Tax Tribunal Rules in Favor of Assessee on Seized Cash Adjustment Issue

The assessee appealed against the order of CIT(A)-16, New Delhi regarding the adjustment of seized cash against advance tax liability and the retrospective application of Explanation 2 to Section 132B of the Income-tax Act, 1961. The Tribunal allowed the appeal, holding that the Explanation is prospective and should not be applied retrospectively. The Tribunal found the AO's order to be against CBDT Circular and High Court rulings, emphasizing that hyper technicalities by the authorities were not appreciated. The decision was pronounced on 20/06/2023.

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Issues Involved:
1. Adjustment of cash seized during a search against advance tax liability.
2. Retrospective application of Explanation 2 to Section 132B of the Income-tax Act, 1961.

Summary:

The present appeal was filed by the assessee against the order of CIT(A)-16, New Delhi dated 26.07.2019. The primary issues involved were the adjustment of cash seized during a search against advance tax liability and the retrospective application of Explanation 2 to Section 132B of the Income-tax Act, 1961.

Issue 1: Adjustment of Cash Seized Against Advance Tax Liability

The assessee contended that the Commissioner of Income Tax (A) erred in not allowing the credit of cash seized during the search as advance tax. The issue of adjustment of cash seized against advance tax was covered by the judgment of the Punjab & Haryana High Court in the case of PCIT Vs. Surinder Kumar Khindri 393 ITR 479, which held that Explanation 2 to Section 132B, inserted with effect from 1-6-2013, is not retrospective in nature. Therefore, the assessee was entitled to the adjustment of seized cash against the advance-tax liability for the assessment year 2011-12.

Issue 2: Retrospective Application of Explanation 2 to Section 132B

The revenue argued that Explanation 2 to Section 132B, which restricts the scope of adjustment of seized cash, should be applied retrospectively. However, the Tribunal upheld the decision that the Explanation is prospective in nature. This position was supported by multiple court rulings, including CIT v. Ashok Kumar and CIT v. Cosmos Builders and Promoters Ltd., where it was held that the Explanation does not have retrospective effect. The CBDT Circular No. 20/2017 also clarified that Explanation 2 to Section 132B is prospective and should not be applied to cases prior to 01.06.2013.

Conclusion

The Tribunal found the order u/s 154 passed by the AO to be against the Circular of the CBDT and the order of the Hon'ble High Court. The appeal of the assessee was allowed, and the Tribunal held that the hyper technicalities embarked upon by the AO and CIT(A) were not appreciated. The order was pronounced in the open court on 20/06/2023.

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