we do not find any error of law having been committed by the Tribunal in accepting the contentions urged by the assessed. While it is true that tax laws and equity do not always go hand in hand, but in the present cases, since there is nothing to prohibit the assessed from making a request for adjustment of the cash seized against advance tax liabilities, equity demands that the cash amount ought to have been adjusted as prayed for by the assessed to save it from any liability of interest.
DELHI HIGH COURT
DIVISION BENCH
( Before : Swatanter Kumar, J; Madan B. Lokur, J )
COMMISSIONER OF INCOME TAX — Appellant
Vs.
KESR KIMAM KARYALAYA — Respondent
ITA 11 of 2003
Decided on : 05-05-2005
Income Tax Act, 1961 – Section 132(5), Section 143(1), Section 154, Section 234B, Section 234C
Income Tax Act, 1961 — Section — 132(5), 154, 234B — Payment of advance tax — Tax laws and equity do not always go hand in hand, but in the present cases, since there is nothing to prohibit the assessed from making a request for adjustment of the cash seized against advance tax liabilities, equity demands that the cash amount ought to have been adjusted as prayed for by the assessed to save it from any liability of interest.
Counsel for Appearing Parties
R.D. Jolly and Ajay Jha, for the Appellant; Anoop Sharma, for the Respondent
JUDGMENT
Madan B. Lokur, J.—The Revenue is aggrieved by an order dated 6th February, 2002 passed by the Income Tax Appellate Tribunal, Delhi Bench C (the Tribunal) in ITA No. 823(Del)/96.
2. A common order was passed in respect of two assessed, namely, M/s K.K. Marketing and M/s Kesr Kimam Karyalaya. In respect of M/s K.K. Marketing, the Revenue has filed ITA No.16/2003 while in the case of M/s Kesr Kimam Karyalaya, the Revenue has filed ITA No.11/2003.
3. The assessment year in both the appeals is the same, that is, 1994-95. In respect of this assessment year, the assessed were required to pay the first installment of advance tax on 15th September, 1993 while the next two installments were due on 15th December, 1993 and 15th March, 1994.
4. A search was carried out in the premises of the assessed in August, 1993. During the search, a large amount of cash was recovered and so, when payment of advance tax was becoming due in September, 1993 the assessed wrote to the department that the cash seized may be adjusted towards advance tax. This request was reiterated in December, 1993 also.
5. On 16th December, 1993, an order was passed u/s 132(5) of the Income Tax Act, 1961 (the Act) and assessments in the case of the assessed were completed on 28th November, 1994. While passing assessment orders u/s 143(1)(a) of the Act, it was held that the assessed were entitled to a refund of Rs.48,78,295/- as against the advance tax liability of Rs.48,55,000/-. The assessing officer charged interest from both the assessed under Sections 234B and 234C of the Act.
6. Feeling aggrieved, both the assessed moved applications u/s 154 of the Act praying that interest was wrongly charged because requests had earlier been made to adjust the amount seized in cash against the impending advance tax liability. The assessing officer turned down the application u/s 154 of the Act.
7. In appeal, the Commissioner of Income Tax (Appeals) [CIT (A)] held that in the case of M/s Kesr Kimam Karyalaya, interest under Sections 234B and 234C could be charged up to the date of the order u/s 132(5) of the Act, that is, 16th December, 1993 while in the case of M/s K.K. Marketing, the CIT (A) held that the request for adjustment of cash was made by the partners of the assessed and not by the assessed itself and so the adjustment could not be made.
8. Both the assessed challenged these orders in appeal before the Tribunal, which accepted their contentions by the impugned order.
9. The Tribunal noted that the assessed had made a request for adjustment of the seized cash before the date on which advance tax became due. It was also noted that ultimately the liability of the assessed towards advance tax was less than the amount found refundable to them. It was also noted that since the question of charging interest under Sections 234B and 234C of the Act was highly debatable, it would be appropriate not to charge interest from the assessed.
10. Before us, learned counsel for the Revenue contended that substantial questions of law arise for consideration inasmuch as both the assessed were liable to pay interest under the provisions of Sections 234B and 234C of the Act. It was also contended that cash belonging to the partners of the assessed could not be adjusted against the liability of the assessed.
11. We are of the view that the present appeals do not raise any question of law, much less any substantial question of law. There is no dispute that the offer for adjustment of the seized cash was made by the assessed before the advance tax liability became due. Therefore, it is not as if the assessed had any intention of shirking their advance tax liabilities. In similar circumstances, the Tribunal had taken the view that adjustment of the cash recovered could be made against advance tax liability and the Revenue in the grounds of appeal has not disputed this. The orders passed by the Tribunal in this regard, which have been referred to in paragraph 9 of the impugned order, appear to have been accepted by the Revenue.
12. In so far as the adjustment of the cash seized against the liability of the firm is concerned, the Tribunal rightly held that there is no difference between a firm and its partners. Its partners constitute a firm and they are liable to make good any demand of taxes on behalf of the firm. The partners of the concerned assessed had categorically prayed that the cash seized from their premises, which also happened to be the premises of the firm, should be adjusted against the advance tax liability of the firm/assessed. Such a request could have been made by the partners to bind the assessed and there could not have been any ground for rejecting such a request.
13. It must also be noted that the Revenue accepted the return filed by the assessed and in fact it was found that they were entitled to a refund, which was more than the amount of cash that was seized.
14. On the basis of the above facts, we do not find any error of law having been committed by the Tribunal in accepting the contentions urged by the assessed. While it is true that tax laws and equity do not always go hand in hand, but in the present cases, since there is nothing to prohibit the assessed from making a request for adjustment of the cash seized against advance tax liabilities, equity demands that the cash amount ought to have been adjusted as prayed for by the assessed to save it from any liability of interest.
15. We are of the view that no substantial question of law arises. Both the appeals are dismissed.
(2005) 196 CurTR 611 : (2005) 278 ITR 596