2023 (6) TMI 39 - AT - Income Tax

Levy of interest u/s. 234B - cash found in the locker was seized by the Department - cash seized was in the possession of the department from the date of search itself - HELD THAT - On a reading of section 132B of the Act, though it transpires that the assets seized can be adjusted against any existing liability under the Act and advance tax may not be an existing liability, however, in our view, self assessment tax is certainly an existing liability created on 1st April once the financial year ends. AO should have adjusted the tax liability relating to the undisclosed income declared by the assessee by way of self assessment tax on 1st April, 2019. In that eventuality, there could not have been levy of interest u/s. 234B of the Act, as interest u/s. 234B has to be computed from first day of April following the financial year, for which, advance tax was required to be paid. We must observe, in a dispute of identical nature arising in case of assessee s brother, the Tribunal while deciding the issue in 2023 (1) TMI 522 - ITAT DELHI has deleted levy of interest u/s. 234B of the Act by observing that the cash seized should have been adjusted against self assessment tax payable with the return of income. We hold that interest charged u/s. 234B of the Act in the peculiar facts and circumstances of the present case, deserves to be deleted. Appeal of assessee allowed.

Summary

Issues involved:
The dispute in the present appeal is confined to the levy of interest u/s. 234B of the Income-tax Act, 1961.

Summary:

Issue 1: Levy of interest u/s. 234B of the Income-tax Act, 1961

The appellant, a resident individual, had cash amounting to Rs.1,07,00,000/- found in a locker during a search and seizure operation. The appellant offered the cash as income, but faced challenges in including it in the return of income due to system constraints. The Assessing Officer levied interest u/s. 234B alleging non-payment of advance tax. The appellant contended that the tax liability should have been adjusted from the seized cash as per section 132B of the Act, which would have prevented the levy of interest. The Tribunal noted that the tax due was only adjusted from the seized cash at a later date. Considering the circumstances and a similar case involving the appellant's brother, the Tribunal held that the interest charged u/s. 234B should be deleted, as the seized cash should have been adjusted against the self-assessment tax liability. Therefore, the Tribunal allowed the appeal and deleted the addition.

Conclusion:
The Appellate Tribunal ITAT DELHI ruled in favor of the appellant, holding that the interest charged u/s. 234B of the Income-tax Act should be deleted in the peculiar circumstances of the case. The appeal was allowed.