Full Judgment
The order passed under section 132(5) was not in ìaccordance with law as the seized money was retained towards ìexisting liability of by way of advance tax because there is no ìsuch provision in the Act to include advance tax in the ìliabilities envisaged in section 132(5).
There is no provision in the Act to include the ìadvance tax in the liabilities envisaged in section 132(5). ìAccording to the provisions of sections 132(5)(ii), (iia) and ì(iii), the amount of tax, interest payable and penalty imposable ìand existing liability under this Act and under Excess Profit Tax ìAct, Business Profit Tax Act, the Indian Income Tax Act, 1922, ìWealth Tax Act, 1957, Expenditure Tax Act, Gift Tax Act and ìCompany's (Profits) Surtax Act only are to be included and ìconsidered for the purpose of retention of seized money. It is ìnoticed that the Commissioner(Appeals) has completely ignored the ìprovisions of sections 132B and 132(6) while deciding the issue ìunder consideration. It is very clearly provided in section ì132B(1) that the amount of the existing liability under section ì132(5)(iii) and the amount of liability determined on completion ìof the regular assessment or reassessment for all assessment ìyears including penalty levied and interest payable may be ìrecovered out of the assets retained under section 132(5). In ìthis way, the Commissioner(Appeals) was wrong in directing the ìassessing officer to treat the seized money as advance tax and ìadjust the same in intimation under section 143(1)(a) without ìfinalisation or completion of regular assessment or reassessment.
Rectification under s. 154--MISTAKE APPARENT--Order passed under s.
132(5) not in accordance with provision of law.
Order passed by the appellate authority based on ìthe order passed under section 132(5) could not be sustained in ìthe eyes of law as the order under section 132(5) was not in ìaccordance with law therefore there was no mistake apparent from ìrecord.
The Commissioner(Appeals) is not justified in ìholding that the facts indeed give rise to a mistake apparent ìfrom record. Firstly, while arriving at such conclusion and while ìdeciding the issue in favour of the assessee, the ìCommissioner(Appeals) is absolutely governed by the order under ìsection 132(5) as quoted by him in his order. The order under ìsection 132(5) itself is wrong and is not in accordance with the ìprovisions of law insofar as the seized money is retained ìtowards "existing liability by way of advance tax". Thus, the ìassessing officer has wrongly mentioned the amount of Rs. ì1,63,000 as "existing tax liability by way of advance tax" in his ìorder under section 132(5). This mistake committed by the ìassessing officer in the order under section 132(5) has certainly ìconsiderable effect on the mind of the Commissioner(Appeals) who ìhas jumped to the conclusion without considering the provisions ìof law. This latitude is not permitted in law. The department is ìbailee of the seized money of the assessee so long as proceedings ìabout assessment continue. So, the assessing officer is expected ìto consider the relevant matters with caution, anxiety and ìfairness in making an order under section 132(5). As this has not ìbeen done while passing the order under section 132(5), the order ìof the Commissioner(Appeals) based on that order cannot be ìsustained in the eyes of law.
1. This is an appeal instituted by the revenue against the order of the CIT(A) for the assessment year 1989-90 on the following ground: That, on the facts and in the circumstances of the case, the Learned Commissioner of Income-tax (Appeals) erred in directing that the non-treatment of sum of Rs. 1,62,194 was a mistake apparent from records.
2. This is a very peculiar case and briefly stated the facts of the case are that the intimation under Section 143(1)(a) of the Income-tax Act, 1961 raising a demand of Rs. 14,123 was sent to the assessee. On receipt of the intimation, the assessee moved a rectification petition dated 10-7-1990 wherein the assessee requested the Assessing Officer to rectify die intimation under Section 143(1)(a) on the following ground : 2. Credit has not been allowed for As. 1,62,194 retained out of the total cash seized, in course of search & seizure operation in September October. In this connection your kind attention is drawn to the order under Section, 132(5) wherein on our request the said amount was treated as advance tax. Accordingly, credit for such amount of As. 1,62,194 has to be allowed as advance tax for the above assessment year.
3. The Assessing Officer rejected the petition of the asses see vide his letter No. 1 l-085-CT-3363/Inv. Cir-I(I)/Cal./332 dated 16-1-1991 stating therein that the assessee's request for rectification of the case by allowing the credit of the seized amount of As. 1,62,194 as advance tax and also for interest under Section 244 A on the refund cannot be allowed as there is no such clear provision in the Income-tax Act, for rectification of order under Section 143(1)(a).
4. When the matter was carried in appeal before the CIT(A) the asses see submitted that there was a search operation in the premises of the asses see on 22-9-1988 and on 5-10-1988 and cash of As. 1,62,194 was seized by I.T. Department. It was further stated that an income of As.
8 lakhs was declared under Section 132(4) at the time of search and in the course of the proceedings under Section 132(5), the following details of the tax payment were given by the asses see vide letter dated 2-1-1989 of the Managing Director of the asses see with a request to adjust the sum of As. 1,62,194 seized at the time of search :Income declared under Section 132(4) for Rs.the assessment year 1989-90 8,00,000 -----------Income Tax @ 60% 4,80,000Surcharge @ 596 of I.T. 24,000 ----------- tax (Receipted challan enclosed) 3,41,000 ----------- towards such tax 1,62,194 ----------- 5. On consideration of the submissions made by the assessee, the CIT(A) found that there had been a mistake apparent from record in not treating a sum of Rs. 1,55,303 out of the seized sum of Rs. 1,62,194 as advance tax in the intimation under Section 143(1)(a) for assessment year 1989-90. He also observed that while passing the order under Section 132(5) on 12-1-1989, the Assessing Officer had retained a sum of Rs. 1,62,194 on the basis of the following details of tax liability of the assessee calculated by him in that order :Assessee's existing tax liability is worked out as under:Income disclosed under Section 132(4) for the Rs.assessment year 8,00,000 ----------Income-tax @ 60% 4,80,000Surcharge @ 5% of income-tax 24,000 ----------Deposited on 2-1-1989 as advance tax 3,41,000 ----------Existing tax liability by way of advance tax 1,63,000Outstanding arrear tax for assessment year 1983-84 6,891 ---------- 6. According to the CIT(A), a sum of Rs. 1,62,194 had, therefore, been retained by the Assessing Officer towards advance tax for assessment year 1989-90 to the extent of Rs. 1,55,303 for, first of all, there had to be an adjustment of outstanding arrear tax of Rs. 6,891 for assessment year 1983-84. Having regard to the Direct Tax Laws (Amendment) Act, 1987 to the effect that no statutory estimate of advance tax is required during the financial year relevant to the assessment year 1989-90 and following the request of the assessee vide its letter dated 2-1-1989 (supra), the CIT(A) came to the conclusion that a sum of Rs. 1,55,303 had to be treated as advance tax without any further statutory requirement. He also pointed out that under the circumstances, non-consideration of the sum of Rs. 1,55,303 as advance tax in the intimation under Section 143(1)(a) when the facts relating thereto had been there on record, should indeed give rise to a mistake apparent from record. In view of this he directed the Assessing Officer to make necessary rectification in the intimation under Section 143(1)(a) treating the sum of Rs. 1,55,303 out of the seized sum of Rs. 1,62,194 as advance tax and work out the refund consequently allowable to the assessee.
7. Being aggrieved by the order of the CIT(A), the revenue preferred this appeal. The Id. departmental representative strongly supported the order of the Assessing Officer and vehemently contended that the CIT(A) was not justified in holding that there was a mistake apparent from record. According to the Id. departmental representative, the seized amount cannot be treated as advance tax but it may be treated as tax on finalisation of assessment.
8. The Id. counsel for the assessee, on the other hand, supported the order of the CIT(A). He also filed a paper book containing computation of total income, copy of intimation under Section 143(1)(a), copy of petition for rectification, order dated 16-1-1991 against the petition for rectification, letter dated 2-1-1989 filed in the course of hearing under Section 132(5), copy of order under Section 132(5) dated 12-1-1989 and copy of order of CIT(A) dated 25-9-1992 against order under Section 143(3) and submitted that as the Assessing Officer has accepted the request of the assessee for adjustment of the seized money against the payment of advance tax and incorporated in his order under Section 132(5), the CIT(A) has correctly held that there was a mistake in intimation under Section 143(1)(a) in not adjusting the seized money as advance tax. He also clarified that the rejection letter of the Assessing Officer dated 16-1-1991 is treated as order under Section 154 and is appealed against. The Id. counsel for the assessee also relied on the Board's circular No. 549 dated 31-10-1989 and particularly invited our attention to para 5.17 (182ITR 26 - Statutes) and contended that the assessments under Sections 143(1) and 143(3) have been done away with by the Finance Act, 1987 and that adjustment under Section 143(1)(a) or income-tax charged under Section 143(1 A) are appealable through the provisions of Section 154 only. He also drew our attention to the order of the CIT(A) dated 25-9-1992 against order under Section 143(3) placed at page 10 of the paper book and stated that in this appellate order also, the CIT(A) has directed the Assessing Officer to allow credit for the sum of Rs. 1,62,194 as advance tax. On the basis of these arguments and contentions, the Id. counsel for the assessee urged that the order of the CIT(A) may be upheld as the mistake is very much apparent from the record.
9. We have carefully considered the rival submissions, relevant facts and material placed on the record. We have also gone through the Board circular and we find that this is not very relevant for deciding the issue under consideration. It is also pertinent to note that the CIT(A)'s order appealed against is order dated 29-7-1991 which was against intimation under Section 143(1)(a)/154 and, therefore, the CIT(A)'s order dated 25-9-1992 against the order under Section 143(3) is not relevant at all.
10. On consideration of the facts and circumstances of the case, we have come to the conclusion that the CIT(A) is not justified in holding that the facts indeed give rise to a mistake apparent from record.
Firstly, we find that while arriving at such conclusion and while deciding the issue in favour of the assessee, the CIT(A) is absolutely governed by the order under Section 132(5) of the I.T. Act as quoted by him in his order. We find that the order under Section 132(5) itself is wrong and is not in accordance with the provisions of law in so far as the seized money of Rs. 1,63,000 is retained towards "existing liability by way of advance tax". There is no such provision in the Act to include the advance tax in the liabilities envisaged in Section 132(5). According to the provisions of Section 132(5)(ii. (ixia) and (iii), the amount of tax, interest payable and penalty imposable and existing liability under this Act and under Excess Profit Tax Act, Business Profit Tax Act, the Indian Income-tax Act, 1922, Wealth-tax Act, 1957, Expenditure Tax Act, Gift-tax Act and Company's (Profits) Surtax Act only are to be included and considered for the purpose of retention of seized money. In this case, the amount of tax as per Section 132(5)(ii) is Rs. 5,04,000 (before adjustment of advance tax) and existing liability as per provisions of Section 132(5)(iii) is Rs. 6,891. After adjustment of advance tax of Rs. 3,41,000 already paid, the current liability under Section 132(5)(ii) works out to Rs. 1,63,000. So, what has been retained under Section 132(5) is tax amounting to Rs. 1,63,000 under Sub-clause (ii) and Rs. 6,891 as existing liability under Sub-clause (iii) of Section 132(5). Thus, the Assessing Officer has wrongly mentioned the amount of Rs. 1,63,000 as "existing tax liability by way of advance tax" in his order under Section 132(5). We noticed that while doing so, he is swayed away by the submissions of the assessee which he has followed in to. This mistake committed by the Assessing Officer in the order under Section 132(5) has certainly considerable effect on the mind of the CIT(A) who has jumped to the conclusion without considering the provisions of law.
This latitude is not permitted in law. The department is bailee of the seized money of the asses see so long as proceedings about assessment continue. So, the Assessing Officer is expected to consider the relevant matters with caution, anxiety and fairness in making an order under Section 132(5) as it is held by the Madras High Court in the case of R. Ramachandra Naidu v. CIT [1976] 102 ITR 227 as under : Having regard to the extensive powers conferred on the Income-tax Officer under Section 132 of the Income-tax Act, 1961, and the far-reaching consequences on the individual rights of the citizen, the Income-tax Officer is expected to deal with the matter of summary assessment under Section 132(5) with such anxiety and fairness as would be required in order to avoid any unreasonable or unfair interference with the private rights of the individual.
As this has not been done while passing the order under Section 132(5), the order of the CIT(A) based on that order cannot be substained in the eyes of law.
11. Secondly, it is noticed that the CIT(A) has completely ignored the provisions of Sections 132B and 132(6) of the Income-tax Act, 1961 while deciding the issue under consideration. For the sake of convenience, relevant part of Section 132B is reproduced as under : 132B. (1) The assets retained under Sub-section (5) of Section 132 may be dealt with in the following manner, namely :- (i) The amount of the existing liability referred to in Clause (iii) of the said sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in Clause (i) of that sub-section relates including any penalty levied or interest payable in connection with such assessment or reassessment and in respect of which he is in default or is deemed to be in default may be recovered out of such assets.
(ii) If the assets consist solely of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in clause, (i) and the assessee shall be discharged of such liability to the extent of the money so applied.
(iii) The assets other than money may also be applied for the discharge of any such liability referred to in Clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, Tax Recovery Officer under authorisation from the Chief Commissioner or Commissioner under Sub-section (5) of Section 226 and the Assessing Officer or, as the case may be, Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule.
It is very clearly provided in Section 132B(1) that the amount of the existing liability under Section 132(5)(m) and the amount of liability determined on completion of the regular assessment or reassessment for all assessment years including penalty levied and interest payable may be recovered out of the assets retained under Section 132(5). This view is duly supported by the decision of the Madras High Court in the case of R. Ramachandra Naidu (supra) wherein it was held that the proceedings under Section 132(5) are concerned only with the retention of amount seized and the regular assessment or reassessment will have to be done before the same is finally appropriated to any tax liability that may be found due from the petitioner. In this way, we observe that the CIT(A) was wrong in directing the Assessing Officer to treat the seized money as advance tax and adjust the same in intimation under Section 143(1)(1) without finalisation or completion of regular assessment or reassessment.
12. The "regular assessment" is defined in Section 2(40) meaning thereby the assessment made under Sub-section (3) of Section 143 or Section 144. This simply means that intimation under Section 143(1)(a) is not a regular assessment and, therefore, as per provisions of Section 132B, no recovery or no adjustment of retained assets is possible against the demand raised under Section 143(1)(a) as the recovery out of the retained assets is permitted only on completion of regular assessment or reassessment. In this way, we do not find any mistake in the intimation under Section 143(1)(a) or on the part of the Assessing Officer in rejecting the petition for rectification. As there is no mistake apparent from the record, the CIT(A) was not justified in directing the Assessing Officer to make necessary rectification in the intimation under Section 143(1)(a) as his order is not in accordance with the provisions of law. The same is quashed.