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2011 (12) TMI 146 - AT - Income TaxMaintainability of appeal against levy of interest u/s 234A, 234B, 234C adjustment of cash seized against advance tax liability date from which adjustment would be effective adjustment of cash seized from third party against the liability of the assessee - Held that - Charging of interest under section 234A, 234B, and 234C is very much part and parcel of assessment proceedings and is an order against the assessee to which the assessee denies his liability to be assessed. Therefore, appeal against charging of interest under those sections is maintainable as in the case of an assessment order. The liability to pay the advance-tax constitutes a part of existing liability as per section 132B(1)(i). As per section 132B, the seized assets to be applied to the discharge of existing liabilities. Thus, the cash seized during the course of search is required to be adjusted against taxes due including advance-tax for the purpose of computation of interest u/s 234A, 234B and 234C. The adjustment towards the advance-tax would be from the date when it was seized. Further, cash seized from third party was found to be the cash of the assessee and this fact is not disputed therby, it is adjustable against the demand created on the assessee. Decided in favor of assessee.
Issues Involved:
1. Maintainability of appeal against levy of interest under sections 234A, 234B, and 234C. 2. Adjustment of cash seized as advance tax from the date of seizure. 3. Adjustment of cash seized from a third party as advance tax payment for the assessee. Issue-wise Detailed Analysis: 1. Maintainability of Appeal Against Levy of Interest Under Sections 234A, 234B, and 234C: The core issue was whether an appeal could be maintained against the levy of interest under sections 234A, 234B, and 234C. The Tribunal referenced the Supreme Court judgment in the case of Central Provinces Manganese Ore Co. Ltd. v. CIT, which established that the levy of interest is part of the assessment process and can be appealed if the assessee disputes the liability. The Tribunal noted that interest levied under sections 139 and 215 of the Income-tax Act is compensatory and not penal, and thus, disputing such interest is a valid ground for appeal. The Tribunal concluded that charging interest under sections 234A, 234B, and 234C is inherently part of the assessment proceedings, making the appeal maintainable. 2. Adjustment of Cash Seized as Advance Tax from the Date of Seizure: The Tribunal examined whether the cash seized during a search could be adjusted against advance tax liabilities. Section 132B of the Income-tax Act, which deals with the application of seized assets, was scrutinized. The Tribunal emphasized that the seized cash should be adjusted against the existing tax liabilities, including advance tax, from the date of seizure. This view was supported by various judicial precedents, including decisions from the ITAT and the Punjab & Haryana High Court. The Tribunal directed the assessing officer to adjust the seized cash against the advance-tax liability from the date of seizure, aligning with the consistent judicial approach. 3. Adjustment of Cash Seized from a Third Party as Advance Tax Payment: The Tribunal addressed whether cash seized from a third party, which was later identified as belonging to the assessee, could be adjusted against the assessee's tax liabilities. It was noted that the cash seized from third parties was ultimately found to be the assessee's cash, a fact not disputed by the revenue. The Tribunal held that the character of the cash remains the same, whether seized from the assessee or a third party. Consequently, the cash seized from third parties should be treated as if it was seized directly from the assessee and adjusted against the assessee's tax liabilities. The Tribunal directed the assessing officer to calculate interest under sections 234A, 234B, and 234C accordingly. Conclusion: In conclusion, the Tribunal allowed the appeal, holding that: - The appeal against the levy of interest under sections 234A, 234B, and 234C is maintainable. - The cash seized during the search should be adjusted against the advance-tax liability from the date of seizure. - Cash seized from third parties, identified as belonging to the assessee, should be adjusted against the assessee's tax liabilities.
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