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2012 (3) TMI 580 - AT - Income TaxAdjustment of seized cash against advance tax liability - Interest u/s.234B and 234C of advance tax - Held that - Assessing Officer was obliged to adjust the seized cash against advance tax liability and, therefore, if any interest chargeable to section 234B and 234C on account of this amount of advance tax is liable to be deleted. The Assessing Officer while recomputing the chargeability of section 234B and 234C will take into consideration the seized cash of ₹ 90,31,000/- towards advance tax prior to 15.03.2009. Therefore, the appeal of the revenue has no merits.
Issues Involved:
1. Whether the seized cash of Rs. 90,31,000 during the course of search and seizure can be treated as advance tax. 2. Whether the assessee should be given credit for the seized cash in calculating the tax and interest liability under sections 234B and 234C. Detailed Analysis: Issue 1: Treatment of Seized Cash as Advance Tax The primary issue in this appeal is whether the seized cash amounting to Rs. 90,31,000 can be treated as advance tax. The appellant, a partnership firm engaged in trading glass beads, had a survey and search operation conducted on 24.12.2008, during which the cash was seized and deposited into the Income Tax Department's account. The appellant admitted the seized amount as additional income and included it in its income tax return for the Assessment Year 2009-10. The appellant requested multiple times to treat the seized cash as advance tax, but the Assessing Officer did not allow any credit for the seized amount and charged interest under sections 234B and 234C. The learned Commissioner of Income Tax (Appeals) [CIT(A)] appreciated the appellant's contention and observed that the seized cash should be adjusted against the advance tax payment. The CIT(A) relied on several judicial precedents, including the cases of CIT vs. K K Marketing, Nikkamal Baburam vs. ACIT, ACIT vs. Kwality Bar & Restaurant, and Sudhakar Shetty vs. ACIT, which supported the appellant's position. The CIT(A) concluded that the interest charged under sections 234B and 234C should be deleted and allowed the grounds of appeal in favor of the appellant. Issue 2: Credit for Seized Cash in Calculating Tax and Interest Liability The learned Departmental Representative (DR) relied on the order of the Assessing Officer and the judgment of the Hon'ble Madhya Pradesh High Court in the case of Ramjilal Jagannath And Others vs. ACIT. However, the appellant reiterated the submissions made before the CIT(A) and further relied on the judgment of the Punjab and Haryana High Court in the case of CIT vs. Ashok Kumar. Upon careful consideration of the submissions and the relevant judgments, it was noted that the provisions for the application of seized assets are provided in section 132B of the Income Tax Act. The section allows for the adjustment of seized assets against existing liabilities, including advance tax. The appellant had requested the adjustment of the seized cash against the third installment of advance tax due on 15.03.2009. The Assessing Officer's failure to adjust the tax liability and the subsequent charging of interest under sections 234B and 234C were found to be incorrect. The Tribunal observed that the advance tax is an existing liability under the Income Tax Act, and the seized cash should have been adjusted against this liability. The judgment of the Hon'ble Madhya Pradesh High Court in Ramjilal Jagannath And Others vs. ACIT was found to be inapplicable as it dealt with the provisions of section 132B prior to the amendment effective from 01.06.2002. The Tribunal also referred to several other judgments, including Nikka Mal Babu Ram, Sudhakar M. Shetty, and CIT vs. KK Marketing, which supported the adjustment of seized cash against advance tax liability. In conclusion, the Tribunal held that the Assessing Officer was legally obliged to adjust the seized cash towards the advance tax liability, and the interest charged under sections 234B and 234C should be deleted. The appeal filed by the department was dismissed. Final Judgment: The appeal filed by the department is dismissed. The Assessing Officer is directed to adjust the seized cash of Rs. 90,31,000 against the advance tax liability and recompute the interest chargeable under sections 234B and 234C accordingly. The order was pronounced on the 2nd day of March, 2012.
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