1999 (3) TMI 112 - AT - Income Tax

Summary

Issues Involved:
1. Additional demand of Rs. 3,07,312 as interest recalculated under section 217 of the IT Act, 1961.
2. Non-adjustment of seized amount of Rs. 8 lakhs before calculating interest under section 217.
3. Non-credit of TDS of Rs. 1,97,140 on winning of lotteries before calculating interest under section 217.
4. Claim for interest from 2nd May 1985 to 12th Feb 1987 on the amount utilized by the Department.

Detailed Analysis:

1. Additional Demand of Rs. 3,07,312 as Interest Recalculated under Section 217:
The assessee disputed the additional demand of Rs. 3,07,312, which was recalculated under section 217 of the IT Act, 1961, through rectification under section 154. The AO issued show-cause notices pointing out the short charge of interest and subsequently passed an order under section 154, creating a demand of Rs. 3,07,312. The assessee argued that the rectification was beyond the scope of section 154 and that the CIT(A) exceeded his jurisdiction by making enhancements and not allowing credit for TDS of Rs. 1,97,140. The Tribunal found that the CIT(A) acted within the scope of his powers under section 251(1) of the IT Act, 1961, and upheld the rectification order, thus dismissing the assessee's contention.

2. Non-Adjustment of Seized Amount of Rs. 8 Lakhs Before Calculating Interest under Section 217:
The assessee contended that the Department adjusted the seized amount of Rs. 8 lakhs without intimation, and since the amount remained in the Department's possession, it should have been treated as advance tax. The Tribunal noted that the amount was seized and appropriated towards tax only after the completion of the assessment for the relevant year. The Tribunal directed the AO to allow credit for the seized amount from the date of the regular assessment's completion, rejecting the assessee's claim for treating it as advance tax from the date of seizure.

3. Non-Credit of TDS of Rs. 1,97,140 on Winning of Lotteries Before Calculating Interest under Section 217:
The assessee argued that the CIT(A) was not justified in enhancing the levy of interest under section 217 due to the non-credit of TDS on lottery winnings. The Tribunal held that no interest is chargeable under section 217 on the amount of TDS deducted at source, as the income on which TDS was deducted was included in the computation of advance tax. The Tribunal directed the AO not to charge interest under section 217 on the TDS amount of Rs. 1,97,140.

4. Claim for Interest from 2nd May 1985 to 12th Feb 1987 on the Amount Utilized by the Department:
The assessee claimed interest for the period during which the seized amount was retained and utilized by the Department. The Tribunal found no provision in the IT Act permitting the allowance of interest to the assessee for the period from the date of seizure to the date of regular assessment. The Tribunal dismissed this ground, as the assessee failed to provide any statutory support or working to justify the claim.

Conclusion:
The Tribunal partly allowed the appeal of the assessee. It upheld the rectification order creating an additional demand of Rs. 3,07,312, directed the AO to allow credit for the seized amount from the date of the regular assessment's completion, and ruled that no interest is chargeable under section 217 on the TDS amount of Rs. 1,97,140. The claim for interest on the seized amount for the period it was retained by the Department was dismissed.