TaxTMI 
TaxTMI 
2011 (10) TMI 648
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....se of search, which was requested by the assessee to be adjusted agasint the tax liability arising on account of surrender made for assessment year 2006-07, in a statement recorded under sec. 132(4) of the Act. 2. The brief facts of the case are that the a search and seizure operation was carried out at the premises of the assessee on 22.3.2006. During the course of search, a sum of Rs. 20.40 lacs was found and seized. The search was continued up to 23.3.2006. Statement of the assessee was recorded under sec. 132(4) of the Act. He has declared an additional income of Rs. 5.40 crores for assessment year 2006-07. The bank locker of the assessee was opened on 9.5.2006 and a further cash of Rs. 40 lacs was seized. In this way, the department h....
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....ed by the department but the ownership of such cash does not vest with the department automatically and it remains with the assessee only. According to the Learned CIT(Appeals), department cannot deal with such money until a proper tax demand is created against the assessee. He further observed that unless and until such liability is crystallized, the cash seized by the department cannot be adjusted. 4. Dissatisfied with the action of the Learned CIT(Appeals), assessee carried the matter in appeal before the learned ITAT. The appeal has been allowed vide order dated 28.11.2008 which was subsequently modified in a miscellaneous application bearing No.64/Del/08. The department took the matter to the Hon'ble High Court vide ITA No.53/Del/....
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....onsidered elaborately by the ITAT, Chandigarh Bench in the case of Nikka Mal Babu Ram Vs. ACIT reported in 41 SOT 407. On the other hand, Learned DR relied upon the order of the Learned CIT(Appeals). She contended that cash seized during the course of search can only be adjusted against the existing liability. When assessee wrote letter to the department at that point of time, there was no existing liability. The date for payment of advance tax has already been expired and, therefore, credit of this amount cannot be given to the assessee. 6. We have duly considered the rival contentions and gone through the record carefully. In order to appreciate the controversy more logically, it is imperative upon us to have a look on section 132B(i) wh....
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....y penalty levied or interest payable in connection with such assessment. Thus, section 132(1)(i) of the Act authorized the Assessing Officer to recover the liability prescribed under the Act out of the assets seized under sec. 132 of the Act. Learned Commissioner in the impugned order, has observed that though assets possessed by the department but its ownership does not vest with the department automatically and it remains with the assessee only. According to the Learned CIT(Appeals), the department cannot deal with such money until a proper tax demand is created against the assessee. He also emphasized that until and unless such liability is crystallized, the cash seized by the department cannot be adjusted. In our opinion, when advance t....
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....isted on a particular date. If the liability to pay advance tax had arisen, it would certainly constitute a part of the 'existing liability' used in section 132B(1)(i ) of the Act. 10. In our considered opinion, the doctrine of purposive construction has to prevail in this situation. In the present situation, it is evident that cash was seized from the assessee during search operation and, assessee requested the Department to adjust a part of such cash receipts against the liability of advance tax which arose on account of the income surrendered during the search operation. The Department does not deny possession of the cash since the time of search. Thus, we find no justification for the Revenue to interpret the expression 'existing liabil....
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....re it, held that unless an order under section 132(5) of the Act is passed, the Assessing Officer could not direct that the assets seized be adjusted towards advance tax liability. The Hon'ble High Court specifically noted that it is only after an order under section 132(5) is passed that the assessee can make a request that the seized amount which is sought to be released in his favour be adjusted or appropriated towards the liability to pay advance tax. Though, in the context of the present assessment year before us, the provisions of section 132(5) are not applicable and therefore, strictly speaking, the ratio of the judgment of the Hon'ble Madhya Pradesh High Court does not apply, so however it is pertinent to observe that the Hon'ble H....