision is not available for the assessee as in the extant case we are not interpreting the effect of any form prescribed in the rules on the interpretation or operation of the parent statute but we have to adjudicate and interpret the issue of retrospective or prospective effect of Explanation 2 inserted to section 132B of the Act itself in the statutory provisions of the Act. 23. Ld. Counsel of the assessee has also stressed his reliance on the decision of Hon'ble High Court of Delhi in the case of Dr. Prannoy Roy Others vs CIT (supra) and submitted that advance tax has been defined to mean the advance tax payable in accordance with the provisions of chapter XVII-C and if the word Advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts and Ors. (Supra) and CIT vs. Kanji Shivji and Co. (Supra) wherein it was held that 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. 29. Turning to the facts and circumstances of the present case, we observe that 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 aforesaid 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. 30. We are inclined to accept the contention of the ld. DR that the Explanation 2 attached t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early mentioned that the seized cash may be adjusted against the tax liability of the assessee. 35. Turning to the contentions of the ld. Counsel of the assessee that the assessee has filed letters before Assistant Director Investigation, Faridabad for adjustment of seized cash on 29.04.2008 and subsequently 2nd letter dated 30.6.2008 and 3rd letter dated 18.8.2008 for adjustment of seized cash before Additional Director of Income Tax, Gurgaon. At the outset, from Para 11 of the impugned order, we observe that the CIT (A) has held that no credits is given to the first letter as there was no valid date of receipt of this letter by the Department and the ld. CIT(A) has rightly ignored the same. The assessee has not challenged these observations of the CIT(A) either by filing an appeal or by way of specific grounds in the cross-objection. In the same Para 11 the ld. CIT(A) has observed that the letter dated 30.6.2008 was received by the Department on 1.7.2008 and letter dated 20.8.2008 was also acknowledged by the Department. 36. On careful perusal of above letters dated 30.6.2008 (Paper book pages no. 37 38) and 18.8.2008 (Paper book pages no. 39-40) we observe that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an advance tax from the date of search i.e. from 29.4.2008 as per provisions of the Act. 41. The ld. DR has also placed reliance on the decision of Hon'ble Supreme Court in the case of ITO vs. Ch. Atchaiah 218 ITR 239 (SC) wherein it has been held that income is required to be assessed in the correct assessment year. The ld. DR also contended that at the time of seizure it cannot be said as to in which year the income referable of assets seized were required to be adjusted and AO's is required to conduct the inquiry to find out as to in whose hands assets seized have to be assessed. All these questions which need investigation/ inquiries can only be answered only on conclusion of the assessment proceedings and therefore, application of assets would be possible only on conclusion of relevant assessment and not before that. 42. In the present case the assessment was framed u/s 153A/143(3) of the Act on 24.12.2010 on total income of ₹ 27,91,00,920/- 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. Therefore, on the basis of foregoing discussions we reach to fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in accordance with calculation of adjustment of seized cash u/s 132B r/w Explanation 2 of the Act. 47. Before we part with the conclusion on ground no. 2 it is pertinent to mention that the Revenue is harping on this legal contention that the CIT(A) admitted the additional ground without seeking comments from the AO as required by Rule 46A of the IT Rules but Rule 46A of the IT Rules 1962 stipulates production of additional evidence before first appellate authority and the same is not related to the admission of additional ground before the CIT(A). Therefore, ground no. 2 of the Revenue is misconceived. We further hold that the issue of levy of interest u/s 234A of the Act is consequential to the main issue, therefore, we set aside the same to the file of the AO with the above directions. Hence, ground no 2 of the Revenue is deemed to be allowed for statistical purposes as indicated above. Cross-objection No. 268/Del/2012 48. The assessee has raised following cross-objection with read as under: 1. That the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law, in only part relief, in not holding that the amount seized on 29.4.2008, ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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