2020 (6) TMI 377 - HC - Income Tax

Interest u/s 234B and 234C - appellant has offered the cash seized as advance tax against the liability in block assessment - Date of filing the return of income for the purpose of computation of interest under Section 234B and 234C - HELD THAT - Asessee has offered a sum of 50 Lakhs on 15.03.2007 towards the advance tax payable for the Assessment year 2007-08. It is also pertinent to mention here that prior to seizure of the cash the assessee had paid advance tax in four installments on 15.06.2006 14.09.2006 14.12.2006 and 08.03.2007 which is evident from statement of total income. Department did not adjust the aforesaid amount even though the cash was available with the department. The aforesaid amount could have been adjusted against the advance tax. We concur with the view taken by High Court of Allahabad which has been upheld by the Supreme Court. It is also pertinent to note that Explanation 2 to Section 132B has been held to be prospective in nature and the aforesaid position has been settled by Circular No.20/2017 dated 12.06.2017. We hold that the tribunal ought to have held the date of payment of tax by the assessee as 15.03.2007 i.e. the date on which the request was made by the assessee to adjust the cash seized against the advance tax payable towards the tax for the Assessment year 2007-08. The first substantial question of law is answered in favour of the assessee and against the revenue. The orders passed by the Income Tax Appellate Tribunal is hereby quashed and it is directed that date of payment of tax shall be taken as 15.03.2007 i.e. the date on which the request was made by the assessee to adjust the cash seized against the advance tax payable for the Assessment year 2007- 08. Appeal allowed.

Summary

Issues:
1. Adjustment of advance tax against cash seized for tax liability computation.
2. Interpretation of provisions of Income Tax Act regarding advance tax payment and adjustment.

Issue 1: Adjustment of advance tax against cash seized for tax liability computation

The case involved appeals under Section 260A of the Income Tax Act, 1961 regarding the adjustment of advance tax against cash seized for tax liability computation for Assessment year 2007-08. The appellant, a private limited company engaged in trading, had cash seized during a search operation, and subsequently disclosed additional income. The key question was whether the cash seized could be adjusted as advance tax payable for the said assessment year. The assessee had requested to treat a portion of the seized cash as advance tax. The Commissioner of Income Tax (Appeals) allowed relief for interest, but the tribunal dismissed the appeal. The High Court analyzed the provisions of Section 132B and relevant case laws, including a decision of the Allahabad High Court upheld by the Supreme Court, to determine the date of payment of tax. The Court held that the cash seized could have been adjusted against advance tax and directed that the date of payment of tax be considered as the date of the request for adjustment, i.e., 15.03.2007. Consequently, the first substantial question of law was answered in favor of the assessee, leading to the quashing of the tribunal's orders.

Issue 2: Interpretation of provisions of Income Tax Act regarding advance tax payment and adjustment

The second issue revolved around the interpretation of the Income Tax Act provisions concerning advance tax payment and adjustment. The counsel for the assessee argued that the advance tax liability could be adjusted against seized cash, citing relevant legal precedents and Circular No.20/2017. On the other hand, the revenue contended that advance tax adjustment was not permissible as it was not an existing liability and highlighted the non-compliance with Section 209(1)(a) and Section 210(1) of the Act. The High Court examined the submissions and records, emphasizing the assessee's offer of a specific amount towards advance tax and the prior installment payments. The Court concurred with the view that the seized cash could have been adjusted against advance tax, aligning with the decisions of other High Courts and Circular No.20/2017. Consequently, the tribunal's decision was overturned, and the date of payment of tax was fixed as the date of the adjustment request, i.e., 15.03.2007.

In conclusion, the High Court's judgment in the case clarified the adjustment of advance tax against seized cash for tax liability computation, emphasizing the date of payment of tax as per the request for adjustment. The detailed analysis of relevant provisions and legal precedents guided the Court in resolving the issues raised by the parties and ultimately ruling in favor of the assessee.