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2017 (11) TMI 798 - AT - Income TaxNon-granting of credit of cash seized and pay orders as advance tax against the income tax liability on the income offered in the statement u/s 132(4) - interest charged under section & 234B and 234C - Held that - Money lying with the department amounting to ₹ 75,50,860/- deserved to be adjusted as advance tax liability and the interest charged under section 234C qua third quarter for non payment of advance tax is not at all legal and justified. u/s 234C, we are of the considered opinion, that the interest for non-default for non payment of tax should not be charges for the last 3rd installment and same is the position with regards to charging interest u/s 234B of the Act. Direct the AO to allow sum to be adjusted against the advance tax and consequently, the interest u/s 234B and 234C for the third quarter installment shall not be chargeable. Accordingly the AO is directed to calculate the interest u/s 234B & 234C after allowing credit of ₹ 75,50,860/- in the advance tax if any. Appeal of the assessee stands allowed.
Issues Involved:
1. Non-granting of credit for cash seized and pay orders as advance tax. 2. Charging of interest under sections 234B and 234C of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Non-granting of Credit for Cash Seized and Pay Orders as Advance Tax: The assessee challenged the order confirming the non-granting of credit for cash seized (?17,50,000) and pay orders (?58,00,860) as advance tax against the income tax liability for the assessment year 2012-13. The search and seizure action under section 132(1) of the Income Tax Act was conducted on 24.11.2011, during which cash and jewellery were found. The assessee filed a revised return declaring the undisclosed cash and jewellery. Despite the assessee's written requests to treat the seized cash and pay orders as advance tax, the Assessing Officer (AO) did not allow any credit while calculating interest under sections 234B and 234C. In the appellate proceedings, the CIT(A) dismissed the appeal, observing that the term "existing liability" under section 132B does not include advance tax payable, as clarified by Explanation 2 to section 132B inserted by the Finance Act 2013. The CIT(A) held that the decisions cited by the appellant did not consider this explanation and that the amendment had retrospective effect. 2. Charging of Interest under Sections 234B and 234C: The assessee argued that the department should have adjusted the seized cash and pay orders towards the advance tax liability, at least for the third installment due on 15.3.2013. The assessee cited several judgments supporting the claim that the seized assets should be adjusted against the advance tax liability if requested before the installment became due. The Tribunal considered the facts and the series of judgments cited by the assessee, including the jurisdictional High Court's decision in CIT vs. Shri Jyotindra B. Mody, which held that the amount seized during the search should be adjusted towards the advance tax liability if requested before the due date for the last installment. The Tribunal found that the AO's failure to adjust the seized amount resulted in an unjustified interest charge under sections 234B and 234C. Conclusion: The Tribunal set aside the order of the CIT(A) and directed the AO to allow the credit of ?75,50,860 against the advance tax liability. Consequently, the interest under sections 234B and 234C for the third quarter installment was not chargeable. The AO was instructed to recalculate the interest after allowing the credit for the seized amount. Judgment: The appeal of the assessee was allowed, and the order was pronounced on 13th Nov. 2017.
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