By TIOL News Service

NEW DELHI, AUG 29, 2017: THE ISSUE BEFORE THE COURT IS - Whether discrimination between two sets of defaulting Assessees is permitted, when the CBDT through its Circular had explicitly directed the Department to grant benefit of adjustment of seized cash against advance tax liability to all Assessees in default of payment of advance tax. NO is the verdict.

Facts of the case:

During the course of search carried out in the premises of Assessees, as far as Ms. Latika Datt Abbott was concerned, the cash seized was to the extent of Rs.1.18 Crores, whereas in the case of Ms. Charu Datt Bhatia, the cash seized was Rs.96,50,000/- in the aggregate. Consequent to the same, Ms. Abbott offered an additional income of Rs.1,25,00,000/- and prayed for adjustment of cash of Rs.1,18,00,000/- found and seized, towards the advance tax liability for AY 2012-13. The declared income of Rs. 5,13,29,582/- was accepted during assessment. However, the credit of Rs. 1,18,00,000/- was not given and accordingly a demand of Rs. 1,48,54,900/- was credited which included levy of interest of Rs. 33,51,110/- as against Rs. 38,524/- computed by Ms. Abbott. As far as Ms. Bhatia is concerned, she too offered an additional income of Rs. 1,50,00,000/- and prayed for adjustment of cash of Rs. 96,50,000/- found and seized, towards advance tax liability. Her declared income of Rs. 5,25,56,564/- was also accepted after raising a demand of Rs. 1,21,22,630/- which included levy of interest of Rs. 25,31,946/- as against Rs.59,319/- computed by Ms Bhatia. The Department thereafter adjusted the seized cash against the tax demand in terms of the assessment order. However, the Assessees were made liable to pay interest u/s 234A, 234B and 234C for the period from the date on which advance tax was due till the date of the above adjustment.

High Court held,

++ it is seen that during the pendency of petitions, the CBDT has come out with Circular No. 20/2017 dated 12th June 2017, and clarifies that Explanation 2 to Section 132B, inserted w.e.f 1st June 2013 and which states that "existing liability does not include advance tax payable in accordance with the provisions of Part-C of Chapter XVII of the Act", shall have prospective application. The Circular No. 20/2017 makes clear the intention of the Department not to contest those cases where the Assessees had been given the benefit of adjustment of seized cash against the advance tax liability. Therefore, there cannot be a situation where for those Assessees who have continued to remain in default of payment of advance tax the benefit of Circular No. 20/2017 is extended but not to those defaulting Assessees whose request made prior thereto for adjustment of the seized cash against advance tax dues is refused and adjustment is made against the tax demand prior to the date of the above Circular. This discrimination vis-a-vis two sets of defaulting Assessees cannot be legally countenanced, particularly since the stand of the Department, as made explicit by Circular No. 20/2017, is to grant the benefit of adjustment of seized cash against advance tax liability to all Assessees in default of payment of advance tax. Consequently, a direction is issued to the Department to give the benefit of Circular No. 20/2017 to both Assessees which in effect would mean that their requests for adjustment of the seized cash against their respective advance tax liability would stand allowed with effect from the date of the first request made by the Assessees.

(See 2017-TIOL-1683-HC-DEL-IT)