2015 (9) TMI 1167 - AT - Income Tax

Tribunal upholds seized cash adjustment for advance tax, citing High Court ruling. Revenue appeal dismissed.

The Tribunal upheld the CIT(Appeals) decision, allowing the adjustment of seized cash towards the assessee's advance tax liability, citing the binding ... Adjustment of seized cash towards advance tax liability - Held that:- Judicial view on Revenue Department's liability towards amount received by it from the tax payer. Revenue cannot keep the assessee's money with itself and claim that it has no liability or less liability towards the assessee by way of an Explanation inserted to negate the effect of judicial decisions without removing the statutory basis of the decisions. Explanation to section 132B, will act prospectively, Hence, the reliance by the learned D.R. on the insertion of this Explanation to section 132B cannot help the case of the Revenue as the Explanation has been inserted much after the conclusion of the assessment year under consideration. On the basis of above discussion and precedent, we hold that there is no infirmity in the order of learned CIT(Appeals) allowing adjustment of cash seized during search towards advance tax liability. - Decided against revenue. Issues Involved:1. Adjustment of seized cash towards advance tax liability.2. Applicability of Explanation to Section 132B inserted by Finance Act, 2013.3. Jurisdictional High Court ruling and its binding nature.4. Substantive change or declaratory nature of the amendment.5. Revenue's liability towards amounts received from taxpayers.Issue-wise Detailed Analysis:1. Adjustment of Seized Cash Towards Advance Tax Liability:The primary issue was whether the cash seized during a search could be adjusted towards the advance tax liability of the assessee. The assessee requested the adjustment of Rs. 72 lakhs seized during the search towards advance tax liability, which was denied by the Assessing Officer (AO). The CIT(Appeals) allowed the appeal, directing the AO to treat the seized amount as payment towards advance tax, referencing the decision of the Hon'ble Bombay High Court in the case of CIT v. Jotindra B. Mody. The High Court had held that once the assessee offers the undisclosed income to tax, the liability to pay advance tax arises even before the assessment is completed.2. Applicability of Explanation to Section 132B Inserted by Finance Act, 2013:The Revenue argued that the CIT(Appeals) erred in applying the jurisdictional High Court decision, contending that the Explanation to Section 132B inserted by the Finance Act, 2013, clarified that 'existing liability' does not include advance tax payable. However, the Tribunal noted that this amendment was not in effect when the AO passed the order and that the Explanation aims to negate the jurisdictional High Court's ruling.3. Jurisdictional High Court Ruling and Its Binding Nature:The Tribunal emphasized that the jurisdictional High Court's decision is binding. The CIT(Appeals) applied the ruling from the Bombay High Court, which held that Section 132B(1)(i) does not prohibit the utilization of seized amounts towards advance tax payable on undisclosed income declared during the search. The Tribunal supported this view, stating that the AO should have considered the assessee's request under Section 154 of the I.T. Act.4. Substantive Change or Declaratory Nature of the Amendment:The Tribunal examined whether the Explanation to Section 132B brought a substantive change or was merely declaratory. Citing the Hon'ble Apex Court's exposition, the Tribunal concluded that the Explanation was intended to change the law and apply to future periods, thus acting prospectively. The Tribunal held that the Explanation aimed to subvert the jurisdictional High Court's decision without removing its statutory basis.5. Revenue's Liability Towards Amounts Received from Taxpayers:The Tribunal referenced the Hon'ble Apex Court's decision in CIT v. Shelly Products, which clarified that the Revenue cannot retain the assessee's money without proper liability. The Court asserted that the Revenue must refund excess tax paid if it is not due, reinforcing the principle that the Revenue cannot negate judicial decisions through retrospective amendments without changing the statutory basis.Conclusion:The Tribunal upheld the CIT(Appeals) order, allowing the adjustment of seized cash towards the assessee's advance tax liability and dismissed the Revenue's appeal. The Tribunal found no infirmity in the CIT(Appeals) decision and emphasized the binding nature of the jurisdictional High Court's ruling.