2013 (4) TMI 310 - AT - Income Tax

Adjustment of tax on the date of seizure ignoring the interest to be allowed to the assessees u/s.234A, 234B and 234C - For the AY 2009-10, the assessee was required to file the return under the Income-tax provisions when it was prayed that the income returned by the assessee includes the income so considered by the assessing authorities having already suffered tax - - Held that - When the AO soumoto could adjust the liability existing on the basis of self assessment tax which self assessment tax partakes the tax liability the AO was stopped short of charging of interest u/ss.234A, 234B and 234C when the assessee as of now has pointed out for the period of the liability for advance tax was not for a completed month therefore cannot be charged to the extent that a delay of 8 days may be considered as part of the period when the interest u/s.234C may be charged. See CIT v. Kesr Kimam Karyalaya (2005 (5) TMI 58 - DELHI HIGH COURT) wherein held that when a search is carried out on a business group as a whole to request made by partners were binding on the group when the request for adjustment was not to be doubted by the assessing authorities for adjusting the liability of tax , if any, on the partners against the cash seized. Also Satpaul D.Agarwal (HUF) v. ACIT 1997 (11) TMI 487 - ITAT MUMBAI wherein held that the amount so adjusted should be treated as advancer tax for the purpose of computation of interest u/ss.234A, 234B and 234C insofar as the claim for non-levy of interest there under is an appealable issue. Also see Vishwanath Khanna v. Union of India (2011 (6) TMI 146 - DELHI HIGH COURT seizure of cash which the assessee was entitled to interest on the amount which became refundable after giving effect on the basis of the order of the AO insofar as the assessee would be entitled to interest u/s.244A from the date of the amount held by the Revenue in their account of seizure. Thus set aside the orders of the CIT(A) and direct the AO to grant interest u/s.234A, 234B and 234C on the demand so raised against the amount adjusted by him from the date of seizure as prayed for by the assessee - in favour of assessee.

Summary

Issues:
Adjustment of tax on the date of seizure when the returned income has been accepted by the authorities, interest to be allowed u/ss.234A, 234B, and 234C, treatment of seized cash as tax paid, charging of interest by assessing officer, appeal against charging of interest, applicability of judicial pronouncements.

Issue 1: Adjustment of Tax on the Date of Seizure
The appeals raised a common issue regarding the adjustment of tax on the date of seizure when the returned income had been accepted by the authorities. The assessing officer did not give credit to the amount of tax paid by the appellant, seized during the search operation, resulting in the charging of interest u/s.234B and 234C. The appellants requested the seized amount to be treated as tax paid, but the assessing officer ignored this request and demanded an amount including interest. The seized cash was disclosed as income, and the appellant claimed it as payment of self-assessment tax, yet the assessing officer did not credit this amount, leading to the dispute.

Issue 2: Charging of Interest and Appeal Against It
The assessing officer charged interest u/s.234B for non-payment of advance tax, despite the appellant's cooperation throughout the process. The appellant filed an appeal against this assessment, but the CIT(A) confirmed the order, stating that the levy of interest is mandatory and the assessing officer has no discretion to waive it off. The appellant argued that the interest charged was appealable, citing various judicial pronouncements where interest was adjusted against advance tax liability. The appellant contended that the cash seized should have been treated as advance tax, and interest should have been calculated accordingly.

Issue 3: Applicability of Judicial Pronouncements
The appellant relied on several judicial pronouncements to support their case, emphasizing the adjustment of seized cash against advance tax liability. Cases such as Shri Ram Sarda vs. Deputy Commissioner of Income Tax and Satya Prakash Sharma vs. ACIT highlighted the importance of adjusting seized cash against advance tax and recomputing interest accordingly. Other cases like CIT vs. Ashok Kumar and Sudhakar M. Shetty vs. ACIT emphasized the adjustment of seized cash towards pending demands and tax liabilities. The appellant argued that the assessing officer should have followed these precedents in their case.

Judgment
After considering the arguments and precedents cited, the Tribunal found in favor of the appellants. The Tribunal noted that the assessing officer failed to adjust the seized cash against the tax liability despite the appellant's request. The Tribunal emphasized that interest u/ss.234A, 234B, and 234C should be mandatorily charged but calculated based on the period when the funds were held by the government. The Tribunal set aside the orders of the CIT(A) and directed the assessing officer to grant interest on the demand raised against the amount adjusted from the date of seizure, as requested by the appellants. Consequently, the appeals of the respective assessees were allowed.

This detailed analysis of the judgment highlights the issues of adjustment of tax on the date of seizure, charging of interest, and the applicability of judicial pronouncements in resolving the dispute between the appellants and the assessing officer.