Sunil Kumar Sharma Vs DCIT (ITAT Bangalore)
Once HC Kills 153C, Rectification Orders Die Too – ₹6.68 Cr Seized Cash Belongs to Assessee: Credit as Advance Tax Allowed
Bangalore ITAT “A” Bench, in Sunil Kumar Sharma Vs DCIT (ITA Nos. 105, 196 & 736/Bang/2022, AY 2018-19; order dated 31.01.2025), delivered a composite ruling dealing with consequences of quashing of 153C proceedings by Karnataka High Court, treatment of ₹6.68 crore seized cash, rectification u/s 154, and employees’ PF & ESI disallowance.
Pursuant to search u/s 132 in the case of Shri D.K. Shivakumar (02.08.2017), Assessee’s premises were also searched & cash of ₹6.68 crore was seized. Though Assessee initially stated that cash belonged to third party, he later offered the entire seized cash as income in ROI filed on 14.06.2018 & requested adjustment towards tax liability. AO, however, assessed the cash on protective basis, initiated proceedings u/s 153C, and later passed rectification orders u/s 154 withdrawing advance-tax & TDS credits.
Subsequently, Karnataka High Court, in a batch of writ petitions including WP No. 9946/2022 (AY 2018-19), quashed the very 153C proceedings holding the notice to be bad in law, which was later affirmed by the Division Bench on 22.01.2024. Tribunal held that once the foundation assessment itself stands quashed, all consequential rectification orders u/s 154 become non-est.
Relying heavily on HC findings, ITAT noted that the High Court had categorically held that the seized cash belonged to Assessee, was already offered in return, and was accepted by Department as advance tax. Tribunal therefore directed that ₹6.68 crore seized cash be treated as valid payment of advance tax, granting full relief to Assessee in ITA No. 196/Bang/2022.
In ITA No. 105/Bang/2022, relating to employees’ contribution to PF & ESI disallowed in 143(1), Tribunal held that even though CIT(A) wrongly dismissed appeal for non-payment of tax, the issue was squarely covered against Assessee by Checkmate Services Pvt. Ltd. (SC), as contributions were paid beyond statutory due dates. Accordingly, disallowance was confirmed on merits.
In ITA No. 736/Bang/2022, challenging rejection of rectification by CIT(A), Tribunal held the appeal to be infructuous, the main issue having already been decided.
Accordingly, ITA No. 196/Bang/2022 was allowed, while ITA Nos. 105 & 736/Bang/2022 were dismissed, resulting in substantial relief on seized cash but no relief on PF–ESI issue.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
