Case Law Details
to Ground No.4, it is not in dispute that the declaration of 2.6 crore by the assessee u/s 132(4) of the Act was on account of sales outside the books. Both the authorities below did not dispute this fact. When the sales are to the tune of Rs.2.6 crore, we find it difficult to understand as to how the entire sales could be brought to tax. It is also an admitted fact that in respect of this assessment year, the GP rate of the assessee’s business of trading in chemicals in the name and style of M/s Samit International at 3.74% was accepted by the AO while passing the assessment order. It is, therefore, quite reasonable to apply the same GP rate on the unaccounted sales of Rs.2.6 crores also which comes to Rs.10.40 lacs. After reducing the seized cash of about Rs.1.30 crores, there remains the balance of Rs.2.7 crores out of the surrendered amount along with the return of income filed on 11.1.2013. Out of this Rs.2.7 crores if the income to the tune of Rs.10.40 lacs is adjusted, still their remains Rs.2.49 crore out of which the alleged outstanding balance to be found from the diary of Rs.2.44 crore could be adjusted. After this, there remains no amount to be brought to tax.
19. The reasons given by the authorities below that these two amounts are surrendered separately, as such, they cannot be telescoped against each other is not sound and cannot be accepted. These two transactions have an intrinsic link as submitted by the learned AR that it is only out of the sale amount the receivable from the persons listed on the leaf relating to 1.1.1998 arise. We accept the same and direct the authorities to telescope Rs.2.44 crores into Rs.2.60 crores in which event nothing over and above the declaration of Rs. 4 crore is taxable. We accordingly answer Ground No.4 in favour of the assessee.
20. Now turning to the 5th ground relating to the adjustment of the seized amount against the advance tax liability, reliance is placed by the assessee on the decision reported in the case of Nikka Mal Babu Ram, 41 SPT 407 (Chd); Mahabir Prasad Gupta (Delhi Bench) and Kanishka Prints P. Ltd., 143 ITD 716 (Ahd). In the case of Kanishka Prints P. Ltd., the Ahmedabad Bench of the Tribunal held as follows:
“11. We have heard that the rival submissions and perused the material on record. It is an undisputed fact that during the course of search at the residence of directors on 8.2.2007 and locker on 7.3.2007 aggregate cash of Rs.43 lacs was seized. It is also an undisputed fact that Assessee vide his letter dated 13.3.2007 submitted that out of the cash seized, Rs 10 lacs be treated towards payment of advance tax in the case of assessee and similarly balance of Rs. 33 lacs be treated towards payment of advance tax in case of family members/group companies. It is also a fact that vide aforesaid letter, the Assessee had requested that cash of Rs 8 lacs be considered as advance tax in the case of Shreeji Prints P. Ltd. The co-ordinate Bench of Tribunal in the case of Shreeji Prints (ITA No 359/Ahd/2012 – order dated 20.4.2012) decided in favour of Assessee by holding as under:
It is evident from a bare reading of the aforesaid provisions that the existing liability under the Income-tax can be discharged from the assets or money seized. In the present case, the search operation was conducted on 22-9-2005 and the assessee filed return on 31-5-2006 declaring the seized money as income. In our opinion, if the assessee has declared income, during the year under consideration in that eventuality he is liable to pay advance tax as per law therefore the A.O. is required to find out whether such liability was existing on the date of seizure. If such liability is existing then he is empowered to apply/adjust the money seized in discharge of the existing liability even without any written representation from the assessee. Now coming to the fact of the present case, it is not disputed that the money seized from the premises of Shri Lalit Patel and same was subsequently declared in the return of income filed on 31-5-2006. Hence, it can very well be inferred from the return so filed that the respondent/assessee was required to pay advance tax on such income as mandated u/s.208 of the I.T.Act. Therefore, in view of the fact that there is no ambiguity in the provision so far application/adjustment of the seized money is concerned. Further, the judgments as relied upon by the Ld. D.R. would not apply on the facts and circumstances of the present case since this is not a case where application u/s.132(5) is made. Moreover, Section 132(5) is no more on statue book, even otherwise there is divergence in opinion between the Hon’ble High Court of Madhya Pradesh and Hon’ble Delhi High Court as fairly pointed by the Ld. D.R. The order of the ITAT Delhi Bench in ITA No.1151/Del/2008 as relied by the Ld. D.R. is on different set of facts therefore, is not applicable on the facts of the present case. The issue whether the seized money should be applied towards advance tax liability of assessee and credit should be given credit there-from the date of seizure of money has been decided in favour of the assessee by the decision of ITAT Rajkot Bench in ITA No. 172/RJT/2010 in the case of Shri Ram S. Sarada V. DCIT and the decision of ITAT Mumbai Bench in the case of Sudhakar M. Shetty v. ACIT in ITA No.4238 & 4239/MUM/2007. Respectfully following the ratio laid therein we do not find any infirmity into the impugned order.”
12. Before us, Ld. D.R. has relied on the amendment made to s. 132A vide Finance Bill of 2013, We find that the amendment has been made by insertion of Explanation and the Explanation has been made applicable with effect from 1st June, 2013,. For ready reference, the amendment made by Finance Bill 2013 and the memorandum is reproduced hereunder:-
13. The amendment made by Finance Bill 2013 reads asunder:- Amendment of section 132B.
34. In section 132B of the Income-tax Act, the Explanation shall be numbered as explanation 1 thereof and after explanation 1 as so numbered the following explanation shall be inserted with effect from the 1st day of June, 2013, (emphasis supplied) namely:-
Explanation 2.- For the removal of doubts it is hereby declared that the “existing liability” does not include advance tax payable in accordance with the provisions of Par C of Chapter XVII.”
The explanatory memorandum to the Finance Bill reads as under:-
The existing provisions contained in section 132B of the Income-tax Act, inter alia, provide that seized assets may be adjusted against any existing liability under the Income Tax Act. Wealth tax Act, the Expenditure-tax Act, the Gift- tax Act and the Interest tax Act and the amount of liability determined on completion of assessments pursuant to search, including penalty levied or interest payable and in respect of which such person is in default or deemed to be in default.
Various courts have taken a view that the term “existing liability” includes advance tax liability of the assessee, which is not in consonance with the intention of the legislature. The legislative intent behind this provision is to ensure the recovery of outstanding tax/interest/penalty and also to provide for recovery of taxes/ interest /penalty, which may arise subsequent to the assessment pursuant to search.
Accordingly, it is proposed to amend the aforesaid section so as to clarify that the existing liability does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII of the Act.
This amendment will take effect from 1st June, 2013. (emphasis supplied)
21. The decision in the case of Kanishka Prints P. Ltd (supra) is applicable to the facts of the case. While respectfully following the same, we direct the AO to allow the credit for the cash seized towards the advance tax payable by the assessee on the date of seized viz. 11.11.2010 as requested by the assessee.
22. In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 28th June, 2018.
