TaxTMI 
TaxTMI 
2002 (3) TMI 209
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the partners recorded under section 132(4) of the Income-tax Act. The assessees also furnished guarantee as required by the Revenue authorities for the release of the stock, which was in excess of the stock disclosed in books of account. The bank guarantee was also requested to be realised by the Revenue before the second instalment of tax was payable by the firm and the partners. The assessee vide letter written on 2-12-1987, had requested that bank guarantee and cash seized from the assessee be adjusted towards the advance tax payable by the firm and the partners. 3. The Assessing Officer did not adjust the seized amount or the bank guarantee realised as advance tax, as prayed for by the assessee and made adjustment of these amounts as paid on the date of assessment order. Accordingly, interest under sections 139(8) and 2l5/217 was charged both in the case of partners as well as that of firm M/s National Feed Store, Ludhiana. The assessees moved an application under section 154 of the Income-tax Act pointing out that in charging the aforesaid interest, as according to the assessee the ld. Assessing Officer had committed a mistake apparent from record. It was prayed that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d amount could not be adjusted as advance tax. The ld. DR further submitted that payment of tax has to be voluntary and any amount seized by the Revenue authorities in search cannot be treated as tax paid. Accordingly, the ld. DR supported the charging of interest. 8. Sh. Sudhir Sehgal, on the other hand, stated that search was carried on 18-9-1987 when the first instalment of advance tax in all the cases stood paid. Before the payment of second instalment, Revenue had realised amount of bank guarantee and also adjusted the amount seized and, therefore, benefit of above was to be allowed to the assessee. Sh. Sudhir Sehgal also drew our attention to the order passed by the Assessing Officer under section 132(5), dated 13-1-1988 of Income-tax Act computing tentative income and tax payable thereon by the firm and its partners. Sh. Sehgal further submitted that decisions relied upon by the ld. DR fully supported his assessee's case. He accordingly, prayed that the impugned order be upheld. 9. We have given careful thought to the rival submissions of the parties. As noted earlier, the search was carried by the Revenue at the business as well as residential premises of the partners....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... --------------- Though the assessee has surrendered the undisclosed income in the shape of cash and excess stock etc. in the statement recorded under section 132(4) of the one of the partners, the issue as to whether penalty under section 271(1)(c) is imposable or not would be decided at the time of regular assessment. However, here minimum penalty of 100% under section 271(1)(c) is imposable, which is at Rs.1,30,480. Total liability of the firm (i) R.P. tax Rs. 1,30,480 (ii) Penalty As above Rs. 1,30,480 -----------------  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; ------------------ firm and its partners. Rs. 4,34,470 ------------------ Total liability to tax and penalty as per above order comes to Rs.4,34,470 which is far in excess of the cash seized. The cash seized in the above case is therefore, hereby ordered to be retained. This order has been passed with the prior approval of the Inspecting Assistant Commissioner of Income-tax, Range-I, Ludhiana conveyed vide his office letter No. JB/4708, dated 13-1-1988."....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of which such person is in default or is deemed to be in default, and retain in his custody such assets/or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized: Provided that if, after taking into account the materials available with him, the Income-tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly: Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in clauses (ii), (iia) and (iii) or any part thereof, the Income-tax Officer may, with the previous approval of the Chief Commissioner or Commissioner, release the assets or suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... treated as payment of advance tax unless order under section 132(5) is passed. The ld. DR has argued on the above lines. 13. The other relevant provisions are that of sub-section (3) of section 132B of the Income-tax Act, which provide how the retained assets are to be dealt with by the Assessing Officer. Seizure of asset is certainly recovery from the assessee and the order under sub-section (5) of section 132 of Income-tax Act furnishes to the assessee an account of liabilities and how seized assets are to be adjusted against the liabilities of the assessee for the current year or some other year. It is difficult to appreciate that despite the directions to adjust seized amount under section 132(5) against the liabilities of the current year, the assessee cannot and should not take into account above adjustments and make payment otherwise due. The assessee should treat statutory provision and orders passed thereunder and amount recovered and retained as of no consequences. This approach defies all logic and rationality. It is, therefore, only reasonable to allow the assessee to take credit for the seized amount as per recovery made by the Revenue authority and make payment ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... jewellery were retained by the Income-tax Officer by his order passed on 18-2-1980. In his order, the source of cash seized was accepted as explained but the explanation regarding acquisition of jewellery valued at Rs.1,22,211 was rejected thereby treating the investment as income from undisclosed sources. The liability under the Act towards the tax, penalty and interest was estimated at Rs.1,73,528. While making the regular assessment for the assessment year 1980-81, the Assessing Officer valued the jewellery at Rs.1,22,211. He accepted the explanation for jewellery worth Rs.1,12,211 only. Accordingly, he added Rs.20,800 being cash seized and Rs.10,000 against jewellery as income from undisclosed sources under section 69A of the Act to the assessed income. Finally, on the appeal, the said additions were deleted. On finalisation of the regular assessment, the petitioners requested the respondents to release the jewellery. But the respondents did not accede to the payer. On a writ petition against the order, a counter affidavit was filed justifying the retention of the jewellery on the plea that demands under the Act were still outstanding against the petitioners for the assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der sub-section (5) of section 132, the seized assets cannot be dealt with in any manner except for their release in accordance with the second proviso to sub-section (5)." 17. In the present case, we have already noted that in the order passed under section 132(5), the Assessing Officer specifically determined the liabilities of the assessees for the assessment year under consideration and retained the amount seized by the Revenue for adjustment against tax payable for the year under consideration. It is quite explicit in the order that amounts retained by the revenue aggregating to Rs.3,80,000 were to be adjusted in the assessment year 1991-92. No other liability is mentioned in the order under section 132(5). Ultimately the aforesaid amounts have been adjusted against liabilities of current year. Now the Assessing Officer is not ready to treat the amounts seized as paid by the assessees through bank guarantee as advance tax paid the assessees should have separately paid the advance tax without considering order under section 132(5). This is quite unreasonable. Supposingly, in a given case advance tax payable is Rs.1 lakh and seized amount from the assessees is more than Rs.1 ....