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TMI Blog2015 (8) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 'CIT(A)'] and ITA Nos. 1874/Del/1995, 6082/Del/1995 & 6084/Del/ 1995 were cross appeals preferred by the Revenue against the orders of CIT (A). The CIT(A) had by separate orders disposed of the appeals preferred by the Assessees against the orders passed by the Assessing Officer (hereafter the 'AO') rejecting the respective applications filed by the said Assessees under Section 154 of the Act. 2. The present appeals involve a common question concerning the treatment of the currency seized during the search and seizure operations conducted under Section 132 of the Act. The Assessees claim that the amounts seized during the search ought to be accounted for as payment of advance tax on the date of seizure and interest chargeable under Section 234A, 234B and 234C of the Act ought to be computed accordingly. The Revenue disputes this contention. According to the Revenue, the currency seized during the search operations under section 132 of the Act, cannot be treated as payment of tax till the filing of the return by the Assessee surrendering the seized amount as payment of tax or a demand being raised pursuant to a regular assessment. 3. In view of the above controversy, this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest chargeable under Section 234A, 234B, 234C ought to have been recomputed. 4.5 By an order dated 25th January, 1994 the AO rejected the Assessee's application under Section 154 of the Act. The AO held that the cash seized during the search operations had to be dealt with in accordance with Section 132B of the Act and had to be applied towards "regular demand raised on the assessment and other proceedings under the I.T Act." Thus, the seized cash could not be treated as advance tax payment on the date of the seizure and, therefore, was adjusted towards the part payment of the demand finally raised pursuant to assessment under Section 143(1)(a) of the Act. 4.6 Aggrieved by the aforesaid order, the Assessee preferred an appeal before CIT(A) being Appeal No.461/1994-95. It was contended before the CIT(A) that the demand of tax would necessarily relate back to the relevant accounting year since the liability of income tax crystallises on the last date of the accounting year, which in this case was 31st March, 1991. Therefore, the amount seized by the Income Tax Authorities ought to be adjusted on the date of the seizure and if not so, at least on the last date of the accounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the seizure. However, the Tribunal held that the liability to pay advance tax by the Assessee stood discharged on the date of the order under Section 132(5) of the Act, as the amount seized had to be applied in accordance with Section 132B of the Act and in terms of that Section the cash seized was to be applied towards "existing liability" referred to in clause (iii) of Section 132(5) of the Act. The Tribunal reasoned that the AO was bound to adjust the cash seized after passing of the order under Section 132(5) of the Act and, therefore, it would be fair to hold that the adjustment of tax by the AO should relate back from the date of order under Section 132(5) of the Act. The Tribunal held that the liability to pay advance tax had occurred during the financial year 1991 and, therefore, had to be treated as an existing liability as mentioned in clause (iii) of Section 132(5) of the Act. 5. Mr Sahni, Sr. Standing Counsel appearing on behalf of the Revenue contended that an order under Section 132(5) of the Act did not permit appropriation of the assets seized but, only empowered the AO to retain the assets to be applied in a manner as provided under the Act. He further contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys of the seizure, make an order, with the previous approval of the Joint Commissioner,- (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1992), or this Act; (iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in clause (a) of subsection (1) of section 230A in respect of which such person is in default or is deemed to be in default. and retain in his custody such assets/or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act. (3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized. (4) (a) The Central Government shall pay simple interest at the rate of fifteen per cent. per annum on the amount by which the aggregate of money retained under section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (iii) of sub-section (5) of that section exceeds the aggregate of the amounts required to meet the liabilities referred to in clause (i) of sub-section (1) of this section. (b) Such interest shall run from the date immediately following the expiry of the period of six months from the date of the order un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability of the Assessee are retained in the custody of the Income Tax Authority, the concerned Authority is not permitted to retain assets in excess or what may be required to meet the Assessee's liability. The words "retained in his custody" are key operative words which, clearly, indicate that the ITO retains the assets in his custody and the same are not appropriated towards payment of tax. Section 132(5) of the Act does not contemplate appropriation of assets towards any liability, whether existing or in future, but is limited to permitting the ITO to retain the seized assets to be applied as provided under the Act. 9. In view of the aforesaid, the conclusion of the CIT(A) as well as the Tribunal that liability of the Assessee would stand discharged to the extent of cash seized from the date of the order under Section 132(5) of the Act is not sustainable as Section 132(5) of the Act does not deal with appropriation of the assets seized. 10. Clause (i) of Section 132B(1) of the Act as it existed in the statute book at the material time enables the Income Tax Authorities to apply the assets retained under Section 132(5) of the Act towards any "existing liability" as referre ..... 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