Commissioner Of Income Tax vs Pandurang Dayaram Talmale
2003 Latest Caselaw 192 Bom

JUDGMENT

V.C. Daga, J.

1. This appeal is at the instance of the Revenue challenging the judgment and order dated 11-4-2001 passed by the Income Tax Appellate Tribunal, Nagpur Bench, Nagpur ('the Tribunal' for short) in ITA No. 358/Nag./96, for the Assessment Year 1990-91 giving rise to the following substantial question of law.

SUBSTANTIAL QUESTION OF LAW Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in directing that the cash seized be adjusted towards the advance tax liability of the assessee as on 30-3-1990 and work out fresh interest chargeable under Section 234A, 234B and 234C of the Income Tax Act, 1961?

THE FACTS

2. Brief facts pertaining to the case, are as under :--

The respondent-assessee is an individual. He is also, Karta of HUF. He is separately assessed to Income tax. The assessee is the head of the family. The assessee had furnished returns on 27-2-1990 declaring total income at Rs. 12,87,470/-. The sources of the income shown were share income from M/s PDT Trading Company, other sources such as N.S.C. interest with agricultural income. The assessee did not maintain any regular Books of Accounts. However, the Balance-sheet was furnished. The assessee did not dispute that the income from the other sources was also from and out of "worli-matka' business.

3. The search and seizure operations under Section 132 of the Act, were carried out on 30-11-1989. During the course of search and seizure proceedings cash worth Rs. 16,88,400/- was found with the assessee and Rs. 2,10,000/- with his son Mr. Harish. In addition, Special Bearer Bonds worth Pis. 14,10,000/- with some other papers; indicating worli-matka transactions carried out by the assessee including some investment in the construction of the house in the name of Smt. Kaushaliyabai (maternal aunt of the assessee), were also noticed.

4. The statement of the assessee was recorded during the course of search and seizure operation. In the statement, he has stated that cash in his possession belonged to himself, his first wife Saraswatibai, second wife Smt. Indubai and the firm M/s PDT Trading Company. During the course of proceedings under Section 132(5) a letter dated 24-3-1990 was also filed to explain the availability of cash as on 30-11-1989 with various members of the family was shown at Rs. 17,32,804/-. However, during the assessment proceedings, it was urged that the cash found at Rs. 16,88,400/- plus Rs. 2,10,000/- should be adopted as a correct figure for purposes of the Income-tax and Wealth-tax assessments.

5. The Assessing Officer vide assessment order dated 30-3-1991 assessed income of the assessee and amongst others charged interest, under Sections 234A, 234B and 234C of the Act, for non-payment of advance tax.

6. Aggrieved by the aforesaid assessment order, the Appeal was carried to the C.I.T. (A.), who was amongst others pleased to hold vide his order dated 19-02-1996 that charging of interest was not appealable.

7. Aggrieved by the aforesaid order of the C.I.T.(A) dated 19-02-1996 an Appeal was carried to the Tribunal at Nagpur wherein; the Tribunal, after hearing the parties vide its order dated 21-11-1994 was pleased to hold as under :--

"The Assessing Officer charged interest under Section 234-A, 234B and 234C of the Act. According to the C.I.T. (A), charging of interest is not appealable. We however, find that relief allowed to the assessee will automatically result in deletion of interest charged by the Assessing Officer. The Assessing Officer is therefore, directed to allow the assessee necessary relief in this regard."

8. The assessee entertaining a belief that the above order is a mistaken order moved an application for rectification under Section 254(5) of the Act and made a request to rectify the mistake purported to be apparent on the face of record in our order dated 21-11-1994 and submitted that the assessee had challenged the very chargeability of interest under Sections 234A, 234B and 234C of the Act, as such Tribunal ought to have decided the said issue on its own merits in accordance with law. The Tribunal after hearing parties to the application was pleased to allow the application for rectification of mistake moved under Section 254(4) of the Act with the following observations :--

"We find that there is a mistake apparent from the record in our order referred to above. The assessee by a petition filed before the C.I.T.(A) on 19-1-1990 had requested to adjust the cash found at the assessee's business premises against the advance tax payable. According to the assessee, this amount had been adjusted, no interest could have been charged under the said sections. We are, therefore, of the opinion that the C.I.T.(A) was not justified in rejecting the claim of the assessee and not deciding the issue on merits. We are, therefore, of the opinion that the ground of appeal No. 6 raised before the C.I.T. (A) should have been decided by him on merits after taking into consideration the assessee's request to the C.I.T. on 19-1-1990. We hold that the assessee has challenged the very chargeability of interest and as such this aspect had to be taken into consideration by the C. I. T. (A). He will also take this aspect of the case into consideration as to if the department had adjusted the cash available to it against the advance tax payable whether any interest under Sections 234A, 234B, 234C could be charged at all. In this regard, the order of C.I.T. (A) is set aside and he is directed to take all the aspects into consideration and decide the ground of appeal No. 6 before him after affording reasonable opportunity of being heard to the parties."

In the result, the Misc. application was allowed.

In the above premise, the proceedings were remitted back to the Commissioner of Income Tax (Appeals)-I, Nagpur, who by his order dated 19-2-1996 was pleased to hold that the cash was seized on 30-11-1989 whereas the order under Section 132(5) passed on 30-3-1990 as such for want of order under Section 132(5) which was passed on 30-3-1990 neither the appellant could have adjusted the cash seized towards advance tax nor A. O. could have granted request under the Act- He was further pleased to hold that by the time under Order 132(5)was passed on 30-3-1990, the dates for payment of advance tax was also over as such no adjustment of cash seized; towards advance tax, could have been grantee. The C.I.T. (A) accordingly held that the interest under Section 234A, 234B and 234C of the Act, for violating the provisions of advance-tax has rightly been charged.

9. The assessee, not satisfied with the aforesaid order again preferred an Appeal before the Appellate Tribunal against the order dated 19-2-1996 for the assessment years 1990-91 and challenged the liability to pay interest under Sections 234A, 234B and 234C of Income Tax Act.

The contention sought to be advanced by the learned counsel appearing for the assessee before the Tribunal was that even if it is admitted that the adjustment was to be made on 31st March, 1990, still no interest was chargeable as the liability to pay interest was to start from 1-4-1990.

The learned Departmental Representatives in reply contended before the Tribunal that no adjustment was possible in view of the provisions of Section 132B of the Act. The reliance was placed on the decision of the Madhya Pradesh High Court in the case of Ramjilal Jagannath and Ors. v. Asstt. Commissioner of Income Tax reported in 241-ITR-758 in support of the contention.

10. The Tribunal after considering the rival submissions was pleased to hold that as per the provision of Section 132(5) the assets seized could have been used to meet the existing liability of the assessee which also includes the liability determined under Section 132(5) of the Act. The Tribunal relying upon the Judgment in the case of Ramjilal Jagannath and others (supra) was pleased to hold that the cash could not have been adjusted prior to 30-03-1990 but at any rate it could have been adjusted on 31st March, 1990 i.e. the day on which the order under Section 132(5) of the Act was passed since the liability of the interest was to commence from 1st April, 1990. The Tribunal was thus pleased to hold that the amounts seized was liable to be treated as adjusted towards advance tax liability on 30-3-1990 and directed for fresh working of interest, if found chargeable under any of the provisions of the Act. With these directions, the matter was remitted back to the Assessing Officer for recalculating the interest chargeable, if any, in accordance with law following principles of natural justice,

11. Being aggrieved by the aforesaid order the Revenue has filed this Appeal under Section 260A of the Act raising a substantial question of law indicated in the opening para of this judgment.

STATUTORY SCHEME

12. In order to appreciate the rival submissions advanced by the parties to the appeal, it is necessary to notice few statutory provisions of the Act, referred to hereinafter.

13. Section 207 provides that in accordance with the provisions of Sections 208 to 219 tax shall be payable in advance during any financial year in respect of the total income of the assessee which would be chargeable to tax. From these provisions, it would clearly appear that the assessee of his own accord or under the directions of the Assessing Officer has to pay the advance tax under Section 208 on or before each of the due dates specified in Section 211. The advance tax is to be paid either of one's own volition or under the orders of the Assessing Officer. Section 132 provides for search and seizure. Sub-section (5) of Section 132 of the Act, which is important for the purposes of the present petition, reads as under :--

"132(5) : Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in Sections 132A and 132B referred to as the assets) is seized under Sub-section (1) or Sub-section (1A), as a result of a search initiated or requisition made before the first day of July, 1995, the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Deputy Commissioner,--

(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian-tax Act, 1922(11 of 1922), or this Act;

(iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment;

(iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in Clause (a) of Sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets of the person from whose custody they were seized :

Provided that if, after taking into account the materials available with him, the Assessing Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly :

Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in Clauses (ii), (iia) and (iii) or any part thereof, the Assessing Officer may, with the previous approval of the Chief Commissioner or Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case".

14. It would thus be clear from the aforesaid provisions that after the assets are seized, Income Tax Officer has to proceed in accordance with the procedure prescribed under Sub-section (5) of Section 132. Not only he has to estimate the undisclosed income in a summary manner, but has to calculate the amount of tax on the income so estimated determining the amount of interest payable and the amount of penalty imposable and specify the amount that would be required to satisfy the existing liability, but has also to retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the above mentioned amounts. It would thus clear that provisions of Section 132(5) is a complete procedure. Unless the Income-tax Officer makes an enquiry as may be prescribed and makes an order, the assets seized cannot be dealt with in any other manner. Thus the assets shall be retained by the Income-tax Officer until a final order is made by him under Sub-section (5) of Section 132 of the Act. The occasion to refund or return the assets or to retain the assets or to adjust the assets shall come into existence only after a final order is made by the Income-tax Officer under Sub-section (5) of Section 132. Immediately after an order is passed under Sub-section (5) of Section 132, the Income-tax Officer is authorised to retain in his custody such assets or part thereof as are in his opinion are sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) of Sub-section (5) of Section 132 and obliges him to release the remaining portion. So long as a final order is not passed and the Income-tax Officer records a finding that the assets in his possession or part thereof are sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) he cannot direct release of the remaining portion nor can he direct that the assets seized can be adjusted towards advance tax. The right to receive the money would accrue in favour of an assessee only after a final order is made under Section 132(5) and if such an order is made, then only the assessee can make a request to the Income-tax Officer that the amount which is sought to be released in his favour may be adjusted or appropriated towards the liability of the payment of advance tax. The scheme of Sub-section (5) of Section 132 clearly provides that the seized assets shall not be disposed of nor shall be dealt with in any manner unless after making an enquiry, an order is made by the Income-tax Officer.

FINDINGS

15. Having seen and examined the statutory scheme of the Legislation in question with respect to payment of advance tax and how Section 132 of the Act operates; let us now revert back to the facts of the present case at hand. The factual matrix reveal that on 30th March, 1991 the order was passed under Section 132(5) of the Act by the Income Tax Officer and surplus cash was found in his hands; as such surplus fund were available satisfy liability of advance tax payable by the assessee. The liability to pay interest on the advance tax was to run from 1st April, 1991 as per Section 234B of the Act. As such the Tribunal has rightly held that no interest was chargeable after 1-4-1990. No fault can be found with the view taken by the Tribunal; rather the view taken is in consonance with the provisions and the Scheme of the Act. In the result appeal dismissed, with no order as to costs.