2018 (1) TMI 390 - AT - Income Tax

ITAT rules no interest on seized cash adjusted as tax

The ITAT upheld the decision of the Ld. CIT(A) in a tax case involving seized cash. It ruled that interest u/s 234A should not be charged on the seized ... Scope of rectification order u/s 154 - withdrawing the credit being cash seized during the course of search and claimed as self-assessment tax in ITR filed under section 153A - Held that:- The Hon’ble Kolkata High Court in the case of Hindustan Lever Limited [2006 (3) TMI 80 - CALCUTTA High Court] while considering the scope of Section 154(1) of the I.T. Act held that the mistake must be so obvious that it can be easily corrected to wit an arithmetic error, wrong quotation of section etc., but not a debatable issue. In the present case, the claim of assessee for adjustment of seized cash towards self-assessment tax was accepted by the A.O. after considering the explanation and statement of assessee. Therefore, without justification, the A.O. should not have rectified the order for withdrawing such benefit to the assessee. The Ld. CIT(A), therefore, correctly followed the order of the ITAT, Kolkata Bench in the case of Narendra N. Thacker (2015 (11) TMI 62 - ITAT KOLKATA). Since, the issue was highly debatable before the A.O, therefore, in such circumstances, A.O. should not have pass the rectification order under section 154 of the I.T. Act. No infirmity have been pointed out in the order of the Ld. CIT(A). We, therefore, confirm the same and dismiss the appeal of the Revenue. Issues involved:1. Whether interest u/s 234A should be charged on seized cash from the date of seizure to the completion of assessment.2. Whether the seized cash should be adjusted as self-assessment tax and if interest u/s 234B is applicable.3. Whether rectification under section 154 for withdrawing the adjustment of seized cash towards self-assessment tax is valid.Analysis:Issue 1:The appeal and cross-objection were against the order of the Ld. CIT(A) regarding the charging of interest u/s 234A on seized cash of Rs. 2,60,00,000 from the date of seizure to the completion of assessment. The Ld. CIT(A) directed not to charge interest u/s 234A, which was contested by the Revenue. The ITAT considered the facts and held that the assessee requested for adjustment of the seized cash as self-assessment tax, which was accepted by the A.O. The A.O. later proposed rectification under section 154 to withdraw the benefit, which was deemed debatable and not rectifiable under section 154. The ITAT upheld the decision of the Ld. CIT(A) and dismissed the appeal of the Revenue.Issue 2:Regarding the adjustment of seized cash as self-assessment tax and the applicability of interest u/s 234B, the ITAT found that the A.O. had initially accepted the amount offered as self-assessment tax on the seized cash. However, without justification, the A.O. later proposed to withdraw this adjustment, which was considered debatable and not rectifiable under section 154. The ITAT referred to relevant case laws and upheld the decision of the Ld. CIT(A) to allow the adjustment of seized cash as self-assessment tax and to cancel the order passed under section 154.Issue 3:The issue of rectification under section 154 for withdrawing the adjustment of seized cash towards self-assessment tax was a key point of contention. The ITAT noted that the A.O. should not have rectified the order without justification, especially when the claim of the assessee for adjustment was accepted initially. Citing relevant case laws, the ITAT affirmed the decision of the Ld. CIT(A) to cancel the rectification order and allow the adjustment of seized cash as self-assessment tax.Overall, the ITAT dismissed the appeal of the Revenue and confirmed the decision of the Ld. CIT(A) in allowing the adjustment of seized cash as self-assessment tax and not charging interest u/s 234A. The cross objection filed by the assessee was also dismissed, and the orders were pronounced in open court.