ACIT, CENTRAL CIRCLE-1(1), KOLKATA, KOLKATA vs. SHRI RAKESH AGAWAL, KOLKATA

The Grievances raised by the Revenue are as follows:

“1) That the CIT(A) erred in law as well as facts and circumstances of the case in holding that the cash seized during the course of search should be adjusted against the tax liability from ‘date of application’ i.e. on 10.04.2012 considering that income tax does not provide for adjustment of seized cash before determination tax liability and cannot be adjusted against advance tax as per explanation 2 to section 132B.

The brief facts qua the issue are that a search and seizure operation was conducted under the provisions of section 132 of the Income Tax Act on 17.01.2012 and cash to the tune of Rs. 1,83,45,000/-, was seized by the search party from the assessee`s residence and office premises.During the rectification proceedings under section 154 of the Act, the Assessing Officer has given credit of seized cash to the tune of Rs.1,75,00,000/- out of total cash seized during the course of search and seizure of Rs.1,83,45,000/-, thereby omitting to give credit of the balance amount of Rs.8,45,000/- ( that is, Rs.1,83,45,000 - Rs.1,75,00,000).The assessee submitted a request Letter on 10/04/2012 to DGIT (Inv) to treat seized cash of Rs. 1,83,45,000/- as Advance Tax for A.Y 2012-13.The Return of Income was filed by assessee on 31/01/2013,wherein he took the credit of seized cash. The assessing officer passed the assessment order u/s 143(3), on dated 31/03/2014, wherein credit of seized cash was not provided to the assessee.

Aggrieved by the stand of the Assessing Officer,( against Rectification order dated 23/09/2014),assessee carried the matter in appeal before the CIT(A), who allowed the balance tax Credit of Rs. 8,45,000/-. The Revenue is not satisfied with the order of ld CIT(A) and is in further appeal before this Tribunal.

The ld. DR for the Revenue hassubmitted before us that ld. CIT(A) erred in holding that the cash seized during the course of search & seizure, should be adjusted against the tax liability from ‘date of application’ i.e. on 10.04.2012. The Income Tax Act does not provide for adjustment of seized cash before determination tax liability and cannot be adjusted against advance tax as per explanation 2 to section 132B of the Act. The ld. DR further stated that the assessee’s request to adjust the seizedcash, towards his advance tax liability, from the ‘date of applicationi.e. on 10.04.2012’ should not be entertained, as the provisions of section 132B of the Act, does not speak about and does not give the guidance that the Department should adjust the seized cash towards the advance tax liability of the assessee from the ‘date of application’ itself.

Learned counsel for the assessee begins by pointing out that the assessee had already submitted a letter on dated 10.04.2012 to the ld. DGIT(Investigation), Kolkata with a request to treat the cash so seized during the course of search & seizure operation,towards his liability to pay advance tax for the Assessment Year 2012-13. The ld. counsel submitted that in accordance with the provisions of Clause (i) of Section 132B of the I.T. Act, 1961,the adjustment of seized cash with the existing tax liability is permitted and for that the assessee submitted a letter on 10.04.2012 to the Shri Rakesh Agarwal Assessment Year: 2012-13 ld. DGIT(Investigation), Kolkata with a request to treat the cash so seized during the course of search & seizure operation,towards his advance tax liability, for the Assessment Year 2012-13. The assessee has mentioned in the said letter that the total cash seized should be adjusted towards his advance tax liability to avoid unnecessary demand and interest due thereon. The ld. Counsel further submitted that it was clear from the letter submitted by the assessee to the Income Tax Authority regarding adjustment of the entire seized cash amounting to Rs.1,83,45,000/- and therefore, it should have been adjusted against the tax dues with effect from the ‘date of application’.

We have given a careful consideration to the rival submissions and perused the materials available on record, we note that the cash was seized during the course of search andthe return of income was filed by the assessee taking credit of seized cash, so the liability to deposit the advance tax could have been adjusted against the seized amount. The advance tax liability in respect of the assessment year 2012-13, the cash was already available in the P.D. account maintained by the department but the assessing officer has not accepted the request made by the assessee, vide letter dated 10.04.2012 for the adjustment of advance tax against the seized cash to the tune of Rs.8,45,000/- whereas the seized cash to the extent of Rs. 1,75,00,000/- has been adjusted by the assessing officer against the liability of the assessee towards liability for payment of advance tax. It seems to us that the assessing officer has accepted the request of the assessee partly to adjust the part amount out of total cash seized to the tune of Rs.1,83,45,000/-, which is acceptable but the question arises that when the amount of Rs. 1,75,00,000/- has been adjusted by the assessing officer against the liability of the assessee towards payment of advance tax, then why the balance amount of Shri Rakesh Agarwal Assessment Year: 2012-13 Rs.8,45,000/- (Rs.1,83,45,000/- - Rs.1,75,00,000/-) should not be adjusted? The characteristic and nature of both the amounts ( that is,Rs.1,75,00,000and Rs.8,45,000) are same. We note that assessee wrote a letter dated 10.04.2012 to DGIT(Investigation), Kolkata, for the adjustment of cash seized during the course of search and seizure operation towards his liability to pay advance tax. However, the Assessing Officer has adjusted on Rs.1,75,00,000/- and balance cash seized to the tune of Rs.8,45,000/- (Rs.1,83,45,000/- - Rs.1,75,00,000/-) has not been adjusted. We note that Rs.1,75,00,000/- was seized from the resident of the assessee and Rs.8,45,000/- seized from the office premises of the assessee. It is abundantly clear that the letter was written by the assessee to the Income Tax Authorities dated 10.04.2012, requesting for adjustment of the entire seized amount of Rs.1,83,45,000/-, towards advance tax liability of the assessee, therefore, the assessing officer should have been adjusted the entire seized cash against tax due with effect from the date of said application.

We note that the facts of the assessee’s case under consideration are similar to the facts narrated in thejudgment of Hon’ble Allahabad High Court in the case of Sunil Chandra Gupta (Supra). We note that the Department seized the cash to the tune of Rs.1,83,45,000/-and deposited in the in the P.D. Account of the company. The assessee made a request in writing dated 10.04.2012 for the adjustment of the cash seized against the liability of advance tax but the Department neither replied nor adjust the said amount of Rs.8,45,000/-. The amount of Rs.8,45,000/-, no doubt, it was available with the Department, andthe same could have adjusted against the advance tax, therefore, the interest for default in payment of advance tax is not leviable u/s 234B for the reason that assessee had already made a request for adjustment of the amount against the advance tax which was already in the custody of the Department. Similarly, interest under section 234C is not attracted as there was no deferment. Therefore, we are of the view that the assessee is entitled to adjustment of the seized cash against advance tax liability, therefore, no interest should be charged u/s 234A, 234B, and 234C of the Act, especially when the Department has assessee`s money in the P.D. account.

In the result, the appeal filed by Revenue is dismissed.