1995 (7) TMI 112 - AT - Income Tax

Tribunal rules seized sum not advance tax; CIT(A) erred in interpretation

The Tribunal overturned the CIT(A)'s decision to treat a seized sum as advance tax, ruling that the Assessing Officer's rejection was valid as there was ... Advance Tax, Assessing Officer, Assessment Year, Regular Assessment, Retained Assets, Tax Liability Issues Involved:1. Treatment of a seized sum as advance tax.2. Mistake apparent from the record.3. Provisions of Section 132(5) and 132B of the Income-tax Act, 1961.4. Regular assessment and intimation under Section 143(1)(a).Issue-wise Detailed Analysis:1. Treatment of a Seized Sum as Advance Tax:The core issue revolves around whether a seized sum of Rs. 1,62,194 should be treated as advance tax. The assessee argued that this amount, retained during a search and seizure operation, was to be treated as advance tax based on their request during proceedings under Section 132(5). The Assessing Officer rejected this request, stating there was no clear provision in the Income-tax Act for such treatment under Section 143(1)(a). The CIT(A) found that Rs. 1,55,303 out of the seized sum should indeed be treated as advance tax, directing the Assessing Officer to rectify the intimation under Section 143(1)(a) accordingly.2. Mistake Apparent from the Record:The CIT(A) concluded that not treating Rs. 1,55,303 as advance tax constituted a 'mistake apparent from the record.' This conclusion was based on the fact that the details were already present in the record, and thus, the non-consideration of the amount as advance tax was a clear oversight. However, the Appellate Tribunal found that the CIT(A) was influenced by an incorrect interpretation of the order under Section 132(5), which itself was not in accordance with the law.3. Provisions of Section 132(5) and 132B of the Income-tax Act, 1961:The Tribunal highlighted that the order under Section 132(5) was flawed because it included advance tax in the liabilities, which is not permitted under the Act. According to Section 132(5)(ii) and (iii), only amounts of tax, interest, penalty, and existing liabilities under various tax laws are to be considered for retention of seized money. The Tribunal emphasized that the CIT(A) ignored the provisions of Sections 132B and 132(6), which stipulate that the retained assets can only be used to discharge liabilities determined upon completion of regular assessment or reassessment.4. Regular Assessment and Intimation under Section 143(1)(a):The Tribunal clarified that 'regular assessment' as defined in Section 2(40) refers to assessments made under Section 143(3) or 144, not intimation under Section 143(1)(a). Therefore, adjustments or recoveries from retained assets are only permissible after the completion of a regular assessment. The Tribunal concluded that the CIT(A) erred in directing the Assessing Officer to treat the seized money as advance tax and adjust it in the intimation under Section 143(1)(a) without completing a regular assessment.Conclusion:The Tribunal found that the CIT(A)'s order was not justified and was based on an incorrect interpretation of the law. The Tribunal quashed the CIT(A)'s order and allowed the revenue's appeal, affirming that there was no mistake apparent from the record and that the Assessing Officer's rejection of the rectification petition was correct.