ITAT Decision: Interest Charges on Seized Cash Partially Allowed

The Income Tax Appellate Tribunal (ITAT) partially allowed the assessee's appeal regarding the seized cash of Rs. 66,80,000. The ITAT directed the Assessing Officer to delete the interest charged under section 234A of the Income Tax Act, 1961, as the seized cash was available with the Income Tax Department from the date of seizure. However, interest under section 234B was upheld for one month only, and interest under section 234C was deemed chargeable due to deferred advance tax payment. The ITAT's decision resulted in the partial allowance of the assessee's appeal.

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Issues:
- Whether the seized cash of Rs. 66,80,000/- is eligible for credit before charging interest u/s 234A and 234B of the Income Tax Act, 1961.

Analysis:
1. The appeal arises from the order of the Commissioner of Income Tax(Appeals) against the order passed by the ACIT under section 143(3) read with Section 153A of the Income Tax Act, 1961 for the Assessment Year 2011-12.

2. The main issue is whether the seized cash of Rs. 66,80,000/- on 23.04.2011 is eligible for credit before charging interest u/s 234A and 234B of the Act. The cash was seized during a search & seizure operation and handed over to the Income Tax Department. The assessee agreed to offer the seized cash as undisclosed income towards unexplained liabilities for the assessment year 2011-12.

3. The Assessing Officer (AO) completed the assessment, determining the total income and charging interest u/s 234A, B & C without giving credit for the seized cash. The CIT(A) allowed adjustment of the seized cash towards tax liability, following a decision of the ITAT, Kolkata, “B” Bench.

4. The assessee appealed on the grounds that the CIT(A) erred in not giving credit for the seized money as prepaid taxes and in not allowing adjustment of self-assessment tax liability from the date of seizure. The ITAT found that the seized cash was available with the Income Tax Department from 23.04.2011 onwards, and directed the AO to delete the charging of interest u/s 234A.

5. Regarding interest u/s 234B, the ITAT held that interest would be chargeable for one month only, i.e., for April 2011. Interest u/s 234C was found to be leviable due to deferment of advance tax payment for the period of 01.04.2010 to 31.03.2011.

6. The ITAT partly allowed the grounds raised by the assessee, directing the AO to charge interest u/s 234B for one month only and confirming the leviability of interest u/s 234C.

7. Consequently, the appeal of the assessee was partly allowed by the ITAT.

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