2013 (12) TMI 998 - AT - Income Tax

Tribunal directs reassessment of interest payments under sections 234A and 234B

The Tribunal allowed the appeals filed by the assessee and directed the assessing authority to recompute interest under sections 234A and 234B after ... Mistake apparent from record – Held that:- There was a seizure of ₹ 1.65 crores at the time of search and there was subsequent payment of ₹ 31 lakhs. These two amounts have been completely blacked out and interest was levied without giving any prior credit to the above amounts - This is a clear mistake apparent from the records liable for rectification – Following Pranoy Roy And Another v. CIT [2008 (9) TMI 150 - SUPREME COURT] - While computing interest both under sections 234A and 234B, prepaid amounts of ₹ 1.65 crores and ₹ 31 lakhs need to be given credit and the interest can be calculated only after giving credit to these amounts and reducing the same from the advance tax liability and tax liability respectively – Following CIT vs. K.K.Marketing [2005 (5) TMI 58 - DELHI High Court] - The advance tax payable should be adjusted from the amount lying with the department in the assessee’s own account when the assessee has given in writing to the department to meet the advance tax liability from such amount withheld by the department – Decided in favour of assessee. Issues Involved:1. Whether the amounts seized during the search and the subsequent payment should be treated as advance tax payments.2. Whether the interest under sections 234A and 234B should be recalculated after giving credit to these amounts.3. Whether the issue raised by the assessee in the application under section 154 constitutes a mistake apparent from the records.Detailed Analysis:Issue 1: Treatment of Seized and Subsequent Payment as Advance TaxThe assessee, an A.O.P., was engaged in money lending and faced a search action under section 132 on 16.5.2007, leading to the seizure of Rs. 1.65 crores. The assessee later paid an additional Rs. 31 lakhs on 17.8.2007. The primary question was whether these amounts could be treated as advance tax payments against the tax liability arising from assessments completed consequent to the search.The Assessing Officer (AO) initially rejected the assessee's rectification petitions under section 154, stating that the seized cash could not be adjusted against any demand as there was no tax liability at the time of the search. The Commissioner of Income-tax (Appeals) upheld this view, relying on the judgment of the Hon'ble Madras High Court in CIT v. K.T. Kunjumon, which stated that seized cash could only be adjusted against the tax resulting from block assessment.However, the Tribunal found that the assessee had indeed requested the department to adjust the seized amount and the subsequent payment against the tax liability arising from the block assessment. This request was made in writing on 30.8.2007. The Tribunal held that the amounts should be treated as advance tax payments, as the assessee had authorized the department to appropriate these amounts towards the tax liability.Issue 2: Recalculation of Interest under Sections 234A and 234BThe Tribunal directed that interest under section 234B should be recalculated after giving credit to the Rs. 1.65 crores seized on 16.5.2007 and the Rs. 31 lakhs paid on 17.8.2007. The seized amount was to be treated as advance tax paid on 16.5.2007, and the Rs. 31 lakhs as advance tax paid on 17.8.2007. The Tribunal emphasized that the department should have appropriated the amounts against the advance tax liability, as the assessee had explicitly requested this in writing.The Tribunal also addressed the issue of interest under section 234A, stating that it should be computed only after giving credit for the amounts paid prior to the completion of the assessment. This principle was upheld by the Hon'ble Supreme Court in Pranoy Roy And Another v. CIT.Issue 3: Mistake Apparent from the Records under Section 154The Commissioner of Income-tax (Appeals) had held that the issue raised by the assessee in the application under section 154 was a debatable issue and not a mistake apparent from the records. However, the Tribunal disagreed, stating that the mistake apparent on the face of the record does not mean an easy or casual procedure. The Tribunal found that the complete blackout of facts regarding the seized amount and the subsequent payment constituted a clear mistake apparent from the records, liable for rectification.The Tribunal concluded that the Commissioner of Income-tax (Appeals) had come to a conclusion based on hyper-technicality and that the issue was indeed a mistake apparent from the records. Accordingly, the Tribunal directed that the amounts be first given credit as advance payment of tax, and interest under sections 234A and 234B be charged only after that credit is effected.ConclusionThe appeals filed by the assessee were allowed, with the Tribunal directing the assessing authority to recompute the interest under sections 234A and 234B after giving credit to the amounts seized and subsequently paid. The Tribunal found that the issue raised by the assessee constituted a mistake apparent from the records and was rectifiable under section 154.