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2017 (6) TMI 731 - HC - Income TaxAdvance tax liability adjustment from the cash seized - Held that - In view of the discussion, considering the decision of Division Bench of this Court in case of Kamlesh Bhogilal Kandoi M/s. Bhogilal Mulchand Kandoi vs. A.C.I.T (2014 (11) TMI 1122 - GUJARAT HIGH COURT) we find that the Assessing Authority was in error in not permitting adjustment of the assessee s advance tax liability against the seized cash. Interest on defaults in payment of advance tax - Held that - Sub section (4) of section 132B of the Act is amply clear and mandates the Central Government to pay interest at the prescribed rate for the prescribed period when the amount is so withheld. Petition allowed. The Revenue shall adjust the advance tax liability on the income of ₹ 70 lacs of the petitioner as requested by him in the letter dated 29.03.2012. Resultantly, the liability to pay interest on the premise that such advance tax was paid late, would not arise. The Revenue shall also pay interest in terms of sub section (4) of section 132B on the remaining amount from out of ₹ 70 lacs after making adjustments as permissible under sub section (1) of section 132B which will include the advance tax, interest under section 234C of the Act and the penalty under section 271AAA of the Act.
Issues Involved:
1. Charging of interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961. 2. Levying of penalty under section 271AAA of the Income Tax Act, 1961. 3. Interest on delayed refund of seized cash. Detailed Analysis: 1. Charging of Interest under Sections 234A, 234B, and 234C: The petitioner disputed the Revenue's action of charging interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961. The petitioner argued that he had promptly informed the Revenue authorities that the seized cash of ?70 lacs should be treated as his income and requested that the advance tax liability be adjusted from the seized cash to avoid any interest for non-payment of advance tax. The Assessing Officer did not accept this request and levied interest of ?74,122 under section 234C on the tax payable amount of ?20,03,350. The court referred to section 132B of the Act, which pertains to the application of seized or requisitioned assets, and noted that Explanation 2 to section 132B, introduced by the Finance Act of 2013 w.e.f. 01.06.2013, clarifies that "existing liability" does not include advance tax payable. However, the court observed that this explanation was introduced to clarify the legislative intent and should not retrospectively affect past judicial interpretations that included advance tax liability within "existing liability." The court cited the Division Bench's decision in Kamlesh Bhogilal Kandoi M/s. Bhogilal Mulchand Kandoi vs. A.C.I.T, which supported the petitioner's stance that the seized cash could be adjusted against advance tax liability. 2. Levying of Penalty under Section 271AAA: The Assessing Officer had instituted penalty proceedings under section 271AAA of the Act and levied a penalty of ?7 lacs. The petitioner did not dispute the computations and adjustments, subject to his pending appeal on the question of penalty. The court did not provide a detailed analysis of the penalty issue, focusing instead on the interest and refund issues. 3. Interest on Delayed Refund of Seized Cash: The petitioner contended that the refunded amount of ?37,61,760 did not include interest, contrary to statutory provisions. The court referred to sub-section (4) of section 132B, which mandates the Central Government to pay interest at the prescribed rate for the period when the amount is withheld. The court concluded that the Revenue must pay interest on the remaining amount of ?70 lacs after making permissible adjustments, including advance tax, interest under section 234C, and penalty under section 271AAA. Conclusion: The court allowed the petition, directing the Revenue to adjust the advance tax liability from the seized cash as requested by the petitioner. Consequently, the liability to pay interest for late payment of advance tax would not arise. The Revenue was also ordered to pay interest on the remaining amount of seized cash, as mandated by sub-section (4) of section 132B. The petition was disposed of accordingly.
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