2012 (7) TMI 457 - AT - Income Tax

Adjustment of cash seized during the search - while filing return in compliance to the notice issued u/s 153A, the assessee has computed his income tax liability by taking credit of the cash seized in course of search and seizure operation - AO has accepted the income declared in return filed u/s 153A of the Act, but has not adjusted the cash seized towards the tax liability - nothing on record to show that there is any other existing liability excepting the income tax liability - Held that - Assessee is entitled to adjustment of seized cash against his income-tax liability - AO to re-compute the tax liability - after adjusting the seized cash from the date of request made by the assessee and thereafter consider charging interest u/ss 234A, 234B and 234C in case there is still any default in discharging the tax liability In favor of assessee

Summary

Issues:
Charging interest under sections 234B and 234C for not adjusting seized cash against Income-tax liability.

Analysis:
The appeals were against orders passed by the CIT (A) related to assessment years 2008-09 and 2009-10, involving common issues. The main ground of appeal was the failure to give credit for cash seized by the department and not adjusting it against Income-tax liability, leading to interest charges under sections 234B and 234C.

The assessee disclosed an income of Rs.5,77,900/- for assessment year 2008-09 and during a search operation, cash amounting to Rs.1,10,00,000/- was seized. The assessee requested to adjust the seized cash against Income-tax liability for the relevant years, but the AO did not comply, raising a tax demand and charging interest under sections 234B and 234C.

The CIT (A) directed the AO to examine the issue under section 132B of the Act but did not provide a clear decision. The assessee argued that the seized cash should have been adjusted as requested, as evidenced by correspondence with the AO and computations in the return filed under section 153A.

The Tribunal analyzed relevant case laws, including ACIT vs. Raghunandan Lal and CIT vs. Ashok Kumar, emphasizing the allowance of seized amount adjustment towards tax liability. The Tribunal found that the assessee's request for adjusting the seized cash against Income-tax liability was justified, especially since no other existing liability was evident.

Consequently, the Tribunal allowed the assessee's appeal, directing the AO to re-compute tax liability for the relevant years after adjusting the seized cash and considering interest charges only if there was a default in tax discharge post-adjustment.

In conclusion, the Tribunal ruled in favor of the assessee, allowing both appeals and emphasizing the entitlement to adjust seized cash against Income-tax liability, thereby providing relief from interest charges under sections 234B and 234C.