Applicability of explanation 2 to section 132B of the it act 1961
Circular No. 20/2017 was issued by the Central Board of Direct Taxes on 12 June 2017. Its subject is Applicability of explanation 2 to section 132B of the it act 1961.
Settles the department's position that Explanation 2 to section 132B, inserted by the Finance Act, 2013 with effect from 1 June 2013, is prospective. That Explanation says "existing liability" against which seized or requisitioned assets may be adjusted does not include advance tax payable under Part C of Chapter XVII. Because it is prospective, it does not govern cases before 1 June 2013. The Board directs that appeals not be filed on this issue for pre-1 June 2013 cases and that those already filed be withdrawn or not pressed.
Courts had held that seized money must be adjusted against advance tax on the assessee's application; after the Explanation was inserted the dispute shifted to whether it was clarificatory and retrospective. Several courts held it prospective, the department's special leave petitions against the Punjab and Haryana High Court in Cosmos Builders and Promoters Ltd. and the Allahabad High Court in Sunil Chandra Gupta were dismissed, and the Board accepted the Punjab and Haryana High Court's judgment in Spaze Towers Pvt. Ltd. dated 17 November 2016.
F. No. 279/Misc./140/2015/ITJ
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Circular No.20/2017
New Delhi, Dated 12th June, 2017
Subject: Applicability of Explanation 2 to Section 132B of the I. T. Act,
1961- reg. -
Section 132B of the Income Tax Act 1961, provides for adjustment of
seized assets/requisitioned assets against the amount of any existing liability
under the Income Tax Act, 1961, (the Act), the Wealth-tax Act, 1957, the
Expenditure-tax Act, 1987, the Gift-tax Act, 1958 and the Interest-tax Act,
1974, and the amount of the liability determined on completion of the
assessment under section 153A of the Act and the assessment of the year
relevant to the previous year in which search is initiated or requisition is made,
or the amount of liability determined on completion of the assessment under
Chapter XIV -B for the block period, as the case may be (including any penalty
levied or interest payable in connection with such assessment) and in respect
of which such person is in default or is deemed to be in default, or the amount
of liability arising on an application made before the Settlement Commission
under sub-section (1) of section 245C of the Act.
2. Dispute arose between the Department and the assessees with regard to
adjustment of such seized/requisitioned cash against advance tax liability etc.
Several Courts held that on an application made by the assessee, the seized
money is to be adjusted against the advance tax liability of the assessee.
Subsequently, Explanation 2 to Section 132B of the Act was inserted by the
Finance Act, 2013 w.e.f. 01-06-2013, clarifying that "existing liability" does not
include advance tax payable in accordance with the provisions of Part C of
Chapter XVII of the Act. However, the dispute continued on the issue as to
whether the amendment was clarificatory in nature having retrospective
applicability or it has only prospective applicability.
3. Several Courts have held that the insertion of Explanation 2 to section
1328 of the Act, is prospective in nature and not applicable to cases prior to
01.06.2013.The SLPs filed by the Department against the judgement of the
Hon'ble Punjab and Haryana High Court in the case of Cosmos Builders and
Promoters Ltd. 1 and the Hon'ble Allahabad High Court in the case of Sunil
Chandra Gupta2 , have been dismissed. Subsequently, the CBDT has also
accepted the judgment of the Hon'ble Punjab & Haryana High Court in the case
of Spaze Towers Pvt. Ltd. 3 dated 17.11.2016, wherein it was held that the
Explanation 2 to Section 132B of the Act is prospective in nature.
4. Accordingly, it has now been settled that insertion of Explanation 2 to
Section 132B of the Act shall have a prospective application and so, appeals
may not be filed by the Department on this issue for the cases prior to
01.06.2013 and those already filed may be withdrawn/ not pressed upon.
5. The above may be brought to the notice of all concerned.
6. Hindi version follows.
(Neeti &'\ \1
Deputy Secretary to Government of India
Copy to:
1. The Chairperson, Members and officers of the CBDT of the rank of Under
Secretary and above.
2 . OSD to Revenue Secretary.
3. All Pro Chief Commissioners of Income-Tax & All Directors General of
Income-Tax with a request to bring to the attention of all officers.
4 . The Comptroller and Auditor General of India.
5. The Pro Director General of Income-Tax, NADT, Nagpur.
6. The Pro DGIT (Systems), ARA Centre, Jhandewalan Extension, New Delhi.
7. The Pro DGIT (Vigilance), New Delhi.
8. The ADG (PR. PP & OL) for circulation as per usual mailing list.
9. ADG-4 (Systems) for uploading on lTD website.
10. Database Cell for uploading on irsofficersonline.
11. njrs_support@nsdl.co.in for uploading on NJRS.
12. Hindi section for Hindi translation
13. Guard File
1 NJRS 2015-LL-0714-2, Order dated 14.07.2015 in ITA No. 425 of 2014 (P&H)
2 NJRS 2015-LL-0311-25, Order dated 11.03.2015 in ITA No. 182 of 2014 (Alld.)
3 NJRS 2016-LL-1117-5, ITA No. 40 of 2015
In a search assessment for a year before 1 June 2013, where interest under sections 234B and 234C has been charged despite an application to appropriate seized cash towards advance tax, and in a departmental appeal on that very question.
It mentions. Circular No. 20/2017
Source: the Income Tax Department’s own published text — its page for this instrument.