2010 (9) TMI 771 - HC - Income Tax

Advance Tax - Interest - In CIT v. Arun Kapoor (2010 -TMI - 204622 - Punjab and Haryana High Court) this court had occasion to consider a similar issue where it has been held that the assessee is entitled to adjustment of seized amount towards advance tax liability from the date of making the application in that regard - The assessee had made request for adjustment of the advance tax liability of Rs. 3, 14, 312 against the seized amount of Rs. 5, 90, 000 on August 28 1989 - Since the first installment of advance tax was payable on September 15 1989 and the request for adjustment having been made on August 28 1989 and reminder on September 12 1989 no interest was exigible u/s 234A and 234B of the Act - The Tribunal has rightly held that the assessee was entitled to adjustment of the said amount and no interest could be charged on that basis - Therefore no fault could be found with the approach adopted by the Tribunal.

Summary

Issues:
Whether the amount seized during a search under section 132 can be adjusted towards advance tax liability for the year of the search.

Analysis:
The case involved a search conducted at the business premises of the assessee, resulting in the seizure of cash. The assessee requested adjustment of the seized amount towards advance tax liability for the relevant assessment year. The appeal raised the question of whether such adjustment was permissible. The assessee argued that the adjustment should be allowed to avoid interest charges under sections 234A and 234B of the Act.

The High Court considered the precedent set in CIT v. Arun Kapoor, where a similar issue was addressed. In that case, it was held that the assessee could adjust the seized amount towards advance tax liability from the date of the application. Applying this principle to the current case, the Court found that since the assessee had made a timely request for adjustment before the first installment of advance tax was due, no interest should be charged under sections 234A and 234B. The Tribunal's decision to allow the adjustment and waive the interest charges was deemed appropriate by the Court.

In conclusion, the High Court ruled in favor of the assessee, holding that the seized amount could be adjusted towards the advance tax liability, thereby negating the need for interest charges under sections 234A and 234B. The appeal was dismissed, affirming the Tribunal's decision in favor of the assessee.