Seized cash adjustment can block interest under sections 234A, 234B and 234C when the Department delays set-off.

Interest under sections 234A, 234B and 234C was not sustainable where seized cash was already in the Department's custody and the assessee had specifically requested adjustment against tax liability. The factual record showed that the seized amount was identified in the section 132(5) order and reiterated in the return, yet no timely adjustment was made by the Department. On those facts, the levy of interest for default in filing or payment was deleted and the assessee's position was accepted.

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Issues: Whether interest under sections 234A, 234B and 234C of the Income-tax Act, 1961 was rightly deleted on the facts where seized cash was available with the Department and adjustment towards tax liability had been requested by the assessee.

Analysis: The seized amount of Rs. 24,85,000 had been traced and taken into custody by the Department, and the assessee had expressly stated that it could be adjusted against the tax payable. The same factual position was recorded in the order under section 132(5) and was reiterated in the return of income. The Department's failure to make timely adjustment, despite the request, was accepted as the basis for holding that the levy of interest was not justified on these facts.

Conclusion: The deletion of interest under sections 234A, 234B and 234C was upheld and the issue was decided in favour of the assessee.

Ratio Decidendi: Where seized funds are available with the Department and are specifically requested to be adjusted against the taxpayer's liability, interest for default in filing or payment cannot be sustained if the Department does not make timely adjustment.

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