2017 (7) TMI 573 - AT - Income Tax

Rectification application - not giving benefit of seized cash for the tax dues and on account of charging of interest under section 234B and 234C - Held that - It is not in dispute that the search was conducted on the assessee on 30.6.2010 and cash amounting to ₹ 1 crore was seized on that date. It is also not disputed that the assessee had made a request, vide letter dated 23.8.2010 and reminder dated 4.7.2011, for adjustment out of the seized amount towards advance tax liability in respect of assessment year under consideration. We find that the issue of adjustment of seized amount towards advance tax liability has been settled by the Jurisdictional High Court in the case of the assessee in the case of CIT Vs. Ashok Kumar 2010 (9) TMI 771 - Punjab and Haryana High Court and CIT Vs. Arun Kapoor (2010 (7) TMI 610 - Punjab and Haryana High Court) wherein it has been held that the assessee is entitled to adjustment of seized amount towards advance liability from the date of making the application in that regard. Explanation-2 to section 132B of the Act is prospective in nature applicable w.e.f. 1.6.2013 and is not applicable in the present case, since search was conducted on 30.6.2010. What emerges from the above is that as per the above decisions of the Jurisdictional High Courts, the cash seized is to be adjusted against the advance tax liability of the assessee from the date of making of application. In view of the decisions of the Jurisdictional High Court as above, this is the settled position of law on the issue at hand. Thus, we find that by not adjusting the same in the present case, an apparent error has occurred in the intimation of the assessee under section 143(1) of the Act which ought to be rectified. In view of the above, we direct that the seized cash be adjusted against the advance tax liability of the assessee from the date of making application to this effect, and necessary adjustment be made as a consequence to the interest to be paid under section 234B and 234C of the Act. - Decided in favour of assessee.

Issues Involved:
1. Adjustment of seized cash against advance tax liability.
2. Applicability of Explanation-2 to section 132B.
3. Charging of interest under sections 234B and 234C.
4. Rectification of apparent error under section 154.

Issue-wise Detailed Analysis:

1. Adjustment of Seized Cash Against Advance Tax Liability:
The primary issue is whether the seized cash can be adjusted against the advance tax liability of the assessee. The assessee argued that the adjustment should be allowed based on precedents set by the Jurisdictional High Court in the cases of CIT vs. Ashok Kumar and CIT vs. Arun Kapoor. These cases established that the assessee is entitled to adjustment of seized cash towards advance tax liability from the date of making the application. The Tribunal found that the assessee had made such a request on 23.8.2010, well before the first installment of advance tax was due on 15.9.2010. Therefore, it was concluded that no interest under sections 234B and 234C should be charged due to the non-adjustment of the seized cash.

2. Applicability of Explanation-2 to Section 132B:
The second issue pertains to whether Explanation-2 to section 132B, which states that advance tax liability is not considered an existing liability for the purpose of adjusting seized assets, is applicable in this case. The Tribunal noted that this explanation was added to the statute with effect from 1.6.2013 and has been held to be prospective by the Jurisdictional High Court in the cases of CIT vs. Sandeep Jain and CIT vs. M/s Cosmos Builders & Promoters Ltd. Since the search and seizure in this case occurred on 30.6.2010, the Tribunal ruled that Explanation-2 does not apply retrospectively and thus cannot be used to deny the adjustment of seized cash against advance tax liability.

3. Charging of Interest Under Sections 234B and 234C:
Given the Tribunal's decision that the seized cash should be adjusted against the advance tax liability from the date of the application, it follows that no interest should be charged under sections 234B and 234C. This is because the adjustment should have been made when the request was initially submitted, thereby negating any grounds for interest due to delayed tax payment.

4. Rectification of Apparent Error Under Section 154:
The assessee filed a rectification application under section 154, claiming that the failure to adjust the seized cash was an apparent error. The Assessing Officer and CIT (Appeals) initially rejected this application, considering the issue debatable due to conflicting decisions and the introduction of Explanation-2 to section 132B. However, the Tribunal concluded that the non-adjustment was indeed an apparent error based on the settled law by the Jurisdictional High Court. Therefore, the Tribunal directed that the seized cash be adjusted against the advance tax liability from the date of the application, and any resulting interest adjustments under sections 234B and 234C be made accordingly.

Conclusion:
The Tribunal allowed the appeal, directing that the seized cash be adjusted against the advance tax liability from the date of the application, and necessary adjustments be made for interest under sections 234B and 234C. This decision was based on the settled law by the Jurisdictional High Court, which clarified that the issue was not debatable and that Explanation-2 to section 132B was not applicable retrospectively.

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