2018 (6) TMI 64 - AT - Income Tax

Interest for default in payment of advance tax leviable u/s 234B - adjustment of the cash seized against the liability of advance tax request ignored - Held that - Department seized the cash to the tune of ₹ 1,83,45,000/- and deposited in the in the P.D. Account of the company. The assessee made a request in writing dated 10.04.2012 for the adjustment of the cash seized against the liability of advance tax but the Department neither replied nor adjust the said amount of ₹ 8,45,000/-. The amount of ₹ 8,45,000/-, no doubt, it was available with the Department, and the same could have adjusted against the advance tax, therefore, the interest for default in payment of advance tax is not leviable u/s 234B for the reason that assessee had already made a request for adjustment of the amount against the advance tax which was already in the custody of the Department. Similarly, interest under section 234C is not attracted as there was no deferment. The assessee is entitled to adjustment of the seized cash against advance tax liability, therefore, no interest should be charged u/s 234A, 234B, and 234C of the Act, especially when the Department has assessee s money in the P.D. account. - Decided against revenue

Summary

Issues:
Adjustment of seized cash against tax liability - Date of application - Advance tax - Section 132B of the Income Tax Act - Rectification proceedings under section 154 - Assessment Year 2012-13.

Analysis:
The appeal concerns the adjustment of seized cash against tax liability for Assessment Year 2012-13. The Revenue challenges the CIT(A)'s decision to adjust the cash seized during a search operation against the tax liability from the 'date of application' on 10.04.2012. The Revenue argues that the Income Tax Act does not allow for such adjustment before determining the tax liability and cannot be adjusted against advance tax as per explanation 2 to section 132B. The Assessing Officer initially provided credit for a portion of the seized cash but omitted to credit the balance amount. The assessee requested the seized cash to be treated as advance tax, but the assessing officer did not adjust the full amount in the assessment order dated 31/03/2014.

During rectification proceedings, the assessing officer partially adjusted the seized cash and denied the balance amount. The CIT(A) allowed the balance tax credit, leading to the Revenue's further appeal. The Revenue argues that the adjustment should not be made from the 'date of application' as requested by the assessee. However, the assessee contends that the adjustment is permissible under Section 132B and had made a formal request for the adjustment on 10.04.2012.

The Tribunal notes that the seized cash was available for adjusting the advance tax liability, and the assessing officer had already adjusted a portion of the seized amount. The Tribunal finds that the balance amount should have been adjusted as well, as both amounts have the same nature. The Tribunal refers to a judgment from the Allahabad High Court supporting the adjustment of seized cash against advance tax liability to justify its decision.

In conclusion, the Tribunal dismisses the Revenue's appeal, upholding the CIT(A)'s decision to allow the balance tax credit. The Tribunal emphasizes that the assessee is entitled to the adjustment of seized cash against the advance tax liability, and no interest should be charged under sections 234A, 234B, and 234C, given that the Department had the seized cash in its custody.

This detailed analysis highlights the key legal arguments, procedural steps, and judicial precedents considered in the judgment, providing a comprehensive overview of the case and its implications.