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TMI Blog2011 (12) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... n it was seized. Further, cash seized from third party was found to be the cash of the assessee and this fact is not disputed therby, it is adjustable against the demand created on the assessee. Decided in favor of assessee. - IT Appeal NO. 1172/RJT/2010 - - - Dated:- 2-12-2011 - D. K. Tyagi And A. L. Gehlot , JJ. ORDER 1. This appeal filed by the assessee is directed against the order of CIT(A)-IV, Ahmedabad dated 26-07-2010 for the assessment year 2008-09. The following effective grounds are taken in the appeal: 1. Hon.CIT(A) had erred in law as well as on fact in holding that the appeal filed against levy of interest u/s 234A, 234B and 234C is not maintainable. 2. Hon.CIT(A) had erred in law as well as on fact in not treating cash seized as advance tax from the date of seizure though specific request was made to assessing officer. 3. Hon.CIT(A) had erred in law as well as on fact in confirming levy of interest u/s 234A, 234B and 234C of the Act on facts and circumstances of the case. 2. In gist, the grounds pertain to charging of interests u/s 234A, 234B and 234C of the Act. Thus the issues for consideration are - (1) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the assessee and has therefore rightly charged interests u/s 234A, 234B and 234C of the Act. 4. The ld.AR reiterated the submissions made before the revenue authorities and submitted that the appeal is maintainable. For this proposition, he relied upon the following judgments: Central Provinces Manganese Ore Co Ltd v. CIT 160 ITR 961 (SC) Jalgaon Dist. Centrral Co-io Bank Ltd. v. ITO 70 ITD 290 (Pune) Trinity Forge v. ACIT 73 TTJ 582 (Pune) The ld.AR further submitted that the interests u/s 234A, 234B and 234C are not chargeable as the seized cash is adjustable as advance-tax. For this proposition he relied upon the following decisions: CIT v. Ashok Kumar 334 ITR 355 (P H) Nikka Mal Babu Ram v. ACIT 41 SOT 407 (Chd) Sudhakar M Shetty v. ACIT 10 DTR 173 (Mum) Satya Prakash Sharma v. ACIT 20 DTR 561 (Del) Satpaul D Agarwal (HUF) v. ACIT 62 TTJ 98 (Mum) CIT v. Kesar Kimam Karyalaya 278 ITR 596 (Del) 5. The ld.DR on the other hand relied upon the order of CIT(A) and submitted that the cash seized from other parties is not adjustable against the advance-tax liability of the assessee. 6. We have heard the ld. represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under sections 139 and 215 of the Act. The Apex court had considered the nature of the levy of interest under sub-section (8) of section 139 and under section 215. It was held that it is not correct to refer to the levy of such interest as a penalty. The expression penal interest has acquired usage, but is in fact an inaccurate description of the levy. Having regard to the reason for the levy and the circumstances in which it is imposed, it is clear that interest is levied by way of compensation and not by way of penalty. The Income-tax Act makes a clear distinction between the levy of a penalty and other levies under that statute. Interest is levied under sub-section (8) of section 139 and under section 215 because, by reason of the omission or default mentioned in the relevant provision, the Revenue is deprived of the benefit of the tax for the period during which it has remained unpaid. The very period for which interest is levied under the relevant provision points to the nature of the levy. If that is borne in mind, it will be apparent that the levy of interest is part of the process of assessment. Although section 143 and section 144 do not specifically provide for the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee denies his liability to be assessed under the Act, he has a right of appeal to the Appellate Assistant Commissioner against the order of assessment. Where penal interest is levied under section 215 by the order of assessment, the assessee may altogether deny his liability to pay such interest on the ground that he was not liable to pay advance tax at all or that the amount of advance tax determined by the Income-tax Officer as payable ought to be reduced. In either case, he denies his liability, wholly or partially, to be assessed. Similarly, where interest is levied under section 139 of the Act, the assessee may deny his liability to pay such interest on the ground that the return was not belated or that the penal provision was not attracted at all to his case. In such a case also, he denies his liability to be assessed to interest. 9. In view of the law laid down by the Apex Curt in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) we do not find any justification to constitute the expression 'denying his liability to be assessed as denial of the total liability, for the Apex Court has observed: What is the substance of the objection of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 234A, 234B, and 234C is very much part and parcel of assessment proceedings and is an order against the assessee to which the assessee denies his liability to be assessed. Therefore, appeal against charging of interest under those sections is maintainable as in the case of an assessment order. 13. Now coming to the second issue whether cash seized could be adjusted against the advance-tax and other demands. To examine this issue we would like to refer to section 132B prior to its substitution with effect from 01-06-2002 by the Finance Act, 2002 which provides for application of seized or requisitioned assets. As per sub section (1) to this section the assets retained under sub section (5) of section 132 could be appropriated against the discharge of existing liability as per clause (iii) of the sub section as well as against the amount of liability determined on completion of regular assessment or re-assessment for all the assessment years relevant to the previous years. Clause (i) of sub section (1) of the newly inserted section has been enacted to harmonise the provision contained in section 132B with the provisions for assessment u/s 153A and the assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation for the retention of money seized and proceeds of the assets shown in excess of the total tax liabilities against which they had not been applied. Where the character of the amount retained u/s 132B and the proceeds, if any, of the assets sold for the purpose of recovery of existing liability referred to in that section existed the character of the existing liability in default and the liability determined at regular assessment, the central government would be under obligation to pay simple interest on the amount of such excess. When under the scheme of section 132B the Central Government is under obligation to pay simple interest on excess amount, the same scheme of the provision is applicable when interest is to be recovered from the assessee, may be u/s 234A, 234B or 234C. Thus, the cash seized during the course of search is required to be adjusted against taxes due including advance-tax for the purpose of computation of interest u/s 234A, 234B and 234C. This view is fortified by various decisions of ITAT in the case of Satpal D Agarwal, HUF v. ACIT 62 TTJ (Mum) 98; Satyaprakash Sharma v. ACIT 20 DTR (Del Trib) 561; Sudhakar M Shetty v. ACIT 10 DTR (Mum Trib) 173; Nik ..... X X X X Extracts X X X X X X X X Extracts X X X X
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