1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 11TH DAY OF JUNE 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE HEMANT CHANDANGOUDAR I.T.A. NO.382 OF 2011 c/w I.T.A. NO.383 OF 2011 IN I.T.A. NO.382 OF 2011 BETWEEN M/S MARBLE CENTRE INTERNATIONAL P. LTD. NO.12A, 7TH CROSS, R.D.LAYOUT, BANNERGHATTA ROAD, BENGALURU [REPRESENTED BY ITS MANAGING DIRECTOR SRI RAJKUMAR LADHA, AGED ABOUT 48 YERS, SON OF SRI RAMDEV LADHA.] ... APPELLANT (BY SRIYUTHS SHARAT.S AND CHYTHANYA K K, ADVS.) AND ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -1(2), BENGALURU. ... RESPONDENT (BY SRI E I SANMATHI, ADV.) 2 THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 30/06/2011 PASSED IN ITA NO.1014/BANG/2010, FOR ASSESSMENT YEAR 2007-08, PRAYING TO I. FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW APPEAL AND SET ASIDE ORDER DATED 30/06/2011 PASSED BY ITAT IN ITA NO.1014/BANG/2010, IN INTEREST OF JUSTICE AND EQUITY. IN I.T.A. NO.383 OF 2011 BETWEEN M/S RPG MARBLE PVT. LTD., NO.11/3, BANNERGHATTA ROAD, BENGALURU [REPRESENTED BY ITS DIRECTOR, SRI PRAVAN KUMAR GUPTA, AGED ABOUT 34 YEARS, SON OF SRI SHIVAPRASAD MALOO). ... APPELLANT (BY SRIYUTHS SHARAT.S AND CHYTHANYA K K, ADVS.) AND ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1 (2) BENGALURU. ... RESPONDENT (BY SRI E I SANMATHI, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 30/06/2011 PASSED IN ITA NO.1015/BANG/2010, FOR ASSESSMENT YEAR 2007-08, PRAYING TO: 3 I. FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW APPEAL AND SET ASIDE ORDER DATED 30/06/2011 PASSED BY ITAT IN ITA NO.1015/BANG/2010, IN INTEREST OF JUSTICE AND EQUITY. THESE APPEALS COMING ON FOR ADMISSION, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: COMMON JUDGMENT These appeals under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act , for short) have been filed by assessee. subject matter of I.T.A.No.382/2011 & I.T.A.No.383/2011 pertains to Assessment year 2007-08. Since, common questions of law arise for consideration in these appeals, they were heard analogously and are being decided by this common judgment. appeals were admitted on following substantial questions of law: (i) Whether on facts and in circumstances of case Honourable Tribunal was right in law in holding that letter of 4 request dated 15.03.2007 but only as on date of filing return of income for purpose of computation of interest under Section 234B and 234C? (ii) Is implied finding of Honourable Tribunal that appellant has offered cash seized as advance tax against liability in block assessment, not perverse in light of letter of request dated 15.03.2007? 2. For facility of reference facts from ITA No.383/2011 are being referred to. assessee is private limited company which is engaged in business of trading random slabs of marbles and granites. proceeding under Section 122 of Act was initiated and search took place in business premises of assessee and residential premises of Director and accountant. During 5 course of said proceeding, cash amount of Rs.4.77 Crores was seized by department and was deposited in personal deposit account. assessee agreed to disclose Rs.50 Lakhs and stock of Rs.1.40 Crores as additional income for Assessment year 2007-08 and sent communication dated 15.03.2007, in which request was made to treat Rs.50 Lakhs out of cash seized as advance tax payable by assessee for Assessment year 2007-08. 3. assessee filed return of income on 31.10.2007 declaring total income of Rs.3,58,15,790/-, which was processed under Section 143(1) of Act and notices under Section 142 and Section 143(2) were issued on 19.05.2008. assessee filed details as sought for by respondent. order of 6 assessment was passed on 31.12.2008 under Section 143(3) of Act. Aggrieved by aforesaid order, assessee filed appeal before Commissioner of Income Tax (Appeals). Commissioner of Income Tax (Appeals) by order dated 24.06.2010 inter alia held that assessee is entitled to grant of relief in respect of interest from date of filing of return till date of order of assessment. Thus, appeal preferred by assessee was partly allowed. tribunal by order dated 30.06.2011 dismissed appeal preferred by assessee. In aforesaid factual background, these appeals have been filed. 4. Learned counsel for assessee has invited attention of this court to communication dated 15.03.2007 and has pointed out that assessee had made request to adjust 7 sum of Rs.50 Lakhs out of cash seized towards advance tax payable for Assessment year 2007-08. While pointing out to statement of total income, it was pointed out that before seizure of cash, four installments of advance tax was paid on 15.06.2006, 14.09.2006, 14.12.2006 and 08.03.2007. Our attention has also been invited to provisions of Section 132B of Act and it has been pointed out that Explanation 2 has been inserted to aforesaid Section with effect from 01.06.2013. It has also been submitted that in respect of aforesaid explanation, Circular No.20/2017 dated 12.06.2017 has been issued wherein it has been stated that insertion of Explanation 2 to Section 132B of Act shall have prospective application. It is further submitted that advance tax liability can be adjusted against cash lying in account of revenue, which was 8 seized from assessee. In support of aforesaid submission, reliance has been placed on decision of Allahabad High Court in COMMISSIONER OF INCOME TAX, KANPUR VS. SH SUNIL CHANDRA GUPTA , 2015-TIOL-673-HC-ALL-IT. It is pointed out that Special Leave Petition was preferred by revenue against aforesaid order, which was dismissed by Supreme Court by order dated 29.04.2016. It is also submitted that payment of interest in instant case is compensatory in nature and amount belonging to assessee was in possession of revenue and aforesaid amount was also to be taken into account to determine tax liability. In support of aforesaid submission, reference has been made to decision of division bench of this court in M/S SHRI RAGHAVENDRA TRADERS SANTHEPET, HASSAN VS. ASSISTANT COMMISSIONER OF 9 INCOME TAX , 2011-TIOL-587-HC-KAR-IT. Therefore, it is submitted that first substantial question of law framed by this court deserves to be answered in favour of assessee and against revenue and second substantial question of law need not be answered. 5. On other hand, learned counsel for revenue submitted that advance tax cannot be adjusted towards tax as it is not existing liability. It is further submitted that assessee did not make computation of advance tax as required under Section 209(1)(a) of Act and as per Section 210(1) of Act is required to calculate amount of advance tax. Therefore, tribunal is justified in taking view that for purposes of adjustment of cash seized against 10 advance tax payable can be treated as tax paid on date of filing of return. 6. We have considered submissions made on both sides and have perused record. Admittedly, in instant case, assessee has offered sum of Rs.50 Lakhs on 15.03.2007 towards advance tax payable for Assessment year 2007-08. It is also pertinent to mention here that prior to seizure of cash, assessee had paid advance tax in four installments on 15.06.2006, 14.09.2006, 14.12.2006 and 08.03.2007, which is evident from statement of total income. However, department did not adjust aforesaid amount even though cash was available with department. aforesaid amount could have been adjusted against advance tax. We concur with 11 view taken by High Court of Allahabad, which has been upheld by Supreme Court. It is also pertinent to note that Explanation 2 to Section 132B has been held to be prospective in nature and aforesaid position has been settled by Circular No.20/2017 dated 12.06.2017. 7. In view of preceding analysis, we hold that tribunal ought to have held date of payment of tax by assessee as 15.03.2007 i.e., date on which request was made by assessee to adjust cash seized against advance tax payable towards tax for Assessment year 2007-08. first substantial question of law is answered in favour of assessee and against revenue. In facts of case, in view of our answer to first substantial question of law, it is not necessary to answer 12 second substantial question of law. orders passed by Income Tax Appellate Tribunal is hereby quashed and it is directed that date of payment of tax shall be taken as 15.03.2007 i.e., date on which request was made by assessee to adjust cash seized against advance tax payable for Assessment year 2007- 08. In result, appeals are allowed. Sd/- JUDGE Sd/- JUDGE ss Marble Centre International P. Ltd. v. Assistant Commissioner of Income-tax Central Circle-1(2), Bengaluru