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TMI Blog2015 (8) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the case of the assessee without appreciating that the AO had established with facts and figures that the main source of income of the assessee company was share trading and not income from other sources. 2. That on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in holding that Explanation to section 73 of the act was not applicable by considering the income declared u/s. 132(4) of the Act as Income from other sources and without considering the true nature of the activity carried on by the assessee and also without deciding the principle business of the assessee. 3. That on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in holding that the share trading loss is not a deemed speculative loss under Explanation to section 73 and the assessee will be entitled to set off such loss with other business income and income from other sources. 5. That on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in invoking the 2 nd proviso to section 132B of the Act in the instant case which is applicable to the time limite within which an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further requested in the said petition that the amount of ₹ 17,50,99,994 lying in the bank account of a group concern M/s. Shoparna Brothers P.Ltd and subsequently seized by the department may be adjusted against tax liability of the assessee arising from such disclosure. The AO also stated that the assessee has shown a share trading loss of ₹ 42,21,015, income from money lending business of ₹ 4,43,482, short term capital gain of ₹ 1,92,224 and disclosed income u/s. 132(4) of the I.T Act at ₹ 30 crores. AO relied upon the decision of Hon ble Jurisdictional Calcutta High Court in the case of Easter Aviation Industries Ltd reported in 208 ITR 1023(Cal) and compared the loss of ₹ 42,21,015 with dividend income of rs.9,46,889 and capital gain of ₹ 1,97,224/-. The Assessing Officer [AO] further stated that the assessee company does not fall within the category of the first exception to explanation to section 73, where it is said that a company whose gross total income consists mainly of income is chargeable under the heads Interest on Securities , Income from House Property , Capital Gains and Income from Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no speculative business profit as envisaged u/s. 43(5) of the I.T Act the provision of section 73 cannot be invoked and if section 73 cannot come in operation, the Explanation cannot be applied to determine the nature of income without applicability of section. In the case of Aman Portfolio (P) Ltd Vs. DCIT (2005) 92 ITD 324 (Delhi) (SMC)-I), relied upon by the assessee, wherein it was held that the Explanation to Section 73 cannot be invoked if no device was adopted in indulging in such share transactions with object of reducing taxable income. The Hon ble Jurisdictional Calcutta High Court have analyzed the Circular No.204 dated 24-07-1976 of CBDT. In the case of CIT Vs. Arvind Investment Ltd reported in 192 ITR 365(Cal) held that the object as stated in the said Circular is to curb the device to manipulate and reduce the taxable income of a company under the management of a controlling group of persons. The Circular has clearly stated in paragraph 19.1 that the business of purchase and sale of shares by companies which are not investment or banking company or companies carrying on business of granting loans and advances will be treated on the same footing as speculation busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. The ground nos. 1 to 3 of the revenue s appeal are dismissed. 10. As regard ground no.7 the brief facts of the case are that the AO has issued a notice of demand u/s. 156 of the I.T Act on 30-12-09 along with the assessment order as per following calculation of tax payable by the assessee :- Total income 300640700 Tax 90152746 Surcharge 9015276 Edu. Cess 2975041 (Tax + Surcharge + Edu. Cess) = 102143081 Less: TDS 95,358 102047723 Add: Interest u/s. 234B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by charging of interest u/s.234B under such circumstances. The assessee referred to the provisions of section 132B(1)(i) and submitted that as referred it includes the liability with regard to the assessment for the year, in which search was initiated or requisition was made. The asessee, therefore, submitted that the tax liability for the year in which the search was conducted may be adjusted from the seized cash. The ld. Counsel for the assessee has referred to the following decisions in support of his contentions in the cases of ITAT Kolkata in the case of DCIT, CC V, Kol Vs. Shri Sitaram Agarwal (HUF), Kolkata in ITA No.101/Kol/2007, in the case of ACIT,CC XXX, Kol Vs. Puranmal Agarwal in IT(SS) A No.114/Kol/08 and in the case of DCIT, CC-XXIV, Kol Vs. Sri Amit Seksaria in ITA No. 253/Kol/09, ITAT Mumbai in the case of Satpaul D. Agarwal (HUF) Vs. ACIT (1999) 105 Taxman 71 and in the case of Nitin M. Jadia Vs. ACIT (1999) 107 Taxman 203. In the case of ACIT Vs. Shailesh Natubhai Desaid (2000) reported in 109 Taxman 330(Ahd.), wherein it has been held that if unexplained cash seized during search operation at the business premises of the firm is assessed in assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 29,64,19,690/- after setting off the recorded share trading loss against the income disclosed u/s. 132(4) of ₹ 30 crore. On this total income appellant calculated the tax liability of ₹ 10,06,13,004/- which is more or less same as what appellant had submitted in the letter dated 28.05.2008. However, appellant did not calculate undisputed liability of interest u/s. 234C and the liability of interest u/s. 234B in the return of income filed on 29.09.2008. It appears that Assessing Officer adjusted the seized cash of ₹ 10,06,13,004/- on 13.04.2009 as per the request of appellant vide letter dated 28-05-2008 or as per the tax liability admitted by appellant in Return of Income before the completion of assessment. Therefore the fact that the adjustment of seized cash could be carried out even before determination of tax liability on completion of assessment, is evident from Assessing officer s own action. 4.2 The provisions of section 132B of IT Act describe the manner in which the seized assets are required to be applied by the Assessing Officer. The provisions of section 132(5) were omitted from 01-06-2002 and from the same date two provisos to claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no such restriction to adjust such cash against the liability admitted u/.s 140A by the appellant. Appellant had categorically admitted before the Assessing Officer the liability of ₹ 10,06,00,000 u/s. 140A of the I.T Act vide letter dated 28-05-2008. Therefore, Assessing Officer could have adjusted the seized cash of ₹ 10,06,00,000/- against the admitted liability of appellant u/s. 140A of the I.T Act for Assessment Year 2008-09 any time after 28-05-2008. The next question is, whether Assessing Officer is bound to adjust such liability against the seized cash or the Assessing Officer has discretion in this regard. Some courts have interpreted that as per the amended provisions of section 132B, the existing tax liabilities include the demand of the Assessment Year in respect of which cash has been seized and assessment of which is pending and the Assessing Officer cannot post pone the adjustment of cash against such liabilities beyond the date of seizure and charge higher interest u/s. 234B for no fault of the assessee. Appellant has referred to the decision of H ble ITAT Kolkata in the case of DCIT, Cent. Circle-V, Kol, Vs. Shri Sitaram Agarwal (HUF), Kol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese facts, as requested by both appellant and M/s. Shoparna Brothers Pvt. Ltd, Assessing Officer should have released the cash seized from the custody of M/s. Shoparna Brothers Pvt. Ltd and should have applied it towards payment of tax liabilities of ₹ 10,06,00,000/- of appellant on or before 06-08-2008. However, it appears that the Assessing Officer did act upon such requests, but after a delay of a few months on 13- 04-2009. If Assessing Officer does not act upon such application or does not reject the application of M/s. Shoparna Brothers Pvt. Ltd by a speaking order, then it is presumed that the Assessing Office has no objection to the proposal of M/s. Shoparna Brothers Pvt. Ltd. Therefore, in present case, the amount of ₹ 10,06,00,000/- seized and prayed by M/s. Shoparna Brothers Pvt. Ltd and the appellant on 28-05-2008 for release and application towards the tax liability of Assessment Year 2008-09 of appellant, is presumed to be accepted by the Assessing Officer. What the Assessing Officer did later should have been done before 6 th August 2008 and therefore it is presumed that the release and application of seized cash towards payment of tax liability dates ..... X X X X Extracts X X X X X X X X Extracts X X X X
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