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2015 (8) TMI 876 - ITAT KOLKATA

2015 (8) TMI 876 - ITAT KOLKATA - TMI - Explanation to section 73 - whether the main source of income of the assessee company was share trading and not income from other sources? - CIT(A) held that by virtue of main source of income of the assessee being “Income from other sources” explanation to section 73 was not applicable - Held that:- In the present case, the AO has considered the income of ₹ 30 crores, disclosed u/s. 132(4) by the assessee as income from other sources because such in .....

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/s. 132(4) is considered to be “Income from other sources”, then the main income of assessee would be income from other sources and assessee company would be covered under the first exception to explanation below section 73 and by virtue of main income assessee being the “income from other sources”, then explanation to Section 73 is not applicable. Accordingly, in the facts and circumstances of the case, we find no infirmity in the impugned order of the ld.CIT(A). We uphold the same. - Decided a .....

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2008 because subsequent delay in such credit was a delay on part of the AO beyond the time allowed by the Income Tax Act - Held that:- No infirmity in the order of the ld. CIT(A), who has rightly held that credit of ₹ 10,06,00,000/- w.e.f 06-08-2008 because subsequent delay in such credit was a delay on the part of the Assessing Officer beyond the time allowed by the Income Tax Act. Interest u/s. 234A is chargeable even on a return filed in time but taxes due remaining unpaid after the due .....

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13-8-2015 - Shri Mahavir Singh and Shri B.P.Jain, JJ. For The Appellant : Shri Adhir Kr. Bar, ld. CIT/ld. DR For The Respondent : Shri A.K Tulsian, FCA, ld.AR ORDER Shri B.P. Jain, AM: These two appeals of the revenue arise from the two different orders of ld. CIT(A)- Central-II, Kolkata each dated 30-07-2010 for the assessment year 2008-09 in the cases of M/s. Janki Textile & Industries Ltd in ITA No.1877/Kol/2010 & M/s. Umang Vincom Pvt. Ltd in ITA No. 1878/Kol/2010. Since the issues .....

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the case of M/s. Janki Textile & Industries Ltd in ITA No.1877/Kol/2010 for the assessment year 2008-09. 3. The ld.DR was permitted to argue the appeal in the case of M/s. Umang Vincom Pvt. Ltd in ITA No.1878/Kol/2010 for the assessment year 2008-09. The revised grounds of appeal filed by the revenue are re-produced herein below:- 4. Revised Grounds of appeal in ITA No. 1878/Kol/2010 A.Y 2008-09 (by the revenue) 1. That on the facts and in the circumstances of the case and in law the ld. CIT .....

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to section 73 of the act was not applicable by considering the income declared u/s. 132(4) of the Act as Income from other sources and without considering the true nature of the activity carried on by the assessee and also without deciding the principle business of the assessee. 3. That on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in holding that the share trading loss is not a deemed speculative loss under Explanation to section 73 and the assessee will .....

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hat this proviso has no application at all towards adjustment of the seized assets with the liability of the assessee and also that no seizure of cash wa made in the case of the assessee. 6. That on the facts and in the circumstances of the case and in law the ld.CIT(A) has erred in presuming that the seized cash of ₹ 10,06,00,000/- prayed by the appellant for application towards the tax liability was accepted by the AO when the provisions of Act does not stipulate for any such presumption .....

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omatically adjusted with the cash seized from another person. 8. That on the facts and in the circumstances on the case the CIT(Appeal) has erred in law in relying upon the decision of Bombay Bench in the case of ACIT Vs. Concord Commercial Pvt. Ltd 95 ITD 117 in interpreting the Gross Total Income and holding that the explanation to section 73 of the Act was not applicable to the present case. 9. That the Department craves leave to add, modify or alter any of the grounds of appeal and/or adduce .....

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petition before DIT wing the assessee disclosed an income of ₹ 30 crores for the FY 2007-08 to buy peace and to avoid long drawn litigation. The AO stated that the assessee had further requested in the said petition that the amount of ₹ 17,50,99,994 lying in the bank account of a group concern M/s. Shoparna Brothers P.Ltd and subsequently seized by the department may be adjusted against tax liability of the assessee arising from such disclosure. The AO also stated that the assessee .....

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e Assessing Officer [AO] further stated that the assessee company does not fall within the category of the first exception to explanation to section 73, where it is said that a company whose gross total income consists mainly of income is chargeable under the heads Interest on Securities , Income from House Property , Capital Gains and Income from Other Sources . The AO found that though the assessee is a non banking financial company(NBFC), it does not mean that the principal business of the as .....

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activities in the assessment years 2007-08 and 2008-09 and found that the assessee deployed 23.11% of its fund in the business of money lending and 76.89% in other than money lending business in AY 2007-08 and deployed 30.62% of its funds in money lending business and 69.38% in other than money lending business in the AY 2008-09 The AO found that in the in the assessment year under appeal the assessee has deployed its fund more than 2 times in activities more than money lending business and the .....

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s made by the assessee and held that Explanation to Section 73 are not applicable in the present case. 8. The ld.DR has supported the order of the AO. On the other hand, the ld. Counsel for the assessee has relied upon the written submission made before the ld.CIT(A) and the order of the ld. CIT(A). 9. We have heard the rival submissions and perused the facts of the case. We agree with the views of the ld.CIT(A). We find that in the case of Godavari Capital Ltd Vs. DCIT (2004( 91 ITD 274 (Hyd) a .....

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folio (P) Ltd Vs. DCIT (2005) 92 ITD 324 (Delhi) (SMC)-I), relied upon by the assessee, wherein it was held that the Explanation to Section 73 cannot be invoked if no device was adopted in indulging in such share transactions with object of reducing taxable income. The Hon ble Jurisdictional Calcutta High Court have analyzed the Circular No.204 dated 24-07-1976 of CBDT. In the case of CIT Vs. Arvind Investment Ltd reported in 192 ITR 365(Cal) held that the object as stated in the said Circular i .....

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to the business of purchase and sale of shares of certain companies. In view of this judgment of Hon ble Jurisdictional High Court, the decisions of ITAT-Hyderabad and ITAT-Delhi (SMC) relied upon by the assessee have no application in the case of assessee. For the applicability of explanation to Section 73 the only fact that is required to be established is that the assessee is neither a company earning main income from sources other than business nor a company whose principal business is the .....

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the provisions of this Act, before making any deduction under Chapter VI-A of the I.T Act. Therefore, the income is chargeable under various heads as Income from House Property, profits and Gains of business and profession , Capital Gain , Income from other sources etc. under Chapter IV of the I.T Act should be computed and loss, if any, under such heads of income, should be set off or carried forward in accordance with the provisions contained in S.70 & 80 of the I.T Act before arriving at .....

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so that it could be deemed as an income u/s. 69 etc of the Act. It has been held that the income declared u/s. 132(4) is required to be taxed under the head Income from other sources . If the income declared u/s. 132(4) is considered to be Income from other sources , then the main income of assessee would be income from other sources and assessee company would be covered under the first exception to explanation below section 73 and by virtue of main income assessee being the income from other so .....

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income 300640700 Tax 90152746 Surcharge 9015276 Edu. Cess 2975041 (Tax + Surcharge + Edu. Cess) = 102143081 Less: TDS 95,358 102047723 Add: Interest u/s. 234B 14848750 Add: Interest u/s. 234C 5080956 121977432 Less: Tax Paid 100613003 Tax Payable 21364429 10.1 The AO has stated in his order that the assessee had requested before him that interest u/s. 234B of the Act should not be charged from 01/05/2008 because assessee had made a request to adjust the cash so seized from M/s. Shoparna Bros. P .....

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sions of law do not permit application of seized cash against the advance tax liability of the assessee for the year in which the search took place. Therefore, the AO charged interest u/s. 234B of the Act from 01-04-2008 upto the date of assessment. The search had taken place on 28-03-08. 11. The ld.CIT(A) has accepted the arguments made by the assessee and held that calculation of interest u/s. 234B the AO should have credited the tax of ₹ 10,06,00,000 from 06-08-2008 because subsequent d .....

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a letter dated 28-05-2008 of search was submitted to the AO for adjustment of cash. It was informed that during course of search cash amount of ₹ 17,51,79,994/- was seized on 8-4-08. An amount of ₹ 15 crore was disclosed u/s. 132(4) of the I.T Act where adjustment with seized cash was sought. The assessee submitted that assessee should not be penalized by charging of interest u/s.234B under such circumstances. The assessee referred to the provisions of section 132B(1)(i) and submitte .....

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01/Kol/2007, in the case of ACIT,CC XXX, Kol Vs. Puranmal Agarwal in IT(SS) A No.114/Kol/08 and in the case of DCIT, CC-XXIV, Kol Vs. Sri Amit Seksaria in ITA No. 253/Kol/09, ITAT Mumbai in the case of Satpaul D. Agarwal (HUF) Vs. ACIT (1999) 105 Taxman 71 and in the case of Nitin M. Jadia Vs. ACIT (1999) 107 Taxman 203. In the case of ACIT Vs. Shailesh Natubhai Desaid (2000) reported in 109 Taxman 330(Ahd.), wherein it has been held that if unexplained cash seized during search operation at the .....

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x Act. However, relevant parts of the order of the ld.CIT(A) for the sake of convenience are reproduced herein below:- 4. I have gone through the assessment order and submissions of appellant. The search u/s. 132 of the I.T Act took place on 28-03-2008. The statement of Shri Sancdeep Sharma u/s. 132(4) was recorded on 08.04.2008 in which after disclosing an income of ₹ 15 crore on behalf of the appellant, Shri Sandeep Sharma submitted on behalf of appellant that the balance lying in the ba .....

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, is 31.03.2008 and therefore by no stretch of imagination it can be said that for a seizure made on 08.04.2008 the onus can never be on department to apply such cash for the advance tax payment of appellant as for Assessment Year 2008-09 when the last date of payment of advance tax is 31.03.2008. Moreover, the appellant was not sure of the exact tax liability and therefore the request on 08.04.2008 for adjustment of tax liability was made in respect of tax liability that may arise as per the re .....

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ss against the income disclosed u/s. 132(4) of ₹ 30 crore. On this total income appellant calculated the tax liability of ₹ 10,06,13,004/- which is more or less same as what appellant had submitted in the letter dated 28.05.2008. However, appellant did not calculate undisputed liability of interest u/s. 234C and the liability of interest u/s. 234B in the return of income filed on 29.09.2008. It appears that Assessing Officer adjusted the seized cash of ₹ 10,06,13,004/- on 13.04 .....

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sing Officer. The provisions of section 132(5) were omitted from 01-06-2002 and from the same date two provisos to clause (i) of sub section (1) of section 132B were inserted. Under section 132(5), which existed till days 01-06-2002, Assessing Officer had to make an estimation of tax liabilities within 120 days of the seizure of assets and till such estimation he could retain all the seized assets. On estimation of tax liabilities u/s 132(5), Assessing Officer could retain the seized assets wort .....

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fied with the explanation of assessee then he should release the asset within 120 days from the date of seizure of such asset after recovering any existing liability under Income Tax Act, Wealth Tax Act etc. If the seized asset is in form of cash, Assessing Officer may on his own, apply the cash, towards discharge of any existing liability under Income Tax Act, wealth Tax Act etc under clause (ii) of subsection (1) of Section 132B. In the present case, according to the Assessing Officer, a liabi .....

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ot be restricted to only demands raised by the Assessing officer u/s. 156 of the I.T Act. It is a fact that the Assessing Officer had adjusted the seized cash of ₹ 10,06,13,003/- towards payment of tax u/s. 140A of the I.T Act before raising the demand u/s. 156 of the I.T Act and therefore, the action of Assessing Officer itself shows that though the Assessing Officer has been instructed by CBDT not to adjust the seized cash Advance Tax liability of appellant, there is no such restriction .....

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is bound to adjust such liability against the seized cash or the Assessing Officer has discretion in this regard. Some courts have interpreted that as per the amended provisions of section 132B, the existing tax liabilities include the demand of the Assessment Year in respect of which cash has been seized and assessment of which is pending and the Assessing Officer cannot post pone the adjustment of cash against such liabilities beyond the date of seizure and charge higher interest u/s. 234B fo .....

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ustody, cash of ₹ 17,51,79,994/- was seized, made an application on 28-05-2008 before the Assessing Officer who happens to be the same Assessing Officer of appellant. Such application is an application under the first proviso to clause (i) of subsection (1) of section 132B. In this application, M/s. Shoparna Brothers Pvt. Ltd had explained that ₹ 17,51,79,994/- seized from their custody on 08-04-2008 was from regular books of account. M/s. Shoparna Brothers Pvt. Ltd further applied f .....

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; 10,06,00,000/- in favour of appellant, as requested for, on or before 06-08-2008, i.e within 120 days from the date of seizure. An application was filed by the appellant also before the Assessing Officer on 28-05-2008 showing categorically its tax liability of Assessment Year 2008-09 at ₹ 10,06,00,000/- u/s. 140A of the I.T Act with a request for adjustment of this liability against the release of cash seized from M/s. Shoparna Brothers Pvt. Ltd. Assessing Office has stated in the assess .....

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ity remaining to be adjusted in their case. In view of these facts, as requested by both appellant and M/s. Shoparna Brothers Pvt. Ltd, Assessing Officer should have released the cash seized from the custody of M/s. Shoparna Brothers Pvt. Ltd and should have applied it towards payment of tax liabilities of ₹ 10,06,00,000/- of appellant on or before 06-08-2008. However, it appears that the Assessing Officer did act upon such requests, but after a delay of a few months on 13- 04-2009. If Ass .....

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is presumed to be accepted by the Assessing Officer. What the Assessing Officer did later should have been done before 6th August 2008 and therefore it is presumed that the release and application of seized cash towards payment of tax liability dates back to 06- 08-2008, when the time allowed to Assessing officer by the statute to take such decision expires. Therefore, I hold that the amount of seized cash of ₹ 10,06,00,000/- should be held as paid u/s. 140A on 06-08-2008 towards the admi .....

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