In a recent decision, the Delhi High Court, comprising Justice Rajiv Shakdher and Justice Girish Kathpalia held that the cash seized during a search action under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as ‘the ITA’), should be treated as advance tax and not as self-assessment tax, as determined by the revenue authorities.
Brief Facts of the Case:
The petitioner, Ashok Kumar Aggarwal, brought forth two primary grievances. Firstly, he contended that the cash amount seized during a search action under Section 132 of the ITA, had not been treated as advance tax, contrary to his consistent representations. Secondly, as a consequence of the first grievance, the revenue authorities treated the seized amount as self-assessment tax, leading to the imposition of interest under Sections 234A, 234B, and 234C of the ITA. This, in turn, resulted in a reduction of the petitioner's refund for the Assessment Year 2009-10.
Contentions of the Parties:
The petitioner argued before the Court that the seized cash, amounting to Rs. 50 lakhs, should be treated as advance tax. He asserted that this position was consistently communicated, and the Return of Income (thereafter “ROI”) for the relevant Assessment Year, filed on March 15, 2010, explicitly stated the same. He relied on legal precedent set in the case of Commissioner of Income Tax Kanpur v. Sunil Chandra Gupta[1], to support his entitlement to have the seized amount considered as advance tax.
On the other hand, the revenue authorities contended that adjustments could only be made against existing tax liabilities. They argued that since no tax liability had been determined on the date of the cash seizure, the adjustment could only be made as self-assessment tax.
Observations by the Court:
The High Court noted that the petitioner had offered the seized amount of Rs. 50 lakhs to be treated as advance tax, as explicitly stated in the ROI and the computation sheet accompanying the ROI. The judges observed that, as per the prevailing regime before the amendment via Finance Act, 2013, the petitioner was entitled to take such a stand.
Justice Rajiv Shakdher and Justice Girish Kathpalia further emphasized that the existing liability, on which the revenue authorities based their argument, did include advance tax before the insertion of Explanation 2 via Finance Act, 2013. The Court referred to relevant sections of the ITA, particularly Section 132B, to support their interpretation.
The Court rejected the revenue's contention that adjustments could only be made against existing tax liabilities, pointing out that the petitioner had made the offer for adjustment before the amendment prohibiting such adjustments.
The Decision of the Court:
In conclusion, the Delhi High Court directed the revenue authorities to treat the seized cash as advance tax and revise the assessment order accordingly. The Court also instructed the authorities to calculate the refund payable to the petitioner, adjust it from the already paid refund, and pay interest at 6% from the date of filing the return.
Case Name: Ashok Kumar Aggarwal vs. Asst. Commissioner of Income Tax and Ors.
Coram: Hon’ble Mr. Justice Rajiv Shakdher and Mr. Justice Girish Kathpalia
Case No.: W.P.(C) 4707/2019
Advocate of the Petitioner: Mr Vidit Sharma
Advocates of the Respondents: Mr Shailendera Singh, Sr. Standing Counsel with Ms Anuja Pethia, Advocate.
Read Order @LatestLaws.com
[1] 2015:AHC:34306-DB
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