ITAT Delhi allows adjustment of seized cash for self-assessment tax, clarifies interest rules.

The ITAT Delhi allowed the appeal, permitting the assessee to adjust the seized cash of Rs. 1.76 crores towards self-assessment tax payable for AY 2015-16. The ITAT clarified that the seized cash could be adjusted with self-assessment tax but not with advance tax. The decision addressed the issue of interest under sections 234B and 234C, stating that interest under section 234C is applicable only on the returned income.

---

---

Issues involved:
The appeal concerns seeking credit for cash seized by the Income Tax Department during a search operation. The main issue is whether the seized cash of Rs. 1.76 crores can be adjusted towards self-assessment tax payable by the assessee.

Summary:
The appeal in ITA No.1986/Del/2018 for A.Y. 2015-16 arises from the order by the Ld. Commissioner of Income Tax(Appeals), New Delhi against the assessment order passed u/s 143(3) of the Income Tax Act, 1961. The assessee, an individual, had filed a return of income for AY 2015-16 declaring total income of Rs. 11,33,54,240/-. During a search operation, cash of Rs. 1.76 crores was seized from a car associated with the assessee. The assessee accepted that the seized cash belonged to him and offered unaccounted income of Rs. 7 crores. The assessee requested adjustment of the seized cash towards self-assessment tax payable. However, the ld AO did not give credit for the seized cash and raised a demand. The assessee filed a rectification application u/s 154 requesting the seized cash to be treated as advance tax payable. The ld AO rejected this request citing Explanation 2 to section 132B of the Act, which excludes advance tax payable from existing liability. The ld CIT(A) upheld the ld AO's decision.

Upon appeal, the ITAT Delhi observed that while the assessee's request to treat the seized cash as advance tax was erroneous, the failure to give credit for the seized cash in the assessment was an oversight. The ITAT held that there is no prohibition to adjust the seized cash with self-assessment tax, as long as it is not with advance tax. Citing relevant judicial precedents, the ITAT allowed the appeal, granting the assessee the adjustment of the seized cash towards self-assessment tax payable. The consequential issue regarding interest u/s 234B and 234C of the Act was also addressed, clarifying that interest u/s 234C is chargeable only on the returned income.

In conclusion, the ITAT allowed the appeal, holding that the assessee is entitled to adjust the seized cash of Rs. 1.76 crores towards self-assessment tax payable. The order was pronounced in the open court on 24/04/2023.

---