Seized cash adjustment and rectification: interest can be recomputed after the statutory retention period when appropriation is requested.

Where the assessment order did not decide appropriation of seized cash, a rectification application under section 154 was maintainable because the issue had not been adjudicated on merits. The ruling further states that section 132B permits excess seized cash to be adjusted against future tax liability at the assessee's request after the statutory retention period, rather than by any automatic obligation on the revenue. Interest on the retained excess is to be reworked from the day after expiry of the 120-day period, or from the date of the request if made later. The appeal was partly allowed with directions to recompute interest accordingly.

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Issues: (i) Whether the assessee's application under section 154 was maintainable for reworking the interest after adjustment of seized cash. (ii) Whether seized cash could be adjusted towards future tax liability and, if so, from which date the interest was to be reworked.

Issue (i): Whether the assessee's application under section 154 was maintainable for reworking the interest after adjustment of seized cash.

Analysis: The Assessing Officer had not applied his mind to the assessee's request for appropriation of seized cash in the assessment order and had not taken any decision on that aspect. In that situation, the question was not one already decided on merits in the assessment order, and the application for rectification could not be treated as barred merely because the Commissioner (Appeals) viewed it as debatable. A rectification request is maintainable where the earlier order does not deal with the issue at all.

Conclusion: The application under section 154 was maintainable, and the assessee succeeded on this issue.

Issue (ii): Whether seized cash could be adjusted towards future tax liability and, if so, from which date the interest was to be reworked.

Analysis: On a reading of section 132B, seized cash is first available for adjustment against existing liability, and the balance is to be returned after the statutory period. The provision does not create an automatic obligation to adjust seized cash against future liability, but if the assessee requests such adjustment, the excess amount can be so appropriated after the expiry of the stipulated 120 days. Interest on the retained excess is to be worked out from the date immediately after expiry of that period, or from the date of the application if the request is made later. The revenue's position that no such adjustment could be made was not accepted.

Conclusion: The seized cash could be adjusted towards future tax liability on the assessee's request, and the interest was directed to be reworked from the relevant date; the assessee succeeded on this issue as well.

Final Conclusion: The appeal was partly allowed with directions to recompute interest after giving effect to the statutory treatment of seized cash under section 132B.

Ratio Decidendi: Where the assessment order does not decide the appropriation of seized cash, a rectification application is maintainable, and section 132B permits adjustment of the excess seized amount towards future liability on the assessee's request after the statutory retention period.

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