2018 (6) TMI 64 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on tax credit adjustment. No interest charges.

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to allow the balance tax credit for the adjustment of seized cash against ... Adjustment of seized cash against tax liability - treatment of seized cash as advance tax from date of application - credit in P.D. account - interest under sections 234A, 234B and 234C - reliance on judicial precedent for adjustment of seized cashAdjustment of seized cash against tax liability - treatment of seized cash as advance tax from date of application - credit in P.D. account - Whether the Assessing Officer was justified in refusing to adjust the balance seized cash against the assessee's advance tax liability from the date of the assessee's application dated 10.04.2012. - HELD THAT: - The Tribunal noted that cash totaling the seized amount was deposited in the Department's P.D. account and that the assessee had, by letter dated 10.04.2012, requested adjustment of the entire seized amount towards advance tax for AY 2012-13. The Assessing Officer had adjusted part of the seized cash but denied credit of the balance. The Tribunal held that where the Department has the seized cash in its custody and the assessee has made a timely request for adjustment, the seized cash is capable of being adjusted against the assessee's tax liability. The character and nature of the amounts adjusted and those denied were identical, and there was no justification for partial adjustment; consequently the Assessing Officer ought to have adjusted the entire seized cash against tax dues with effect from the date of the application. The Tribunal also placed reliance on precedent treating adjustment of seized cash against advance tax as permissible where the amount was available with the Department and the assessee had sought adjustment. [Paras 7, 8]The Assessing Officer's refusal to give credit of the balance seized cash was set aside and the balance amount was to be adjusted against the assessee's advance tax liability with effect from the date of the application.Interest under sections 234A, 234B and 234C - treatment of seized cash as advance tax from date of application - Whether interest under sections 234A, 234B and 234C is payable where the assessee had requested adjustment of seized cash held in the Department's P.D. account towards advance tax. - HELD THAT: - The Tribunal observed that because the seized cash was available in the Department's custody and the assessee had made a request for its adjustment towards advance tax prior to the relevant dates, interest for default in furnishing return or payment of advance tax would not be leviable. In these circumstances there was no deferment attracting section 234C, and no basis for interest under sections 234A or 234B where the Department had not acted on the timely request to adjust the cash in its possession. [Paras 8]No interest under sections 234A, 234B or 234C is to be charged in respect of the amounts which were in the Department's P.D. account and which the assessee had requested to be adjusted towards advance tax.Final Conclusion: The Revenue's appeal is dismissed: the Tribunal upheld the CIT(A)'s allowance of credit for the entire seized cash against the assessee's advance tax liability with effect from the date of the assessee's application and held that no interest under sections 234A, 234B or 234C is payable in respect of those amounts. Issues:Adjustment of seized cash against tax liability - Date of application - Advance tax - Section 132B of the Income Tax Act - Rectification proceedings under section 154 - Assessment Year 2012-13.Analysis:The appeal concerns the adjustment of seized cash against tax liability for Assessment Year 2012-13. The Revenue challenges the CIT(A)'s decision to adjust the cash seized during a search operation against the tax liability from the 'date of application' on 10.04.2012. The Revenue argues that the Income Tax Act does not allow for such adjustment before determining the tax liability and cannot be adjusted against advance tax as per explanation 2 to section 132B. The Assessing Officer initially provided credit for a portion of the seized cash but omitted to credit the balance amount. The assessee requested the seized cash to be treated as advance tax, but the assessing officer did not adjust the full amount in the assessment order dated 31/03/2014.During rectification proceedings, the assessing officer partially adjusted the seized cash and denied the balance amount. The CIT(A) allowed the balance tax credit, leading to the Revenue's further appeal. The Revenue argues that the adjustment should not be made from the 'date of application' as requested by the assessee. However, the assessee contends that the adjustment is permissible under Section 132B and had made a formal request for the adjustment on 10.04.2012.The Tribunal notes that the seized cash was available for adjusting the advance tax liability, and the assessing officer had already adjusted a portion of the seized amount. The Tribunal finds that the balance amount should have been adjusted as well, as both amounts have the same nature. The Tribunal refers to a judgment from the Allahabad High Court supporting the adjustment of seized cash against advance tax liability to justify its decision.In conclusion, the Tribunal dismisses the Revenue's appeal, upholding the CIT(A)'s decision to allow the balance tax credit. The Tribunal emphasizes that the assessee is entitled to the adjustment of seized cash against the advance tax liability, and no interest should be charged under sections 234A, 234B, and 234C, given that the Department had the seized cash in its custody.This detailed analysis highlights the key legal arguments, procedural steps, and judicial precedents considered in the judgment, providing a comprehensive overview of the case and its implications.