TaxTMI 
TaxTMI 
2023 (9) TMI 1613
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..... Rs. 50,00,000/- (ultimately the exact amount was Rs. 49,99,000/-) in the form of demonetized currency notes of Rs. 500 and 1,000. Acting thereon, the statements of all three persons (including assessee) were recorded u/s 131 on 14.11.2016 wherein all of them (including assessee) admitted that the entire cash belonged to assessee. Accordingly, a requisition dated 14.11.2016 u/s 132A was issued. The statements of assessee were again recorded u/s 132(4) on the very same date i.e. 14.11.2016 wherein the assessee accepted that the impugned cash was not recorded in his books and it was earned from undisclosed sources. All statements are re-produced by AO in assessment-order. The cash was seized. Thereafter, the assessments of past six years from AY 2011-12 to 2016-17 were framed under special provision u/s 153A. For the relevant AY 2017-18 under consideration, which relates to the previous year 2016-17 in which the requisition dated 14.11.2016 was executed, the assessee filed regular return on 09.01.2018 declaring total income of Rs. 54,25,260/-. In the income so declared in return, the assessee included income of Rs. 47,59,000/- out of the admitted undisclosed income of Rs. 49,99,000/....
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....ntire cash had been seized. It was also submitted that looking to the financial status of assessee and his family, the small sum of Rs. 2,40,000/- should be accepted as savings. Reliance was also placed on the decision of ITAT, Agra in Smt. Uma Agarwal (2021) 127 Taxmann.com 735 where a deposit upto Rs. 2.50 lakh was held to be acceptable for homemakers. However, the CIT(A) was not satisfied with the submission of assessee who held that the cash was found with assessee in Jaipur though the assessee belonged to Ratlam. He also held that the CBDT Press Release/Instruction as well as the decision in Smt. Uma Agarwal (supra) was applicable only for depositing demonetized currency in bank a/c but not for carrying such currency from one location to another for unknown purposes. The CIT(A) upheld addition. 8. Before us, both sides put forward their respective contentions for and against the addition, such contentions being on the same line as were made before the lower-authorities. 9. We have considered rival contentions of both sides and perused the facts of case. We find that in the Ground the assessee has mentioned that the cash of Rs. 2,40,000/- was saving of his wife. Before us....
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.... savings in cash into their bank accounts would not be questioned. The people are requested not to get lured by black money converters and be a partner in this crime of converting black money into white through this method. Unless all citizens of the country help the Government in curbing black money, this mission of black money will not succeed. Also the people who are against the black money should give information of such illegal activities going on to the Income Tax department so that immediate action can be taken and such illegal transfer of cash can be stopped and seized. Black money is a crime against humanity. We urge every conscientious citizen to help join the Government in eradicating it. (Meenakshi J. Goswami) Commissioner of Income Tax (Media and Technical Policy) Official Spokesperson, CBDT. Instruction No. 03/2017 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block New Delhi Dated 21st of February, 2017 Subject: - Standard Operating Procedure (SOP) to be followed by the Assessing Officers in verification of Cash transactions relating to demonetisation-regd.....
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....are reading of Press Release dated 18.11.2016, one can easily find that the CBDT has clarified that the genuine persons depositing their own household savings in cash into the bank accounts would not be questioned. Further, it is also mentioned that the "Unless all citizens of the country help the Government in curbing black money, this mission of black money will not succeed. Also the people who are against the black money should give information of such illegal activities going on to the Income-tax Department so that immediate action can be taken and such illegal transfer of cash can be stopped and seized. Black money is a crime against humanity. We urge every conscientious citizen to help join in the Government in eradicating it". Then, the Instruction dated 21.02.2017 issued by CBDT prescribed a Standard Operating Procedure for on-line verification of cash- transactions. Thus, the Press Release/Instruction do not save the assessee's case of transferring hefty cash of Rs. 49.99 lakh in bags from one place to another. The assessee himself admitted not only the ownership of cash but also to have earned from undisclosed sources of current financial year 2016-17 and it was not even ....
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....ntion is also drawn to another letter (undated) filed to AO apprising the very same facts, copy of the letter placed at Page No. 30-31 of Paper- Book-2. Ld. AR also drew our attention to Page No. 82 of Paper-Book-1 where a copy of letter dated 17.01.2017 filed by assessee to AO is placed in which the assessee requested AO to adjust the seized cash against advance- tax/income-tax on undisclosed income. Ld. AR submitted that in the said letter dated 17.01.2017, the assessee has clearly mentioned that the seized amount was earned during current year itself and the assessee did not have any other money to pay tax. Ld. AR submitted these facts/documents are enough evidences to infer that the impugned cash seized during search represented or sourced from assessee's business income. Therefore, the AO is not justified in treating the impugned cash as deemed income u/s 69A. (ii) The second contention raised by Ld. AR is such that the AO has imposed penalty u/s 271AAB qua the impugned income through Penalty- order dated 26.06.2019, copy of order is re-produced below for an immediate reference: Referring to Para 5, Ld. AR pointed out that the AO has imposed penalty in two parts, n....
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....as imposed penalty @ 10% qua the income of Rs. 47,59,000/- u/s 271AAB(1)(a) and not @ 60% u/s 271AAB(1)(c). That means, Ld. AR contended, the AO is very much satisfied that the assessee fulfilled the conditions prescribed in section 271AAB(1)(a), namely the assessee has specified the manner in which such income had been derived and the assessee has substantiated the manner in which the undisclosed income was derived. Ld. AR submitted that the AO has passed penalty-order with the approval of JCIT. Therefore, according to Ld. AR, it must be a considered view of authorities that the manner/source of income of at least Rs. 47,59,000/- is proved, if not of addition of Rs. 2,40,000/- made by AO for which penalty @ 60% has been imposed. Ld. AR contended that when the AO has accepted the manner/source of income in penalty-proceeding, there is no reason to sustain the applicability of section 69A and for that matter the higher rate of tax u/s 115BBE. To support this submission, Ld. AR relied upon the decision in Basir Ahmed Sisodia Vs. ITO (2020) 116 taxmann.com 375 (SC), para No. 14 to 16, which reads as under: "13. Reverting to the findings and conclusions recorded by the Officer....
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....nscious of the fact that these observations are made by the competent forum (appellate authority) in penalty proceedings under Section 271 of the 1961 Act in favour of the assessee. However, what needs to be noted is that the stated penalty proceedings were the outcome of the assessment order in question concerning assessment year 1998-1999. Indeed, at the time of assessment, the appellant/ assessee had failed to produce any explanation or evidence in support of the entries regarding purchases made from unregistered dealers. In the penalty proceedings, however, the appellant/assessee produced affidavits of 13 unregistered dealers out of whom 12 were examined by the Officer. The Officer recorded their statements and did not find any infirmity therein including about their credentials. The dealers stood by the assertion made by the appellant/ assessee about the purchases on credit from them; and which explanation has been accepted by the appellate authority in paragraphs 17 and 19 of the order dated 13.1.2011. 15. To put it differently, the factual basis on which the Officer formed his opinion in the assessment order dated 30.11.2000 (for assessment year 1998- 1999), in rega....
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....ble prospectively from 15.12.2016 and this view is also held by (i) ITAT, Indore in DCIT Vs. M/s Punjab Retail Pvt. Ltd, ITA No. 677/Ind/2019 order dated 08.10.2021 and (ii) ITAT, Jabalpur ACIT Vs. Sandesh Kumar Jain, ITA No. 41/JAB/2020 order dated 31.10.2022. Further reliance is also placed on Govind das Vs. ITO (1976) 103 ITR 123 (SC), CIT Vs. Hindustan Electro Graphites Ltd. (2000) 243 ITR 48 (SC) and Piu Ghosh Vs. DCIT (2016) 73 taxmann.com 226 (Calcutta HC) to support the proposition that any amendment made in statute shall apply prospectively and not retrospectively. At that juncture, the Bench questioned Ld. AR on the later and recent decision of ITAT, Indore in Narendra Kumar Shantilal Jain HUF Vs. PCIT, ITA No. 124/Ind/2022, order dated 23.12.2022, wherein the Co-ordinate Bench, following the decision of Hon'ble Kerala High Court in WA No. 984 of 2019, Maruthi Babu Rao Jadav Vs. The Assistant Commissioner of Income-tax, Central, Circle, Kozhikode, dated 23.09.2020, has held that the amendment though made on 15.12.2016, would apply to the whole previous year 2016-17, AY 2017-18. In reply, Ld. AR only gained support from following decision of CIT Vs. Thana Electricity Compa....
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....o department, this fact is clearly mentioned by AO in Para No. 5.2 of assessment-order. Ld. DR contended that the argument of Ld. AR that an inference has to be drawn for ascertaining source is only an effort to get out of section 69A and that too without any basis. He submitted that it is quite illogical for assessee to submit that he was in the process of starting business of property by entering into certain deal of property which could not be made and that is why the source of cash must be treated as explained from business income. Ld. DR submitted that the mobile messages exchanged by assessee mention only flat Nos. and not amounts. In any case, those messages as claimed by assessee himself were for a proposed source of income and not a real source of income, then by no stretch of imagination they can be taken as something proving the source of impugned cash. (ii) Regarding second contention, Ld. DR submitted that it is true that in Para No. 5 of penalty-order, the AO has imposed penalty in two parts, partly @ 10% and partly @60%. But on going through Para No. 4, immediately preceding Para No. 5, it is very much clear that the AO has made break-up of 10% and 60% on si....
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....oceeding. Then came the 2nd stage of filing return where also the assessee himself disclosed income u/s 69A, this fact is clearly noted by AO in assessment-order and also emphasized by Ld. DR for revenue and cannot be rebutted or controverted by Ld. AR. Thus, the assessee has not only made admission of having earned "income from undisclosed sources" in statement but also declared the income u/s 69A in return of income. Therefore, the pleading made by Ld. AR that the 'source should be inferred', does not deserve any merit in the first instance. Still for the sake of justice, even if we go into the said pleading, then also there is hardly any material to demonstrate that the source of said cash is explained. Ld. AR is simply relying upon land holdings of assessee and certain messages found in the mobile of assessee, thereby trying to impress upon us that the assessee was in the process of starting business of real estate and therefore the source of impugned cash can be inferred as business income. We hardly find any substance in such pleading. When section 69A talks of source of cash, the source has to be proved and not inferred the way Ld. AR is trying to argue. Even if we assume th....
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....es an alternative claim that the present case of Assessment-Year 2017-18 relates to the Previous-Year 2016-17 and the rate of tax u/s 115BBE was 30%+3% Cess as on first day of the Previous-Year i.e. 01.04.2016, therefore the tax-rate of 30%+3% Cess shall apply to the present case and not the higher rate, hence the assessment-order does not cause prejudice to the interest of revenue. The reason of projecting such a claim by assessee is that the higher rate of tax was prescribed in section 115BBE through an amendment made vide Taxation Laws (Second Amendment) Act, 2016 and the said amendment received assent of the President of India on 15.12.2016 and therefore the amendment shall apply prospectively w.e.f. 15.12.2016 and not retrospectively. The assessee claims that survey in assessee's case was conducted on 19.09.2016 which is prior to 15.12.2016 and therefore the higher rate of tax is not applicable to it, the tax-rate of 30%+3% Cess as existing in section 115BBE as on 01.04.2016 shall apply. To resolve this controversy, a lengthy discussion on the scheme of Income-tax Act, 1961; particularly the framework of previous year, assessment-year, the parliamentary system of prescribing t....
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....t could apply to the assessments of the previous year, made in that financial year, but a substantive amendment not relating to the rates, could only be applied to the assessments of that financial year and not of the previous year. Reliance is placed on the Constitution Bench decision of the Hon'ble Supreme Court in C.I.T Vs. Vatika Township Private Ltd. (2015) 1 SCC 1. The learned Counsel would also place before us a number of decisions of the Hon'ble Supreme Court in Kesoram Industries v. Commissioner of Wealth Tax, [AIR 1966 SC 1385], Guffic Chem P. Ltd v. C.I.T [2011(4) SCC 245], C.I.T v. Sarkar Builders [(2015) 375 ITR 392 (SC)], Shiv Raj Gupta v. C.I.T [(2020) 425 ITR 420(SC)] and State of Kerala v. Alex George [(2004) 271 ITR 290(SC), to further buttress his arguments. Reliance is also placed on the Full Bench decision of the Patna High Court in Loknath Goenka v. C.I.T [2019 417 ITR 521(Patna)]. 11. Before we look at the amendments carried out, on facts, there were two seizures of cash made on 02.08.2016 and 03.11.2016 respectively of Rs. 1,05,03,500/- and Rs. 1,24,68,750/- both in the F.Y 2016-2017. The persons from whom the cash was seized as also the app....
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.... the assessment year, which relates to the previous financial year. 14. Likewise it was by Chapter II with heading 'Rates of Income Tax', as provided in the Finance Act 2016, that a surcharge was introduced by way of the 3rd proviso of Section 2(9) of that Finance Act. This comes into effect from the Financial Year 2016-2017; which is the year in which the subject seizures were occasioned. The proviso refers to various provisions where the advanced tax computed under the first proviso stands increased by a surcharge for the purpose of the Union. Section 115BBE is one of the provisions referred to in the 3rd proviso and in the case of individuals the surcharge was @15% where the total income exceeds one crore, as on 01.04.2016. By the 2nd Amendment Act Section 2 of the Finance Act, 2016 stood amended by which 115BBE was omitted from the 3rd proviso. After the 6th proviso yet another proviso was inserted which provided for the 'advance tax' computed under the first proviso, in respect of any income chargeable to tax under Section 115BBE(1)(i), to be increased by a surcharge for the purposes of the Union, calculated @25%. Hence there is no new liability of sur....
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....charge whenever provided which are also surcharges within the meaning of Article 271 of the Constitution. The phraseology employed in the Finance Acts of 1940 and 1941 showed that only the rates of income tax and super tax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958 the language used showed that income tax which was to be charged was to be increased by a surcharge for the purpose of the Union. The word "surcharge" has thus been used to either increase the rates of income tax and super tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term "Income Tax" as used in section 2 includes surcharge. 8. According to Article 271 notwithstanding anything in Article 269 and 270 Parliament may at any time increase any of the duties or taxes referred to in those Articles by a surcharge for the purpose of the Union and the whole proceeds of any such surcharge shall form part of the consolidated Fund of India. Article 270 provides for taxes levied and collected by the Union and distributed between the union and these states. Caluse (1) says that tax on income other....
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....R as well Ld. DR, both sides agrees that there is no decision of jurisdictional High Court till now on this issue. Further, they are not able to show any contrary decision of non- jurisdictional High Court also. That means, the only decision available before us is the decision of Kerala High Court which is against assessee. Ld. AR has submitted that in Thana Electricity Company (supra), the Hon'ble Mumbai High Court has held that the decision of a high court is binding in its over territory and not upon the higher courts or even lower courts working outside territory. While arguing this, Ld. AR seems to have missed the point that the Hon'ble Mumbai High Court has also held that "In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect." Therefore, the decision of Hon'ble Kerala High Court is certainly having a persuasive effect, if not binding nature. On perusal of decision of Hon'ble Kerala High Court, we find that the Hon'ble High Court has extensively dealt the scheme of Income-tax Act, 1961, Finance Act, Amendment Act, Section 115BBE and the previous decisions of Hon'ble Supreme Court and thereafter came to a conclu....
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....d 234B cannot be charged. At that juncture, the Bench invited attention of Ld. AR to the following Explanation inserted in section "132B. Application of seized or requisitioned assets" from 01.06.2013 which prohibits the adjustment of seized/requisitioned asset against advance-tax liability: "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 Part C of Chapter XVII". It was further pointed out to Ld. AR that the decision in Ashok Kumar (supra) was prior to introduction of this Explanation in section 132B and therefore not applicable. Hence, the adjustment of seized-cash is not allowable against advance-tax liability. Still the Ld. AR prayed to allow the benefit of adjustment on the ground of 'equity' in view of the fact that the assessee was not having any money except the seized cash and the assessee made a specific request to AO to adjust the seized cash against advance-tax liability. Thereafter, some more discussion took place wherein it emerged that the assessee deserves some relief in the matter of calculation of interest u/s 234B for the reason tha....
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....tly for statistical purpose. 21. Resultantly, this appeal of assessee is allowed partly for statistical purpose. Order pronounced in the open court on 01.09.2023. ============= Document 3 220 Government of India Ministry of Finance (Department of Revenue) Office of the Deputy Commissioner of Income Tax (Central)-2, Room no. 303, 3rd floor, Aaykar Bhawan, Main Building, White Church, Indore 1. Name & Address of the Assessee : 2. Permanent Account Number 3. Assessment Year 4. Date of Order : Shri Gaurav Ajmera, 38, Rajmohalla, Ratlam AGLPA8863C 2017-18 26/06/2019 PENALTY ORDER UNDER SECTION 271AAB OF THE INCOME TAX ACT, 1961 In this case, information.was received from the office of the SP, ATS, Jaipur about three persons travelling by Mumbai, Jaipur superfast train on 14/11/2016 from Ratlam, Madhya Pradesh to Jaipur carrying cash of approximately Rs 50 Lakhs (Sh Gaurav Ajmera, M/s Bhavi Ajmera and Sh Dilip Patidar). All the three persons were intercepted at the Durgapura Railway Station(at Jaipur) by the ATS team with suppe. of local GRP staff. After preliminary investigation and physical search of their bel....
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..../- by the assessee. Showcause notice u/s 271AAB was also issued on 29/12/2018 and 01/05/2019. 3.1 In compliance to the notice u/s 271AAB, the AR of the assessee submitted his reply through mail on 09/01/2019 in which he stated that the assessee has filed an Anive /be * Page 2 of 4 appeal against the assessment order and requested to keep the the penalty proceedings in abeyance till the decision of first appeal. 3.2 The reply submitted by the assessee company in this regard, is duly perused and found that there is no any merit in the said reply. The grounds of appeal filed by the assessee before the Ld. CIT(A) are as under:- (a)The Ld. AO has erred in making addition of Rs 2,40,000/- being the amount of savings, which is usually permitted as a normal saving (b) The Ld. AO has erred in levying tax at the rate of 60% w/s 115BBE which was inserted in the statute book after the relevant date when the amount was seized. (c) The appellant reserves the right to add amends or alter any grounds of appeal as above. 4 Therefore In view of the above, it is clear that the assessee filed an appeal only on the issue of addition of R....