IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER .ITA No. 2824/Ahd/2013 Assessment Year : 2009-10 Shri Anil Kumar C. DCIT, Radhanpura, Vs Central Circle (2)2, F-404, Shreeji Enclave, Ahmedabad Nr.Anand Nagar Cross Roads, Satellite, Ahmedabad-380015 PAN : AEDPR 4879 K (Appellant) (Respondent) Assessee by : Shri P.M. Mehta, CA Revenue by : Shri Rahul Kumar, Sr. DR Date of Hearing : 29/09/2016 Date of Pronouncement: 30/09/2016 ORDER This appeal by assessee is directed against order of Commissioner of Income-Tax (Appeals)-III, Ahmedabad dated 30.09.2013 for AY 2009-10. 2. solitary ground raised by assessee reads as under: In law and on facts and in circumstances of case, learned CIT(A) has erred in confirming penalty u/s 271AAA levied by Assessing Officer for Rs.2,62,597/-. 3. Ld. Counsel for assessee contends that vide application dated 15.03.2009 request was made to AO that it was not possible for assessee to make advance tax payment of seized jewellery; therefore, same should be disposed of and its proceeds should be appropriated towards tax liability. undisclosed income was included in return of income which is not disputed by ld. AO. However, penalty has been imposed on technical ground that assessee did not pay advance tax on returned income. ld. AO, however, failed to appreciate following, as narrated by assessee in its letter dated 15.03.2009:- SMC-ITA No.2824/Ahd/2013 Anil C. Radhanpura vs. DCIT AY : 2009-10 2 . In this connection, assessee relies on decision of Hon'ble Supreme Court in case of B.A. Malani v/s CIT, Civil Appeal No. 5950 of 2008 wherein facts were that during course of search, shares worth market value of Rs. 61.38 lakhs and demand draft worth Rs. 10 lakhs in name of Pan Clothing Company Limited was seized and assessee by letter dated 16 December, 1995, stated that he gives his consent to dispose of shares as expeditiously as possible for appropriating proceeds towards taxes and advance taxes. However, such application was not acceded to by Income- Tax Department and demand was raised. Even Income-Tax Officer has levied interest under Section 220(2) of Act. In Civil Appeal filed by assessee, Hon'ble Apex Court has observed as under:- Unfortunately, this aspect of matter has not been considered by learned Commissioner and High Court in its proper perspective. Department has taken plea that unless amount of fax due was ascertainable, securities could not have been sold and demand draft could not be encashed. same logic would apply to case of assesses in regard to levy of interest also. It is one thing to say that levy of interest on ground of non-payment of correct amount of tax by itself can be ground for non-acceding to request of assesses as levy is statutory one but it is another thing to say that said factor shall not be taken into consideration at all for purpose of exercise of discretionary jurisdiction on part of Commissioner. Appellant volunteered that securities be sold. Why said request of appellant could not be acceded to has not been explained, It was voluntary act on part of appellant . 4 In view of what is stated herein above, that assessee's request to treat seized gold of 1162.059 gms against advance tax liability is well within purview of section 132B of Act and assessee's requests your goodselves to kindly adjust seized gold as stated herein above against advance tax of AY 2009-2010 Now Assessee will not be liable to any interest u/s 234A, 234B or 234C of Act. . 3.1 In first appeal, ld. CIT(A) took new angle and confirmed penalty by observing as under:- 7. From perusal of records it is found that in this case appellant made disclosure of additional income but taxes were not paid on same. Appellant wrote letters on 15/12/2008, 01/01/2009 and 31/01/2009 to AO for release of stock of gold ornaments. Subsequently, letter dtd. 15/03/2009 was written to AO for adjustment of seized assets against advance tax. However, as per provisions of Section 132B of IT Act, seized assets can be adjusted only against existing liability of assessee. SMC-ITA No.2824/Ahd/2013 Anil C. Radhanpura vs. DCIT AY : 2009-10 3 Since advance tax is not existing liability, request of appellant was not accepted. 8. Explanation (2) has been inserted below Section 132B of IT. Act w.e.f. 1st June, 2013 which reads as follows: 'Explanation 2. - For removal of doubts, it is hereby declared that "existing liability" does not include advance tax payable in accordance with provisions of Part C of Chapter XVII'. Explanation is clarificatory in nature because it begins with phrase "for removal of doubts". Thus it is clear that intention of legislature was always that seized assets cannot be adjusted against advance tax liability. 9. reliance placed by appellant on decision of Hon'ble ITAT, Lucknow Bench in case of Sureshchandra Varma is also of no help because by insertion of Explanation 2 to section 132B as mentioned above, it has been clarified that seized assets cannot be adjusted against advance tax liability of assessee. Therefore, AO has rightly concluded that essential condition of section 271AAA regarding payment of taxes in respect of undisclosed income is not satisfied. Levy of penalty of Rs.2,62,957/- u/s. 271AAA is justified in such situation and same is confirmed. 3.2 Ld. Counsel contends that (a) judgment of Hon ble Supreme Court in case of B.A. Malani (supra) has clearly held that if assessee has made request for disposal of jewellery, it cannot be brushed aside and definite view is to be taken. In this case there is no rejection of assessee s application. Assessee is handicapped person and financially week and was not able to pay advance tax; therefore, request was made which is as per law as held by Hon ble Supreme Court. (b) assessment year is AY 2009-10; whereas explanation sought to be applied by ld. CIT(A) has come into effect from 01.06.2013, which is clearly prospective application. Assessee reliance on decision of ITAT, Lucknow Bench in case of Sureshchandra Varma (supra) was perfectly justified. 4. Ld. DR, on other hand, supported orders of lower authorities. SMC-ITA No.2824/Ahd/2013 Anil C. Radhanpura vs. DCIT AY : 2009-10 4 5. I have heard rival contentions, perused material available on record and gone through orders of authorities below. In view of Hon ble Supreme Court judgment in case of B.A. Malani (supra) and decision of ITAT, Lucknow Bench in case of Sureshchandra Varma (supra), this is not fit case to levy penalty u/s 271AAA of Act. Hon ble Supreme Court in case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, has squarely held that penalty cannot be imposed for technical or venial violation of law. assessees application for disposal of jewellery has not been rejected. Similarly, Explanation (2) to Section 132B is not applicable to assessees case as it was introduced much later with effect from 01.06.2013. In view of these facts, it is held that it is not fit case for imposition of penalty u/s 271AAA of Act, which is deleted. 6. In result, assessees appeal is allowed. Order pronounced in Court on 30th September, 2016 at Ahmedabad. Sd/- R.P. TOLANI (JUDICIAL MEMBER) Ahmedabad; Dated 30/09/2016 Biju T. Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. Concerned CIT 4. CIT(A) 5. DR, ITAT, Ahmedabad 6. Guard file.BY ORDER, TRUE COPY (Dy./Asstt.Registrar) , ITAT, Ahmedabad Anil Kumar C. Radhanpura v. DCIT, Central Circle-(2)2, Ahmedabad