Cash seized during search and offered as advance tax must be treated as such under Section 132B provisions

The Delhi HC held that cash seized during search and offered by the assessee as advance tax must be treated as such under the then-prevailing Section 132B provisions. The court ruled that interest liability under Sections 234A, 234B, and 234C was wrongly imposed since there was no default in filing returns or advance tax payment when seized cash was properly offered for adjustment. The revenue must recalculate the refund after removing wrongly imposed interest and pay 6% interest from the return filing date. The court followed the Latika Datt Abbott precedent, emphasizing that adjustment requests must be honored from when first made.

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Issues Involved:
1. Treatment of the amount seized during the search action as advance tax.
2. Levy of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.
3. Truncation of refund for the Assessment Year 2009-10.

Issue 1: Treatment of Seized Amount as Advance Tax
The petitioner contended that the amount seized during the search action under Section 132 of the Income Tax Act, 1961, should be treated as advance tax. Despite representations made by the petitioner, the respondents/revenue treated the seized amount as self-assessment tax. The court noted that the search and seizure action was carried out on 15.01.2009, and the petitioner filed the Return of Income (ROI) on 15.03.2010, explicitly stating that the seized cash of Rs. 50 lakhs should be treated as advance tax. The court observed that before the amendment via Finance Act, 2013, Section 132B allowed the adjustment of seized cash as advance tax.

Issue 2: Levy of Interest Under Sections 234A, 234B, and 234C
The respondents/revenue imposed interest under Sections 234A, 234B, and 234C of the Act, which the petitioner argued was incorrect as the seized cash should have been treated as advance tax. The court agreed with the petitioner, noting that the ROI was filed after the seizure and the cash was offered to be treated as advance tax. Consequently, there was no default in payment of advance tax, and the imposition of interest under the aforesaid sections was deemed incorrect.

Issue 3: Truncation of Refund for AY 2009-10
Due to the respondents/revenue treating the seized amount as self-assessment tax and imposing interest under Sections 234A, 234B, and 234C, the refund for AY 2009-10 was reduced. The court ruled that the respondents/revenue should have treated the cash seized as advance tax and recalculated the refund accordingly. The court directed the respondents/revenue to excise the imposition of interest and compute the correct refund amount, adjusting it against the already paid refund of Rs. 20,73,340/- and paying interest at 6% from the date of filing the ROI.

Conclusion
The court concluded that the respondents/revenue should have treated the seized cash as advance tax and not imposed interest under Sections 234A, 234B, and 234C. The respondents/revenue were directed to recompute the refund and pay the petitioner the due amount with interest at 6% from 15.03.2010. The writ petition was disposed of with the expectation that the amount due would be remitted within six weeks.

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