TaxTMI 
TaxTMI 
2013 (12) TMI 998
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....o completed were taken in first appeals before the Commissioner of Income-tax(Appeals). Certain modifications were granted by the Commissioner of Income-tax(Appeals). Later on, the appeals were taken before the Tribunal in second appeals. The Tribunal confirmed the orders of the Commissioner of Income-tax(Appeals). 4. The matter being so, the assessee thereafter filed rectification petitions under sec.154 on 26.8.2011 before the Assessing Officer praying for rectification of certain mistakes apparent in the assessment orders. The mistake pointed out by the assessee is that the assessing authority levied interest under sec.234B without giving credit to the sum of Rs. 1.65 crores seized at the time of search and also to the sum of Rs. 31 lakhs paid on 17.8.2007. 5. The Assessing Officer examined the prayer made by the assessee in the light of the law stated in sec.132B(1)(i). He held that it is clear from the above section that cash seized at the time of search has to be adjusted first against any existing liability, if any. At the time of search there was no tax liability and therefore, the seized cash could not have been adjusted against any demand. The Assessing Officer observed....
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.... the assessee had requested that the sums seized be treated as "tax paid by the assessee under section 140A or otherwise"as defined u/s 234B(2) of the Income Tax Act, 1961. 4. The Learned the Commissioner of Incometax( Appeals) has erred in not directing that the interest u/s 234B should cease to be charged to the extent of cash seizure." 10. The assessee has also filed another additional ground for the consideration of the Tribunal. The additional ground reads as below: "The learned Assessing Officer erred in calculation of interest under sections 234 A of the Income-tax Act, 1961." 11. As the additional ground does not call for any further investigation of facts, the said ground is admitted for adjudication. 12. In paragraph 6 of his order, the Commissioner of Incometax( Appeals) has agreed to the facts explained by the assessee that a sum of Rs. 1.65 crores was seized by the department in the course of search on 16.5.2007. He has also confirmed the payment of Rs. 31 lakhs made on 17.8.2007. Therefore, there is no dispute regarding the amounts seized by the department and paid by the assessee, both lying in the hands of the department before completing the ass....
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....ady requested in writing to the department that the said amount of Rs. 31 lakhs also may be appropriated against the tax liability of the assessee-A.O.P. When the assessee is paying Rs. 31 lakhs over and above the seized amount at the time of search, it is obvious that this additional amount was paid by the assessee to meet the tax liability arising out of the assessments consequent to the search. 15. The Commissioner of Income-tax(Appeals) in his order has relied on the judgment of the Hon'ble Madras High Court in the case of CIT v. K.T.Kunjumon (239 ITR 782), to reject the contention raised by the assessee. In the said judgment, the Hon'ble High Court has held that the provisions relating to search and seizure and consequential block assessment override other provisions of the Income-tax Act, 1961 and therefore, cash seized in the course of search must be adjusted in first instance towards the liability arising out of the consequential block assessment. The court held that if any surplus is available after adjusting the demand of block assessment, the surplus alone can be adjusted against existing liability. It is relying on the above ratio that the Commissioner of Income-tax(Ap....
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.... the demand arising out of the consequential assessment. When the Revenue is taking such a precaution on the presumption that the liability is going to arise, it is futile to argue that the assessee had no advance tax liability at the time of search. The search has created the advance tax liability against the assessee except for exact quantification. That is why, we again repeat the question that if there was no such liability, how the Revenue levied interest under sec.234B? It is clear that the stand taken by the Revenue is contradictory. 18. The Income-tax Appellate Tribunal, Cochin Bench in the case of Synthetic Industrial Chemicals Ltd. v. DCIT (270 ITR (AT) 98) has observed that "It is to be seen that even the payment of advance tax is an advance payment of assessed tax". In the light of the above proposition, when the assessee has written to the department to treat the seized amount against the tax liability arising out of the consequential assessment, it is clear that the assessee was requesting the department to adjust the amount towards advance payment of assessed tax. 19. In fact, the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. v. CIT (280 ITR 643) has demys....
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.... advance tax paid on 17.8.2007. The interest shall be reworked on the above lines. 23. The contention of the assessee regarding levy of interest under sec.234B is thus accepted. 24. On the same analogy of the above discussion made in respect of sec.234B, it is to be held that while computing interest under sec.234A it is necessary to give credit for the above stated two amounts paid prior to the completion of the assessment. This principle has been upheld by the Hon'ble Supreme Court in the case of Pranoy Roy And Another v. CIT (309 ITR 231). 25. Therefore, while computing interest both under sections 234A and 234B, prepaid amounts of Rs. 1.65 crores and Rs. 31 lakhs need to be given credit and the interest can be calculated only after giving credit to these amounts and reducing the same from the advance tax liability and tax liability respectively. 26. It is also necessary for us to deal with the finding of the Commissioner of Income-tax(Appeals) that the issue raised by the assessee in his application under sec.154 was not a mistake apparent from the records. He has held that it is necessary to go beyond the records of the case and deep into the facts to decide whether there ....