2013 (7) TMI 108 - AT - Income Tax

Money seized during the search operation - whether be treated as advance tax from the date of its seizure - levy of interest u/s 234B - Held that - If the assessee has declared income during the year under consideration in that eventuality he is liable to pay advance tax as per law therefore the Assessing Officer is required to find out whether such liability was existing on the date of seizure. If such liability is existing then he is empowered to apply/adjust the money seized in discharge of the existing liability even without any written representation from the assessee. The issue whether the seized money should be applied towards advance tax liability of assessee and credit should be given credit there from the date of seizure of money has been decided in favour of the assessee by the decision Shri Ram S Sarda v. DCIT 2011 (12) TMI 146 - ITAT RAJKOT . - Decided against the revenue.

Summary

Issues:
1. Rectifiability of mistake u/s.154 of the Income-tax Act.
2. Treatment of seized money as advance tax liability.
3. Applicability of judgments on seized cash credit.

Issue 1: Rectifiability of mistake u/s.154:
The appeal concerned a case where a search operation under section 132(1) of the Income-tax Act was conducted, leading to the issuance of a notice u/s.153A to the assessee. The Assessing Officer observed a claimed amount of Rs.39 lakh, seized from the directors' premises, was mistakenly treated as self-assessment during assessment proceedings. The Commissioner of Income-tax (Appeals) held that this was not a rectifiable mistake u/s.154, leading to the Revenue's appeal challenging this decision.

Issue 2: Treatment of seized money as advance tax liability:
The core issue revolved around whether money seized during a search operation could be considered as advance tax liability from the date of seizure. The Tribunal analyzed the provisions under section 132B(1) of the Income-tax Act, emphasizing that if the assessee declared the seized money as income and filed returns accordingly, they were liable to pay advance tax. In this case, as the seized money was declared in the return filed post-seizure, the Tribunal concluded that the assessee was required to pay advance tax, and the Assessing Officer could adjust the seized money towards the existing liability without a written representation from the assessee.

Issue 3: Applicability of judgments on seized cash credit:
The Revenue relied on judgments from the Madhya Pradesh High Court and the ITAT Delhi Bench to support their argument that seized cash credit is not automatic and requires a representation from the assessee. However, the Tribunal differentiated the facts of those cases from the present one, emphasizing that the seized money, when declared as income, necessitated advance tax payment. The Tribunal cited decisions from the ITAT Rajkot Bench and the ITAT Mumbai Bench, which favored the assessee's position on applying seized money towards advance tax liability. Ultimately, the Tribunal dismissed the Revenue's appeal, upholding the order that allowed the seized money to be adjusted towards the advance tax liability.

In conclusion, the Tribunal's judgment clarified the treatment of seized money as advance tax liability, highlighting the importance of the assessee's declaration in filing returns and the Assessing Officer's authority to adjust the seized amount towards existing liabilities without the need for a formal representation.