2015 (11) TMI 62 - AT - Income Tax

Adjustment of seized cash against self assessment tax liability - determination of tax liability - Held that - This issue has reached the corridors of various courts as to the legality of the adjustment of seized cash and that itself makes the issue highly debatable and hence in any case cannot be the subject matter of rectification u/s 154 of the Act. It is well settled that an issue which is highly debatable cannot be rectified u/s 154 of the Act. The action of the Learned AO in adjusting the seized cash towards the tax liability determined on completion of search assessment is in order. With regard to charging of interest u/s 234B and 234 C of the Act for non-payment and short payment of advance tax is concerned, we have already held that the amendment in section 132B of the Act is held to be prospective in operation from 1.6.2013 and accordingly not applicable for Asst Year 2006-07. Hence we hold that no interest u/s 234B and 234 C of the Act shall be charged by the Learned AO from the date of seizure of cash to the date of completion of assessment in respect of seized cash of ₹ 20,00,000/-.

Issues Involved:
1. Justification of adjustment of seized cash against self-assessment tax liability.
2. Legality of revoking the credit for seized cash under section 154.
3. Applicability of interest under sections 234B and 234C for non-payment and short payment of advance tax.

Issue-wise Detailed Analysis:

1. Justification of Adjustment of Seized Cash Against Self-Assessment Tax Liability:
The primary issue is whether the Learned CIT(A) was justified in allowing the adjustment of seized cash against self-assessment tax liability, despite the Income Tax Act not explicitly providing for such adjustment before the determination of tax liability. The facts reveal that during a search operation on the Thacker Group, cash amounting to Rs. 20,00,000 was seized from the assessee. The assessee requested the adjustment of this seized cash towards his self-assessment tax liability while filing the return in response to a notice issued under section 153A. The Learned AO initially adjusted the seized cash but later revoked this adjustment under section 154, leading to the appeal.

2. Legality of Revoking the Credit for Seized Cash Under Section 154:
The tribunal found that the action of the Learned AO in initially adjusting the seized cash towards the tax liability determined under section 153A was in accordance with section 132B of the Act. Section 132B allows the application of seized assets towards existing liabilities, which includes self-assessment tax payable. The tribunal noted that the amendment to section 132B, which precludes the adjustment of seized cash towards advance tax liability, was introduced by the Finance Act 2013 and is effective from 1.6.2013. Therefore, this amendment is prospective and does not apply to the assessment year 2006-07. Consequently, the tribunal held that the revocation of the credit for seized cash under section 154 by the AO was illegal, as the issue is highly debatable and cannot be rectified under section 154.

3. Applicability of Interest Under Sections 234B and 234C:
The tribunal addressed the issue of charging interest under sections 234B and 234C for non-payment and short payment of advance tax. It concluded that since the amendment to section 132B is prospective from 1.6.2013, it does not apply to the assessment year 2006-07. Therefore, no interest under sections 234B and 234C should be charged from the date of seizure of cash to the date of completion of the assessment in respect of the seized cash of Rs. 20,00,000.

Conclusion:
The tribunal dismissed the appeal of the revenue, upholding the adjustment of seized cash against self-assessment tax liability and ruling that the revocation of this adjustment under section 154 was illegal. It also concluded that no interest under sections 234B and 234C should be charged for the period from the date of seizure to the date of assessment completion. The judgment emphasizes that the amendment to section 132B is prospective and does not affect the assessment year in question.

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