2023 (5) TMI 630 - AT - Income Tax

Interest u/s 234 B - Advance tax - Adjustment / Credit for cash as seized at the time of search - AO stated that the existing liability does not include advance tax payable and observed that by applying the provisions of Explanation 2 to section 132B of the Act, the assessee s plea has been rightly rejected by the AO - HELD THAT - Seized cash of Rs. 1.76 crores was not given credit by the ld AO in the assessment framed u/s 143(3) of the Act dated 31.03.2016. It is not in dispute that the assessee had indeed made a claim for adjustment of seized cashwith his self assessment tax payable by the assessee along with return of income on 31.08.2015 itself. This was conveniently ignored by the lower authorities. From the bare reading of provisions of section 132B of the Act together with Explanation 2 thereon, there is no prohibition to adjust the seized cash with self assessment tax. What is prohibited is only adjustment of seized cash with the advance tax. Hence, we hold that the assessee is entitled for adjustment of seized cash of Rs. 1.76 crores with self assessment tax payable by the assessee in the return of income. Our view is further fortified by the decision of ACIT Vs. Narendra N. Thacker 2015 (11) TMI 62 - ITAT KOLKATA and in case of Spaze Towers (P) Ltd 2016 (11) TMI 1401 - PUNJAB AND HARYANA HIGH COURT Ground raised by the assessee is hereby allowed.

Summary

Issues involved:
The appeal concerns seeking credit for cash seized by the Income Tax Department during a search operation. The main issue is whether the seized cash of Rs. 1.76 crores can be adjusted towards self-assessment tax payable by the assessee.

Summary:
The appeal in ITA No.1986/Del/2018 for A.Y. 2015-16 arises from the order by the Ld. Commissioner of Income Tax(Appeals), New Delhi against the assessment order passed u/s 143(3) of the Income Tax Act, 1961. The assessee, an individual, had filed a return of income for AY 2015-16 declaring total income of Rs. 11,33,54,240/-. During a search operation, cash of Rs. 1.76 crores was seized from a car associated with the assessee. The assessee accepted that the seized cash belonged to him and offered unaccounted income of Rs. 7 crores. The assessee requested adjustment of the seized cash towards self-assessment tax payable. However, the ld AO did not give credit for the seized cash and raised a demand. The assessee filed a rectification application u/s 154 requesting the seized cash to be treated as advance tax payable. The ld AO rejected this request citing Explanation 2 to section 132B of the Act, which excludes advance tax payable from existing liability. The ld CIT(A) upheld the ld AO's decision.

Upon appeal, the ITAT Delhi observed that while the assessee's request to treat the seized cash as advance tax was erroneous, the failure to give credit for the seized cash in the assessment was an oversight. The ITAT held that there is no prohibition to adjust the seized cash with self-assessment tax, as long as it is not with advance tax. Citing relevant judicial precedents, the ITAT allowed the appeal, granting the assessee the adjustment of the seized cash towards self-assessment tax payable. The consequential issue regarding interest u/s 234B and 234C of the Act was also addressed, clarifying that interest u/s 234C is chargeable only on the returned income.

In conclusion, the ITAT allowed the appeal, holding that the assessee is entitled to adjust the seized cash of Rs. 1.76 crores towards self-assessment tax payable. The order was pronounced in the open court on 24/04/2023.