2016 (5) TMI 1363 - AT - Income Tax

Interest levied u/s 234B and 234C - whether seized asset shall be adjusted against any existing liability ? - Held that - We note that the assessee has made a specific request to adjust the cash seized towards advance tax liability prior to the due date of payment of advance tax liability. Therefore, we are of the opinion that the Revenue was under obligation to accede to the request and appropriate the cash seized against the advance tax liability. The cash seized and available at the disposal of the revenue was sufficient to cover the advance tax liability for the assessment year under consideration, therefore, no interest under section 234B & 234C could be charged. We also find that the issue is no longer res-integra. We find that the identical issue has been decided in the favour of the assessee in the case of Kesr Kimam Karyalaya (2005 (5) TMI 58 - DELHI High Court). Respectfully following the judicial precedents on the issue noted above, we find no infirmity in the order of CIT(A). - Decided against revenue.

Summary

Issues Involved:
1. Deletion of interest levied under sections 234B and 234C of the Income-tax Act.
2. Adjustment of seized assets against advance tax liability.

Issue-wise Detailed Analysis:

1. Deletion of Interest Levied Under Sections 234B and 234C:
The Revenue challenged the CIT(A)'s decision to delete the interest levied under sections 234B and 234C of the Income-tax Act. The CIT(A) relied on several judicial precedents, including the Delhi High Court's decision in CIT vs. Kesr Kimam Karyalaya and the Mumbai ITAT's decision in Sudhakar M. Shetty vs. ACIT, to conclude that interest under sections 234B and 234C cannot be levied for the alleged default in payment of advance tax. The CIT(A) noted that the assessee had requested the adjustment of the seized cash against the advance tax liability, but the Assessing Officer did not adjust it until the completion of the assessment. Consequently, the CIT(A) directed the Assessing Officer to give due credit for the seized cash while calculating the interest under sections 234B and 234C.

2. Adjustment of Seized Assets Against Advance Tax Liability:
The assessee had requested the adjustment of the seized cash of ?76,00,000 against the advance tax liability for the assessment year 2004-05. The CIT(A) observed that the seized cash was available for adjustment and that the assessee had made a specific request for its adjustment before the due date of payment of advance tax. The CIT(A) cited multiple decisions, including those from the Pune ITAT, Rajkot ITAT, and Delhi High Court, which supported the view that seized cash should be treated as advance tax for the purpose of computing interest under sections 234A, 234B, and 234C. The CIT(A) emphasized that the Revenue was obligated to adjust the seized cash against the tax liability, and failure to do so would render the interest levied under sections 234B and 234C inapplicable.

Conclusion:
The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal. The Tribunal agreed that the Revenue should have adjusted the seized cash against the advance tax liability as requested by the assessee. Consequently, no interest under sections 234B and 234C could be charged. The Tribunal found no infirmity in the CIT(A)'s order and noted that the issue was already settled by judicial precedents, including the Delhi High Court's decision in Kesr Kimam Karyalaya and the ITAT's decision in Shri Lodha Vijay Shantilal. The appeal of the Revenue was dismissed, and the order was pronounced on May 25, 2016.