2016 (3) TMI 1241 - AT - Income Tax

Tribunal reinstates unaccounted cash receipt, allows Revenue's appeal for fresh assessment, and directs advance tax treatment.

The Tribunal upheld the Revenue's appeal, reinstating the addition of Rs. 74 lacs as unaccounted cash receipt in the assessee's hands. The Tribunal ... Assessment of unaccounted cash - ownership of seized cash and identification of the right assessee - application of seized cash in discharge of advance tax liability - prospective operation of explanatory amendment to seized-assets provisionAssessment of unaccounted cash - ownership of seized cash and identification of the right assessee - Whether the unaccounted cash of Rs. 74 lacs seized from the HDFC Bank locker stood assessable in the hands of M/s B. Nanji Enterprises Ltd or in the hands of Shri Bhikubhai N. Padsala - HELD THAT: - The Tribunal examined the material showing who was authorized to operate the locker on the date of search and noted that the assessee produced a bank certificate and a statement that Mr. Sandip B. Padsala operated the locker on the date of search, thereby undermining the claim that Shri Bhikubhai was the authorised custodian. The Settlement Commission record did not conclusively treat the amount as capitalized in Shri Bhikubhai's hands and the Assessing Officer's order had brought the amount to tax in the company's hands. The Tribunal emphasised the importance of assessing income in the hands of the correct person and found that, in the absence of any evidence establishing Shri Bhikubhai as the authorised operator of the locker, the cash belonged to the assessee-company. The Tribunal directed that the assessing authority ensure the amount is not taxed twice. [Paras 7, 8]Assessing Officer's addition of the seized cash of Rs. 74 lacs in the hands of M/s B. Nanji Enterprises Ltd is restored; Revenue's appeal IT(SS)A 446/Ahd/2012 accepted.Assessment of unaccounted cash - ownership of seized cash and identification of the right assessee - Whether the unaccounted cash of Rs. 80 lacs seized from the HDFC Bank locker in case of M/s Siddhi Vinayak Buildcon Pvt. Ltd. was correctly assessed and whether further adjudication was required - HELD THAT: - Although facts were similar to the other appeal, the assessee had, in its reply, stated that it had disclosed income inclusive of the seized sum and had treated the sum as advance tax paid in its computation. There were contradictions and unresolved questions regarding assessment and attribution of the seized cash between the company and Shri Bhikubhai. Given these inconsistencies and the absence of a definitive finding in the assessment order, the Tribunal considered it appropriate that the Assessing Officer re-examine and re-decide the issue afresh, giving the assessee an opportunity of hearing. [Paras 9]Matter remitted to the Assessing Officer for fresh decision in accordance with law; Revenue's appeal IT(SS)A 451/Ahd/2012 allowed for statistical purposes.Application of seized cash in discharge of advance tax liability - prospective operation of explanatory amendment to seized-assets provision - Whether the assessee (M/s Siddhi Vinayak Buildcon Pvt. Ltd.) is entitled to credit the seized cash of Rs. 80 lacs as advance tax and relief from interest charged under sections relating to interest for defaults - HELD THAT: - The Tribunal followed coordinate-bench precedent which held that seized money, if shown as income in the return and thereby giving rise to an existing tax liability, can be applied towards discharge of advance tax liability, and that the explanatory amendment inserted by Finance Bill 2013 (declaring that 'existing liability' does not include advance tax) is applicable only prospectively from 1 June 2013 and thus not applicable to the facts of this case. The assessee had not produced evidence of a specific pre-return written representation, but the Tribunal held that on the authority relied upon the assessee is entitled to credit from the date of filing the return. The Assessing Officer was directed to grant consequential relief. [Paras 10, 11, 12]Assessee entitled to credit of the seized sum as advance tax with effect from date of filing return; assessee's appeal ITA 2294/Ahd/2013 partly allowed and Assessing Officer directed to pass consequential orders.Final Conclusion: The Tribunal allowed Revenue's appeal in IT(SS)A 446/Ahd/2012 restoring the Rs. 74 lacs addition in the hands of M/s B. Nanji Enterprises Ltd; IT(SS)A 451/Ahd/2012 (Rs. 80 lacs) was allowed for statistical purposes and remitted to the Assessing Officer for fresh adjudication; and the assessee's appeal ITA 2294/Ahd/2013 was partly allowed by directing credit of the seized amount as advance tax from the date of filing the return. Issues Involved:1. Deletion of unaccounted cash receipt addition of Rs. 74 lacs.2. Deletion of unaccounted cash receipt addition of Rs. 80 lacs.3. Treatment of cash seized of Rs. 80 lacs as advance tax and relief towards wrong charging of interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Deletion of unaccounted cash receipt addition of Rs. 74 lacs:The Revenue challenged the CIT(A)'s order deleting the unaccounted cash receipt addition of Rs. 74 lacs made by the Assessing Officer (AO) in the assessment order dated 30-12-2011. The AO had added this amount to the assessee's income, rejecting the contention that the cash belonged to the chairman, who had included it in his cash flow statement. The CIT(A) deleted the addition based on the chairman's ownership claim and inclusion in his cash flow statement filed before the Settlement Commission. However, the Tribunal found that the chairman was not authorized to operate the locker from which the cash was seized and that the Settlement Commission had not considered the chairman's claim. The Tribunal concluded that the cash belonged to the assessee and should be assessed in its hands, reviving the AO's addition of Rs. 74 lacs.2. Deletion of unaccounted cash receipt addition of Rs. 80 lacs:The Revenue's appeal against the deletion of the Rs. 80 lacs addition was based on similar grounds as the Rs. 74 lacs case. The assessee had disclosed an income of Rs. 1.6 crores, including the Rs. 80 lacs, and treated it as advance tax. The Tribunal noted contradictions in the assessment of the unaccounted cash and directed the AO to re-decide the issue, ensuring that the same amount is not taxed twice. The appeal was allowed for statistical purposes, requiring a fresh examination by the AO.3. Treatment of cash seized of Rs. 80 lacs as advance tax and relief towards wrong charging of interest:The assessee contested the lower authorities' decision to treat the Rs. 80 lacs cash seized as advance tax and the consequent charging of interest under sections 234A, 234B, and 234C. The Tribunal referred to a co-ordinate bench decision in Kanishka Print Pvt. Ltd vs. ACIT, which held that seized cash could be treated as advance tax. The Tribunal directed the AO to give credit for the Rs. 80 lacs as advance tax from the date of filing the return, partially allowing the assessee's appeal.Conclusion:- The Tribunal allowed the Revenue's appeal regarding the Rs. 74 lacs addition, concluding it should be assessed in the assessee's hands.- The Tribunal allowed the Revenue's appeal for statistical purposes regarding the Rs. 80 lacs addition, directing a fresh examination by the AO.- The Tribunal partially allowed the assessee's appeal, directing the AO to treat the Rs. 80 lacs as advance tax from the date of filing the return and adjust interest calculations accordingly.Order Pronounced:The order was pronounced in the open court on 08-03-2016.