Tribunal directs AO to credit seized cash against tax liability, no interest under sections 234B & 234C -tax

The Tribunal allowed the assessee's appeal, directing the AO to credit seized cash and pay orders totaling Rs. 75,50,860 against advance tax liability for the assessment year 2012-13. Consequently, interest under sections 234B and 234C for the third quarter installment was not chargeable. The AO was instructed to recalculate interest after adjusting the seized amount.

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Issues Involved:
1. Non-granting of credit for cash seized and pay orders as advance tax.
2. Charging of interest under sections 234B and 234C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Non-granting of Credit for Cash Seized and Pay Orders as Advance Tax:
The assessee challenged the order confirming the non-granting of credit for cash seized (Rs. 17,50,000) and pay orders (Rs. 58,00,860) as advance tax against the income tax liability for the assessment year 2012-13. The search and seizure action under section 132(1) of the Income Tax Act was conducted on 24.11.2011, during which cash and jewellery were found. The assessee filed a revised return declaring the undisclosed cash and jewellery. Despite the assessee's written requests to treat the seized cash and pay orders as advance tax, the Assessing Officer (AO) did not allow any credit while calculating interest under sections 234B and 234C.

In the appellate proceedings, the CIT(A) dismissed the appeal, observing that the term "existing liability" under section 132B does not include advance tax payable, as clarified by Explanation 2 to section 132B inserted by the Finance Act 2013. The CIT(A) held that the decisions cited by the appellant did not consider this explanation and that the amendment had retrospective effect.

2. Charging of Interest under Sections 234B and 234C:
The assessee argued that the department should have adjusted the seized cash and pay orders towards the advance tax liability, at least for the third installment due on 15.3.2013. The assessee cited several judgments supporting the claim that the seized assets should be adjusted against the advance tax liability if requested before the installment became due.

The Tribunal considered the facts and the series of judgments cited by the assessee, including the jurisdictional High Court's decision in CIT vs. Shri Jyotindra B. Mody, which held that the amount seized during the search should be adjusted towards the advance tax liability if requested before the due date for the last installment. The Tribunal found that the AO's failure to adjust the seized amount resulted in an unjustified interest charge under sections 234B and 234C.

Conclusion:
The Tribunal set aside the order of the CIT(A) and directed the AO to allow the credit of Rs. 75,50,860 against the advance tax liability. Consequently, the interest under sections 234B and 234C for the third quarter installment was not chargeable. The AO was instructed to recalculate the interest after allowing the credit for the seized amount.

Judgment:
The appeal of the assessee was allowed, and the order was pronounced on 13th Nov. 2017.

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