2008 (3) TMI 692 - AT - Income Tax

Adjustment of cash seized at the time of search against the advance tax liability - completion of assessment u/s 153A - Interest charged u/s 234B and 234C - HELD THAT - After going through the old provisions of law and the new provisions of law of s. 132B and cl. (d) of s. 158BC it is amply clear that whatever the amount has been seized by the Department that has to be treated against any pending demand including penalty and against the demand of the block period of which the assessment has to be completed. As per the old provisions of law the AO has to wait (sic) the order under s. 132(5) and then the order under s. 158BC. However taking into the difficulties of the assessee in mind the legislature has amended the provisions of s. 132B as well as cl. (d) of s. 158BC. Even as per the amended provisions of law there is no requirement to seek any request from the assessee for adjustment. However in the present case the assessee has requested to adjust the remaining cash seized during the search against the tax liability of the assessee. Therefore in our considered view the Department has to adjust the amount seized at the time of search towards the advance tax etc. from the date when the amount was seized. It is incorrect on the part of the AO who has taken into consideration the adjustment from the date of assessment. It is a matter of commonsense that once the amount is lying with the Department that has to be adjusted; otherwise that amount where will be adjusted and in which account the Department will keep the amount. The seizure of the amount is for the obvious reason that the same has to be adjusted against any demand raised against the assessee or against any demand which is pending before the date of search. Therefore we direct the AO to adjust the remaining cash seized by the Department from the date of seizure because if any amount is to be adjusted against any liability the date of payment of that liability shall be the date of seizure and not the date of adjustment and/or the date of order. The AO is therefore directed to modify his order accordingly. Rate of interest under ss. 234A and 234B has to be applied - The rate of tax (sic-interest) is mentioned under the respective sections. It is also clearly mentioned that what rate is to be charged from which date and upto which date and what rate has to be charged from the date of amendment. Therefore the AO is directed to ascertain the factual date that upto which date the current rate of interest is to be charged. The AO will also allow opportunity to the assessee for applicability of current rate of interest. We order accordingly. In the result the appeals filed by the assessee are allowed in part.

Issues Involved:
1. Legality of the order passed under section 153A.
2. Charging of interest under section 234C.
3. Adjustment of seized cash towards self-assessment tax and charging of interest under sections 234A and 234B.
4. Rate of interest applicable under sections 234A and 234B.

Detailed Analysis:

1. Legality of the Order Passed under Section 153A:
The first ground raised by the assessee, challenging the legality of the order passed under section 153A, was not pressed by the learned counsel of the assessee. Consequently, this ground was dismissed as not pressed.

2. Charging of Interest under Section 234C:
Similarly, the ground regarding the charging of interest under section 234C was also not pressed by the learned counsel of the assessee for both assessment years. Accordingly, this ground was dismissed.

3. Adjustment of Seized Cash Towards Self-Assessment Tax and Charging of Interest under Sections 234A and 234B:
The primary issue revolved around the adjustment of Rs. 40 lakhs (remaining from the seized amount of Rs. 62 lakhs) towards the payment of tax and the charging of interest under sections 234A and 234B.

Facts:
- A search and seizure action was conducted on 23rd Jan 2004 on the Deepa Restaurant & Bar Group.
- The assessee, a director of the company, had Rs. 62 lakhs seized during the search.
- The assessee requested to treat Rs. 22 lakhs as advance tax for AY 2004-05, which was accepted. The balance Rs. 40 lakhs was sought to be adjusted against demands for various years in the block period.
- The AO and CIT(A) rejected the assessee's request to treat the seized cash as self-assessment tax, citing section 132B, which mandates that seized assets be applied towards liabilities determined upon completion of the block assessment.

Tribunal's Findings:
- The Tribunal examined both the old and amended provisions of section 132B and clause (d) of section 158BC.
- Under the old provisions, the cash/assets seized were to be applied towards liabilities upon completion of regular or block assessment.
- The amended provisions allowed for immediate adjustment of seized cash against any existing or determined liabilities.
- The Tribunal referenced prior judgments, including the case of Asstt. CIT vs. Raghu Nandan Lal & Ors. and CIT vs. Kesr Kimam Karyalaya, which supported the adjustment of seized amounts towards tax liabilities from the date of seizure.
- The Tribunal concluded that the Department should adjust the seized cash from the date of seizure and not from the date of assessment. The rationale was that the seized amount should be used to offset any tax liabilities immediately, rather than being held until the assessment is completed.

4. Rate of Interest Applicable under Sections 234A and 234B:
- The assessee contended that the AO applied a higher rate of interest than prescribed.
- The Tribunal noted that the provisions of law clearly specify the applicable rates of interest and the periods for which they apply.
- The AO was directed to ascertain the correct rate of interest based on the factual dates and to allow the assessee an opportunity to present their case regarding the applicable rates.

Conclusion:
- The Tribunal directed the AO to adjust the remaining seized cash from the date of seizure towards the assessee's tax liabilities.
- The AO was also instructed to verify and apply the correct rate of interest under sections 234A and 234B based on the relevant dates.
- The appeals filed by the assessee were allowed in part, providing relief regarding the adjustment of seized cash and ensuring the correct application of interest rates.

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