2013 (7) TMI 19 - AT - Income Tax

Interest u/s 234B and 234C - money seized during the search operation - whether be adjusted against the assessed tax as self assessment or advance tax - Held that - If the assessee has declared income, during the year under consideration in that eventuality he is liable to pay advance tax as per law therefore the A.O. is required to find out whether such liability was existing on the date of seizure. If such liability is existing then he is empowered to apply/adjust the money seized in discharge of the existing liability even without any written representation from the assessee. Thus allow the appeal of the assessee and direct the A.O. to give credit of Rs.8 lakhs as advance tax as requested by the appellant.

Summary

Issues involved:
Charging of interest under section 234B and 234C of the Income Tax Act for Assessment year 2007-08 due to the adjustment of Rs.8 lakhs against assessed tax as self-assessment instead of advance tax.

Detailed Analysis:

1. Issue of Charging Interest under Section 234B and 234C:
The primary issue in this case revolved around the charging of interest under sections 234B and 234C of the Income Tax Act. The contention was related to the adjustment of Rs.8 lakhs against the assessed tax as self-assessment instead of advance tax. The appellant challenged the order of the CIT(A)-II, Ahmedabad dated 21-12-2011 for the Assessment year 2007-08. The key argument was whether the seized money during a search operation could be treated as advance tax from the date of its seizure. The Tribunal referred to a similar case (ITA No.570/AHD/2011) involving ACIT Central Circle 1(1) Ahmedabad vs. Meghmani Industries. The Tribunal analyzed the relevant provisions of law, specifically Section 132B(1), which allowed for the assets seized to be applied in discharge of liabilities under the Income Tax Act. The Tribunal emphasized that if the assessee declared income during the relevant year, they were liable to pay advance tax as per the law. In this case, the money seized was subsequently declared in the income tax return, indicating the liability to pay advance tax. The Tribunal cited precedents from ITAT Rajkot Bench and ITAT Mumbai Bench, which supported the application of seized money towards advance tax liability. Consequently, the Tribunal allowed the appeal and directed the Assessing Officer to credit Rs.8 lakhs as advance tax, thereby resolving the issue in favor of the appellant.

2. Conclusion:
The Tribunal's decision in this case clarified the treatment of seized money as advance tax liability, aligning with relevant provisions of the Income Tax Act and supported by precedents from other benches. By allowing the appeal and directing the credit of seized money as advance tax, the Tribunal provided a clear resolution to the issue raised by the appellant regarding the charging of interest under sections 234B and 234C. The judgment highlighted the importance of compliance with advance tax obligations and the applicability of seized assets in discharging tax liabilities, ensuring a fair and legally sound outcome for the appellant in this matter.