2012 (2) TMI 133 - AT - Income Tax

Search - Unaccounted Cash to be settled against Advance Tax liability - Held That - Search conducted on 19.1.09 and advance tax liability was due on 15.03.09, before conduct of search assessee wrote a letter to the Additional Director to adjust the cash towards his liability and the liabilities of the associates. Assessee had no intention to shrink his liability thus CIT(A) has rightly allowed adjustment of cash against Advance tax.

Summary

Issues Involved:
1. Adjustment of seized cash towards advance-tax liability.
2. Recomputation of interest under sections 234B and 234C.

Issue 1: Adjustment of Seized Cash Towards Advance-Tax Liability
The case involved a situation where the assessee's cash of Rs. 90.00 lakh was seized during a search, and the advance-tax payment subsequently fell due. The assessee requested the adjustment of the seized cash towards his tax liability and that of his associates. Initially, the Assessing Officer (AO) did not provide credit for the seized cash, but in a rectification order, allowed the credit as if it had been paid later. The issue raised was whether the AO should have adjusted the seized cash against the advance-tax liability when the request was made. The decision of the Hon'ble Delhi High Court in a similar case highlighted that adjusting the seized cash before the tax liability became due was permissible. The Tribunal found the facts of the current case aligned with the precedent case, leading to the conclusion that the AO should have adjusted the cash against the advance-tax liability on the date of the request.

Issue 2: Recomputation of Interest Under Sections 234B and 234C
Following the adjustment of the seized cash towards the advance-tax liability, the question arose regarding the recalculation of interest under sections 234B and 234C. The revenue appealed the order directing the AO to recompute interest based on the adjustment of the seized cash. The argument presented was that the ld. CIT(A) erred in directing the AO to make such adjustments. However, the Tribunal considered the facts of the case and the legal precedent, emphasizing that the decision of the jurisdictional High Court served as a binding precedent. As the facts were similar to the precedent case, where interest was not charged due to the adjustment of seized cash against the advance-tax liability, the Tribunal upheld the decision of the ld. CIT(A) and dismissed the appeal.

In conclusion, the Tribunal dismissed the appeal, affirming the direction to adjust the seized cash against the advance-tax liability and the subsequent recalculation of interest under sections 234B and 234C in accordance with the legal precedent and the specific circumstances of the case.