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TMI Blog2002 (3) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act. The assessees also furnished guarantee as required by the Revenue authorities for the release of the stock, which was in excess of the stock disclosed in books of account. The bank guarantee was also requested to be realised by the Revenue before the second instalment of tax was payable by the firm and the partners. The assessee vide letter written on 2-12-1987, had requested that bank guarantee and cash seized from the assessee be adjusted towards the advance tax payable by the firm and the partners. 3. The Assessing Officer did not adjust the seized amount or the bank guarantee realised as advance tax, as prayed for by the assessee and made adjustment of these amounts as paid on the date of assessment order. Accordingly, interest under sections 139(8) and 2l5/217 was charged both in the case of partners as well as that of firm M/s National Feed Store, Ludhiana. The assessees moved an application under section 154 of the Income-tax Act pointing out that in charging the aforesaid interest, as according to the assessee the ld. Assessing Officer had committed a mistake apparent from record. It was prayed that the above mistake be rectified under section 154 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. DR further submitted that payment of tax has to be voluntary and any amount seized by the Revenue authorities in search cannot be treated as tax paid. Accordingly, the ld. DR supported the charging of interest. 8. Sh. Sudhir Sehgal, on the other hand, stated that search was carried on 18-9-1987 when the first instalment of advance tax in all the cases stood paid. Before the payment of second instalment, Revenue had realised amount of bank guarantee and also adjusted the amount seized and, therefore, benefit of above was to be allowed to the assessee. Sh. Sudhir Sehgal also drew our attention to the order passed by the Assessing Officer under section 132(5), dated 13-1-1988 of Income-tax Act computing tentative income and tax payable thereon by the firm and its partners. Sh. Sehgal further submitted that decisions relied upon by the ld. DR fully supported his assessee's case. He accordingly, prayed that the impugned order be upheld. 9. We have given careful thought to the rival submissions of the parties. As noted earlier, the search was carried by the Revenue at the business as well as residential premises of the partners of M/s. National Food Store on 18-9-1987. A sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30% Rs. 1,41,456 Tax Rs. 49,978 ... Rs. 49,978 Total liability of the ------------------ firm and its partners. Rs. 4,34,470 ------------------ Total liability to tax and penalty as per above order comes to Rs.4,34,470 which is far in excess of the cash seized. The cash seized in the above case is therefore, hereby ordered to be retained. This order has been passed with the prior approval of the Inspecting Assistant Commissioner of Income-tax, Range-I, Ludhiana conveyed vide his office letter No. JB/4708, dated 13-1-1988." 10. As all the cases are identical, we may proceed to examine the case of Sh. Muni Lal, partner. In that case the assessee filed return declaring net income of Rs. 3,13,490 on which tax payable was worked out at Rs. 1,42,795. The assessee claimed to have paid the entire amount on the basis of seized amount of tax as also bank guarantee duly encashed by the Revenue. Detail of encashment of bank guarantee is not available on record althoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly: Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in clauses (ii), (iia) and (iii) or any part thereof, the Income-tax Officer may, with the previous approval of the Chief Commissioner or Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case." Section 132B: "(1) The assets retained under sub-section (5) of section 132 may be dealt with in the following manner, namely: (i) The amount of the existing liability referred to in clause (iii) of the said sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee an account of liabilities and how seized assets are to be adjusted against the liabilities of the assessee for the current year or some other year. It is difficult to appreciate that despite the directions to adjust seized amount under section 132(5) against the liabilities of the current year, the assessee cannot and should not take into account above adjustments and make payment otherwise due. The assessee should treat statutory provision and orders passed thereunder and amount recovered and retained as of no consequences. This approach defies all logic and rationality. It is, therefore, only reasonable to allow the assessee to take credit for the seized amount as per recovery made by the Revenue authority and make payment accordingly. There is no basic difference between "payment" or "recovery" through seizure and other modes of recovery provided in the statute as far as discharge of liabilities of tax is concerned. This is amply demonstrated by several provisions of the income-tax Act. We may refer to section 190 of the Act providing as under:-- Deduction at source and advance payment. Section 190(1) Notwithstanding that the regular assessment in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1980-81, the Assessing Officer valued the jewellery at Rs.1,22,211. He accepted the explanation for jewellery worth Rs.1,12,211 only. Accordingly, he added Rs.20,800 being cash seized and Rs.10,000 against jewellery as income from undisclosed sources under section 69A of the Act to the assessed income. Finally, on the appeal, the said additions were deleted. On finalisation of the regular assessment, the petitioners requested the respondents to release the jewellery. But the respondents did not accede to the payer. On a writ petition against the order, a counter affidavit was filed justifying the retention of the jewellery on the plea that demands under the Act were still outstanding against the petitioners for the assessment years 1981-82 and 1982-83. Held, that 1980-81 was the only assessment year relevant for determining the rights and liabilities of the assessee under section 132(5) read with section 132B. Even according to the respondents, as stated in the counter affidavit, the said liability had been found to be only to the extent of Rs.670 and Rs.339 towards tax and interest, respectively. The entire seized assets could not be retained on the ground that ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment against tax payable for the year under consideration. It is quite explicit in the order that amounts retained by the revenue aggregating to Rs.3,80,000 were to be adjusted in the assessment year 1991-92. No other liability is mentioned in the order under section 132(5). Ultimately the aforesaid amounts have been adjusted against liabilities of current year. Now the Assessing Officer is not ready to treat the amounts seized as paid by the assessees through bank guarantee as advance tax paid the assessees should have separately paid the advance tax without considering order under section 132(5). This is quite unreasonable. Supposingly, in a given case advance tax payable is Rs.1 lakh and seized amount from the assessees is more than Rs.1 lakh and the Assessing Officer has passed the order under section 132(5) passed much before the last instalment of advance tax is payable, even then the assessees should pay advance tax. This, in our view, is not the scheme of the Act. Having determined the income and the tax payable and the finding that seized asset is to be retained in final adjustment against the income of the given year, the assessee can take benefit of finding recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest can be calculated only with reference to the date on which the amount was paid or recovered. It being a compensatory levy one cannot ignore the date of recovery. There is no provision to take the date of recovery other than the date on which it was recovered. Again principles applicable to the cash amount seized in search not being "payment" are not applicable to amount realised as a bank guarantee. The assessee had specifically and voluntarily requested the tax authorities to realise the bank guarantee and, therefore, this amount has to be treated as payment by the assessee and accordingly, the credit for the same is to be given. 19. In the light of our above directions, the Assessing Officer shall pass afresh order relating to interest charged under sections 234A and 234B of the Income-tax Act. The detail and date of the amount paid and recovered from each of the partners is not available on record and therefore, the issue cannot be finally decided at the stage of the Tribunal and is required to be remitted back to the file of the Assessing Officer. Afresh orders be passed having regard to principles laid down in this order. 20. In the result, all the appeals as well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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