Case Law Details
1. This appeal has been preferred by the appellant-revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 31.08.2015, Annexure A.3, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No. 185/Asr/2015, for the assessment year 2011-12, claiming following substantial question of law.
(i) “Whether the Honourable ITAT committed an error of facts and in law by ignoring the fact that penalty under Section 271 AAA of I.T. Act, 1961 was imposed due to non payment of taxes on surrendered income under Section 132(4) of the Income Tax Act, 1961 in the event of department not responding to the assessee’ request for adjustment of cash seized against advance tax liability without appreciating the fact that the advance tax does not constitute the existing liability as per specific provision of Section 132 B of the I.T. Act, 1961?
(ii) Whether the Honourable ITAT is correct in facts and in law by not treating the Explanation 2 to Section 132 B of the I.T. Act, 1961 inserted by the Finance Act, 2013 with effect from 01.06.2013 which has clarified that the “existing liability’ does not include advance tax payable in accordance with the provision of Part C of Chapter XVII?
(iii) Whether the Explanation 2 to Section 132B of the I.T. Act, 1961 though inserted by the Finance Act, 2013, with effect from 01.06.2013 being clarificatory in nature, make explicit what was implicit in the provision before the insertion of the said explanation?”
2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. On 09.09.2010, during the course of search, cash of ` 99,00,000/- was seized from the residence and bank lockers of the respondent-assesseee. Vide letter dated 15.09.2010, the assessee requested the Assessing Officer to adjust the cash seized during search against his expected advance tax liability. The request of the assessee was not accepted by the Assessing Officer as Assessing Officer was of the view that seized cash could not be adjusted against advance tax liability as the same was not existing liability. The assessee filed returned income of ` 3,04,23,555/- on 30.03.2012 in which ` 3,00,00,000/- was shown as undisclosed income. The assessee did not pay any tax as according to him, his liability to pay tax and interest on returned income was less than the amount of cash seized during search. Returned income was accepted by the Assessing Officer vide order dated 28.02.2013 under Section 143(3) of the Act. Seized cash of the assessee was adjusted against the regular taxes and interest payable. Liability determined on completion of assessment order was higher than the amount of cash seized due to charging of interest under Sections 234B and 234C of the Act. The Assessing Officer initiated proceedings under Section 271AAA of the Act as all the conditions specified for non application of penalty under the said provision were not fulfilled. The assessee pleaded that he had paid all the taxes and interest in relation to undisclosed income and hence no penalty could be levied. The Assessing Officer did not accept the plea of the assessee to the effect that seized cash could be adjusted towards existing tax liability and not against advance tax. The Assessing Officer further held that Explanation 2 to Section 132B of the Act which states that existing liability does not include advance tax payable in accordance with the provisions of Part ‘C’ of Chapter XVII is clarificatory in nature and hence applies to all pending proceedings. It was concluded that the assessee was in default for having failed to pay the taxes and interest in relation to undisclosed income declared and levied penalty under Section 271AAA of the Act vide order dated 26.08.2013, Annexure A.1. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 27.01.2015, Annexure A.2, the CIT(A) held that Explanation 2 to Section 132 B of the Act inserted by Finance Act, 2013 was clarificatory in nature. It was further held that the said amendment did not have retrospective effect. Thus, the CIT(A) allowed the relief to the assessee. Not satisfied with the order, the department filed an appeal before the Tribunal. Vide order dated 31.08.2015, Annexure A.3, the Tribunal upheld the decision taken by the CITA No. 25 of 2016 (O&M) 4 CIT(A) and dismissed the appeal filed by the Department. Hence, the instant appeal by the revenue.
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In which section of IT ACT, 1961 an assessee can adjust his advance tax.