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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by Revenue is arising out of order of Commissioner of Income Tax (Appeals) Central-III, Kolkata in appeal No.24/CC-XXII/CIT(A)C- III/12-13/Kol dated 22.03.2013. Assessment was framed by DCIT, CC-XXII, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 14.12.2011 for assessment year 2010-11.
DCIT,CC-XXII Kol. v. M/s Manakamna Flour Mills (P) Ltd. Page 2 2. The only issue in this appeal of Revenue is that Ld. CIT(A) erred in treating the impounded / seized cash as advance tax. For this, Revenue has raised following ground:- “
1. On the facts and circumstances of the case Ld. CIT(A) erred in law in directing to treat the seized cash as payments of Advance tax by the assessee, ignoring the provisions of section 132B of the IT Act on application of seized assets, which allows adjustment of liability existing on the day of search & seizure or requisition only under the Income Tax Act., Wealth Tax Act, Expenditure Tax Act, Gift Tax Act and Interest Tax Ac and liability determined on completion of assessment or assessment under section 113(3)/154.
2. On the facts and circumstances of the case Ld. CIT(A) erred in not considering the judgment of Madras High Court in the case of P.P.Kanniah vs. ITO (1981) 129 ITR 414 (Mad.) wherein it has been held that the Cash seized by the Dept. are kept as a deposit in the PD Account of the CIT, remains an asset of the assessee which can be adjusted only after an existing liability crystallizes after completion of assessment.”
3. Briefly stated facts are that there was a search and seizure operation conducted at different residential and business premises of Begraj Group on 22.03.2010. The assessee in the present case belongs to Begraj Group so it was covered under the search & seizure operation. As a result of search several assets were found including cash of ₹8,04,300/-, and IT Department seized cash of ₹7.50 lakh. The Assessing Officer completed the assessment and raised demand of tax for₹11,26,470/- including the interest u/s 234B of the Act for an amount of ₹1,98,177/- but AO has not treated the impounded cash as advance tax, therefore interest u/s. 234B was charged on the entire outstanding demand. The assessee filed a rectification application u/s 154 of the Act on dated 31.01.2012 for allowing credit of seized cash for ₹7.50 lakh for charging the interest u/s 234B of the Act. However, AO rejected the said petition by disallowing to treat the seized cash as advance payment of tax.
4. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO by observing as under:-
DCIT,CC-XXII Kol. v. M/s Manakamna Flour Mills (P) Ltd. Page 3 “I have carefully perused the impugned order u/s. 143(3) / 154 and submissions made by the A/R. in connection with the issue on hand reference may b made to the decision of Hon'ble “B” Bench of the Kolkata ITAT in ACIT v. Vaibhav Tulsyan (ITA No. 1695/Kol/2011, date of order 20.04.2012) where the Hon'ble Tribunal upheld the appellant’s claim of adjustment of the cash seized during the search towards the Advance Tax liability of the assessee and charge interest u/s 234B and 234C after considering such adjustment.”
Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us.
Before us both the parties are supported the orders of Authorities Below as favourable to them.
We have heard rival contentions and perused the materials available on record. Ld. AR submitted paper book which is running pages 1 to 10. We find that AO has not treated the seized cash as advance tax but in appellate proceedings Ld. CIT(A) treated the same as advance tax. Now the issue before us is as whether the impounded cash found during the search can be treated as payment of advance tax. We find that the Hon'ble jurisdictional High Court in similar facts and circumstances allowed the issue in favour of assessee and against the Revenue in the case of CIT v. M/s Blb Securities (P) Ltd. in GA No. 3245 of 2012 dated 09.01.2013, for the sake of clarity, relevant extract reproduced below:- “The Court: The learned ITAT, by it order dated 25th June 2012 upheld the order allowing adjustment of the seized cash against the liability to pay tax which arose on 30th September, 2008.
Mrs. Ghutghutia submitted that under section 132B(i) of the Income Tax act, 1961, the seized cash could be adjusted against an existing liability and could not have been adjusted against a liability which arose subsequent thereto.
We are unable to accept this submission. If the seized cash can be adjusted against an existing liability, there is no reason why the seized cash cannot be adjusted against a liability which arose in future because in that the seized cash would amount to some sort of advance DCIT,CC-XXII Kol. v. M/s Manakamna Flour Mills (P) Ltd. Page 4 payment. We are as such unable to find any merit in the contention of Mr. Ghutghutia. Mr. Ghutghutia lastly submitted that if such adjustment is permissible, then interest would be payable by the assessee. But that question was not raised before the learned Tribunal. The learned Tribunal, therefore, had no occasion to express any option with regard thereto. In the facts of the case, it is not possible for us to say that the impugned judgment and order of the learned Tribunal is erroneous in law.”