IT: Where seized amount belonged to company and, not to employee/agent of company, block assessment proceeding under section 153A against latter was to be set aside
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[2013] 40 taxmann.com 19 (Allahabad)
HIGH COURT OF ALLAHABAD
Premier Car Sales Ltd.
v.
Director General of Income-tax, Investigation (North)*
RAJIV SHARMA AND DR. SATISH CHANDRA, JJ.
MISC. BENCH NO. 8223 OF 2013
OCTOBER 9, 2013
Section 153A of the Income-tax Act, 1961, read with rule 112F of the Income-tax Rules, 1962 - Assessment - In case of search or requisition [In case of agent/employee] - Petitioner-company entered into contract with NHAI for collecting toll on NH2 with effect from 9-1-2012 - Thereafter, cash was seized from possession of its collection agent by police and matter was referred to Income-tax department - Thereafter, proceeding under section 153A were initiated for assessment years 2006-07 to 2011-12 against collection agent and further assessment proceeding for current year was also initiated - Case of petitioner-company was that amount should be released along with interest at rate of 18 per cent as no proceeding could be initiated as per rule 112F and Circular No. 10 of 2012 - Whether as rule 112F came into existence by 4th amendment with effect from 1-7-2012 and Circular No. 10 of 2012 was dated 31-12-2012 and where cash was seized on 11-1-2012, benefit of said amended rule and Circular could not be availed as same had no retrospectively effects - Held, yes - Whether where no proceeding under section 153A was initiated against petitioner-company, and further seized amount belonged to petitioner-company, not to employee/agent of company, block assessment against collecting agent, was to be set aside - Held, yes [Paras 11 & 18] [In favour of assessee]
Circulars & Notifications : Circular No. 10 of 2012, dated 31-12-2012
FACTS
| ■ | The P1 company entered into a contract with National Highway Authority of India (NHAI) for collecting 'Toll' on National Highway 2 and the contract became effective from 9-1-2012 (24 hrs.)/10-1-2012 (00 hrs.) | |
| ■ | On 11-1-2012, the petitioner No. 2 (P2) employee of P1 was intercepted by the police and cash of Rs. 7,15,000 was seized from his possession. The information was given to the Income-Tax Department and the Officers of the Income Tax department seized the money, after due approval of the Additional Director, Income-Tax (Investigation). | |
| ■ | After the preliminary investigation, the proceedings under section 153A was started for the assessment years 2006-07 to 2011-12, i.e., block period and assessment proceeding for current year was also initiated against P2. | |
| ■ | The petitioner-company submitted that the Election Commission of India had clearly issued the clarification that if the cash is sent to the Bank for deposit, same shall not be seized and only a form will have to be filled up by the custodian of the currency and further rule 112F of the Income-tax Rules, 1962, specifically provides that no notice shall be issued under section 153A for a period of six years in instant case. This was further clarified by CBDT in Circular No. 10 of 2012, dated 31-12-2012 and, therefore, the notice issued under section 153A to petitioner No. 2 for six assessment years, is highly illegal and against the legislative spirit and further amount should be released along with interest at the rate of 18 per cent interest. | |
| ■ | On present writ: |
HELD
| ■ | It appears that the cash was seized from the possession of the petitioner No. 2 by the police who referred the matter to the Income-Tax Department and after necessary approval, proceedings under section 132A were initiated. [Para 11] | |
| ■ | Submission of the petitioner is that the amount should be released along with interest at the rate of 18 per cent as no proceedings can be initiated as per Rule 112(F) of the Income-tax Rules, 1962 as well as Circular No. 10 of 2012, dated 31-12-2012. [Para 12] | |
| ■ | Rule 112(F) came into existence by 4th amendment with effect from 1-7-2012. The Circular No. 10 is dated 31-12-2012 but the cash was seized on 11-1-2012. So, the benefit of the said amended rules or circular cannot be given as the same are not applicable retrospectively. [Para 13] | |
| ■ | The amount belongs to the P1 company and certainly not to the P2, who is merely an employee of the company. The explanation, if any, will have to be sought from the petitioner-company. So, there is no occasion to start the proceedings under section 153A against the petitioner No. 2, who is simply an agent of the company. [Para 16] | |
| ■ | In the light of above discussion, the Court is of the view that the proceedings for the block period is not required in the case of the employee i.e. petitioner No. 2 specially when no such proceedings were initiated against the P1-company. [Para 17] | |
| ■ | Hence, the proceedings of the block assessment pertaining to the petitioner No. 2 is to set aside and accordingly mandamus is issued for not proceeding any further against the petitioner No. 2 pertaining to the block assessment in pursuance of the notice under section 153A. However, the proceedings for the current assessment year will continue. Further, the opposite parties are directed to release the seized amount within a period of four weeks as per law, which shall be subject to the outcome of the proceedings for the current assessment year. The department is always at liberty to take proceedings against the P1-company but as per law. [Para 18] |
CASES REFERRED TO
CIT v. Vindhya Metal Corpn. [1997] 224 ITR 614/91 Taxman 192 (SC) (para 7) and Dimondstar Exports Ltd. v. DGIT [2005] 278 ITR 36/143 Taxman 16 (Bom.) (para 8).
Pradeep Agrawal for the Petitioner. D.D. Chopra for the Respondent.
ORDER
1. By this writ petition, the petitioner has prayed for following reliefs:
"(a) issue a writ order or direction in the nature of writ of certiorari and quash the proceedings initiated under section 153-A of the Income Tax Act against the petitioner no.2 for the assessment years 2006-07 to 2011-12 in view of the specific provisions contained in Rule 112 F as well as the Circular No. 10 of 2012 dated 31.12.2012 after summoning the records.
(b)Issue a writ, order or direction in the nature of writ of Mandamus directing the opposite parties to release the cash of Rs.7,15,000/-either to Petitioner no.1 or to the petitioner no.2, since the same belongs to Petitioner no.1 and was being carried for depositing in the HDFC Bank at Varanasi was illegally seized.
(c) Issue a writ order or direction in the nature of writ of Prohibition/Mandamus prohibiting/directing the opposite party no. 2 from assessing the petitioner under section 153A for the assessment years 2006-07 to 2011-12 as well as for the A.Y. 2012-13 and not to impose tax and realize the same.
(d)Issue a writ order or direction in the nature of writ of Mandamus directing the Opposite Party no.1 to release the cash with interest @18% since the same has been seized against the SOP issued by the Election Commission of India on 15.01.2012 as well as the circular no.10 of 2012, which is binding on the opposite parties.
| (e) and (f)** | ** | **" |
2. Brief facts giving rise to the petition are that the petitioner no.1 got a contract of National Highway Authority of India for collecting 'Toll' at Lala Nagar Toll Plaza on National Highway 2 situated in District Sant Ravidas Nagar and the contract became effective from 09.01.2012 (24 hrs)/10.01.2012 (00hrs). The petitioner no.2 Sri Sanjay Agarwal is an employee of the petitioner no.1, as General Manager w.e.f. 8th February, 2010.
3. On 11.01.2012, in the morning at about 10.00am, the petitioner no. 2 was going in a Innova Car bearing No. UP-32/CX-1288 to HDFC Bank, Lohata Branch, Varanasi. On the way, he was intercepted by the Police. A cash of Rs.7,15,000/-was seized from his possession. The information was given to the Income Tax Department and the officers of the Income Tax Department seized the money, after due approval of the Additional Director, Income Tax (Investigation), Varanasi. After the preliminary investigation, the proceedings under section 153-A were started for the assessment years 2006-07 to 2011-12 i.e. Block Period. Notices under sections 142(1) and 142(2) of the Act for the assessment year 2012-13 were also issued to the petitioner no.2. Being aggrieved, both the petitioners have filed the present writ petition.
4. With this background, Sri Pradeep Agarwal, learned counsel for the petitioners submits that after getting the Contract, the petitioner no. 2 - Sri Sanjai Agarwal was staying in the tourist bungalow at Gopiganj, Bhadohi. As he was authorized to collect the money from the Toll Plaza, he collected the money from the Toll Plaza for depositing the same in the HDFC Bank, which is the Principal Banker of the petitioner no.1. He was carrying the cash with 'carrying certificate' of the company. He submits that the cash collection was as under:
| Date | Shift Time (hrs) | Shift No. | Collection (Rs.) |
| 10.01.2012 | 00.00 to 08.00 | 1 | 1,92,610/- |
| 10.01.2012 | 08.00 to 16.00 | 2 | 1,22,750/- |
| 10.01.2012 | 16.00 to 24.00 | 3 | 3,21,264/- |
| 11.01.2012 | 00.00 to 08.00 | 1 | 1,68,815/- |
| Total | : Rs.8,03,439/- | ||
5. Out of the Cash Collection, amount, Rs.7,15,000/- was taken for the deposit. The remaining amount was in small denomination so, the same was left at the Toll Plaza.
6. Learned counsel further submits that since the Election in U.P. were notified on 24.12.2011, which were to be conducted in phase manner from 08.02.2012 to 03.03.2012. The money was seized as there was the standard operating procedure (SOP) and the direction of the Election Commission of India to Flying Squad and Surveillance Team.
7. Learned counsel further submits that on 15.01.2012, the Election Commission of India had clearly issued the clarification that if the cash is sent to the Bank for deposit, same shall not be seized and only a form will have to be filled up by the custodian of the currency. He also submits that Rule 112 -F of the I.T. Rules 1962, specifically provides that no notice shall be issued under section 153-A for a period of six years in such cases. This was further clarified by CBDT in Circular No.10 of 2012 dated 31.12.2012 and, therefore, the notice issued under section 153-A to petitioner no.2 for six assessment years, is highly illegal and against the legislative spirit of the Act. He submits that the amount has not been released till date inspite of the fact that on 13.03.2013, the petitioner no. 2 has given details of the amount to the assessing authority and requested to drop the proceedings initiated under section 153-A of the Act for the assessment year 2006-07 to assessment year 2011-12 in view of Rule 112-F of the Income Tax Rules, 1962 as well as Circular No.10 of 2012 dated 31.12.2012. For this purpose, he relied on the ratio laid down in the case of CIT v. Vindhya Metal Corpn. [1997] 224 ITR 614/91 Taxman 192, where the Hon'ble Apex Court while upholding the judgment of the Hon'ble High Court has observed that:
"Mere unexplained possession of the amount, without anything more, could hardly be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income, which would not have been disclosed by the person in possession for the purpose of the Act."
8. Further, in the case of Dimondstar Exports Ltd. v. DGIT (Investigation) [2005] 278 ITR 36/143 Taxman 16 (Bom.), it was observed that no proceedings under section 132 of the Act can be carried out merely on the basis of an information to the effect that a person is in possession of a certain cash, jewellery or ornaments. Lastly, he made a request that the seized amount may kindly be refunded along with 18% interest and the proceedings under section 153-A may be dropped.
9. On the other hand, Sri D. D. Chopra, learned counsel for the department, at the strength of the affidavit furnished by the opposite party no. 3 submits that the S.O. Rohaina Police Station, Varanasi, on 11.01.2012 intercepted a Innova Car by Static Surveillance Team. A cash amounting to Rs.7,15,000/- was found and seized from the possession of the petitioner no.2. The denominations of the cash seized were as under :
| Rs.1,000 Note | 115 Nos. | Rs.1,15,000/- |
| Rs.500 Note | 1100 Nos. | Rs.5,50,000/- |
| Rs.100 Note | 500 Nos. | Rs.50,000/- |
| Total : | Rs.7,15,000/- | |
10. He submits that the petitioner no. 2 in his statement dated 11.01.2012 has informed that Toll Fee is Rs.45/- per Car and Rs.160/- per Truck/Bus for one trip. The petitioner is working as a Collection Agent for Lal Nagar Toll Plaza situated in District Sant Ravi Das Nagar, Bhadohi. The total amount of Rs.8,13,439/- was collected during three shifts on 10.01.2012 plus one shift (ending on 08.00 am) on 11.01.2012. The explanation given by the petitioner no.2 was not found satisfactory. Lastly, he justified the proceedings initiated against the petitioner.
11. After hearing both the parties and on perusal of record, it appears that the cash was seized from the possession of the petitioner no.2 by the police who referred the matter to the Income Tax Department and after necessary approval, proceedings under section 132-A of the Act were initiated.
12. Submission of the petitioner's counsel is that the amount should be released along with interest @18% as no proceedings can be initiated as per Rule 112 (F) of the Income Tax Rules, 1962 as well as Circular No.10 of 2012 dated 31.12.2012.
13. Rule 112(F) came into existence by 4th amendment w.e.f. 01.07.2012. The Circular No.10 is dated 31.12.2012 but the cash was seized on 11.01.2012. So, the benefit of the said amended rules or circular cannot be given as the same are not applicable retrospectively.
14. In the instant case, it appears that the amount was collected at the Toll Plaza, where the fee for the Car was Rs.45/- and for the Truck/Bus, Rs.160/- per trip. From the statement furnished by the petitioner pertaining to the previous collection, it appears that the Collection was made as under:
| Date | Denomination | Quantity | Amount |
| 05/01/12 | Rs.1000 | 45 | Rs.45,000/- |
| Rs.500 | 865 | Rs.4,32,500/- | |
| Rs.100 | 428 | Rs.42,800/- | |
| Rs.10 | 3 | Rs.30/- | |
| Total : Rs.5,20,330/- | |||
| 07/01/12 | Rs.1000 | --- | --- |
| Rs.500 | 1000 | Rs.5,00,000/- | |
| Rs.100 | 799 | Rs.79,900/- | |
| Rs.50 | 1 | Rs.50/- | |
| Rs.10 | 1 | Rs.10/- | |
| Total Rs. 5,79,960/- | |||
| 09/01/12 | Rs.1000 | 76 | Rs.76,000/- |
| Rs.500 | 1970 | Rs.9,85,000/- | |
| Rs.100 | 1300 | Rs.1,30,000/- | |
| Rs.50 | 101 | Rs.5,050/- | |
| Rs.10 | 4 | Rs.40/- | |
| Total Rs. 11,96,090/- | |||
15. It is also allegation of the Department that the note of highest denomination of Rs.1,000/- per day were 76 and on the date of seizure, the same were Rs.115/-. The explanation of the petitioner is that note of smaller denomination were held at the toll plaza since there is a shortage of small denomination. Further, it appears that it is the first week of the petitioner and in the absence of experience, small denomination currency was held up at the toll plaza.
16. In the facts and circumstances of the case, the explanation given by the petitioner prima facie appears to be reasonable. The amount belongs to the company i.e. the petitioner no. 1 and certainly not to the petitioner no. 2, who is merely an employee of the company. The explanation, if any, will have to be sought from the petitioner-company. So, there is no occasion to start the proceedings u/s 153 A of the Act against the petitioner No. 2, who is simply an agent of the company.
17. In the light of above discussion, we are of the view that the proceedings for the block period is not required in the case of the employee i.e. petitioner no.2 specially when no such proceedings were initiated against the petitioner no. 1.
18. Hence, we set aside the proceedings of the block assessment pertaining to the petitioner no. 2 and accordingly mandamus is issued for not proceeding any further against the petitioner no.2 pertaining to the block assessment in pursuance of the notice under section 153-A. However, the proceedings for the current assessment year will continue. Further, the opposite parties are directed to release the seized amount within a period of four weeks as per law, which shall be subject to the outcome of the proceedings for the current assessment year. The department is always at liberty to take proceedings against the company i.e. petitioner no.1 but as per law.
19. With the above observations and directions, the writ petition is disposed of finally.
MINELIRegards
Prarthana Jalan
__._,_.___
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