Shri Ram S Sarda, RAJKOT-GUJARAT v. The D.C.I.T, RAJKOT-GUJARAT

ITA 1172/RJT/2010 | 2008-2009
Pronouncement Date: 02-12-2010 | Result: Allowed

Appeal Details

RSA Number 117224914 RSA 2010
Assessee PAN ABSPS7231E
Bench Rajkot
Appeal Number ITA 1172/RJT/2010
Duration Of Justice 2 month(s) 16 day(s)
Appellant Shri Ram S Sarda, RAJKOT-GUJARAT
Respondent The D.C.I.T, RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 02-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 02-12-2010
Date Of Final Hearing 29-09-2011
Next Hearing Date 29-09-2011
Assessment Year 2008-2009
Appeal Filed On 16-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI D.K. TYAGI (JM) AND SHRI A.L. GEHLOT (A M) I.T.A. NO.1172/RJT/2010 (ASSESSMENT YEAR 2008-09) SHRI RAM S SARDA VS DY .CIT CENT.CIR.II SARDAS COURT RAJKOT CENTRAL BANK ROAD JAMNAGAR PAN : ABSPS7231E (APPELLANT) (RESPONDENT) DATE OF HEARING : 29-09-2011 DATE OF PRONOUNCEMENT : 02-11-2011 APPLICANT BY : SHRI KALPESH DOSHI RESPONDENT BY : SHRI YOGESH PANDE O R D E R PER BENCH THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF CIT(A)- IV AHMEDABAD DATED 26-07-2010 FOR THE ASSESSMENT Y EAR 2008-09. THE FOLLOWING EFFECTIVE GROUNDS ARE TAKEN IN THE APPEAL : 1. HON.CIT(A) HAD ERRED IN LAW AS WELL AS ON FACT IN HOLDING THAT THE APPEAL FILED AGAINST LEVY OF INTEREST U/S 234A 234B AND 234C IS NOT MAINTAINABLE. 2. HON.CIT(A) HAD ERRED IN LAW AS WELL AS ON FACT I N NOT TREATING CASH SEIZED AS ADVANCE TAX FROM THE DATE OF SEIZURE THOUGH SPECIFIC REQUEST WAS MADE TO ASSESSING OFFICER. 3. HON.CIT(A) HAD ERRED IN LAW AS WELL AS ON FACT I N CONFIRMING LEVY OF INTEREST U/S 234A 234B AND 234C OF THE ACT ON FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.1172/RJT/2010 2 2. IN GIST THE GROUNDS PERTAIN TO CHARGING OF INTE RESTS U/S 234A 234B AND 234C OF THE ACT. THUS THE ISSUES FOR CONSIDERATION ARE (1) WHETHER THE APPEAL IS MAINTAINABLE WHERE LEVY OF INTERESTS U/S 234A 234B AND 234C ARE CHALLENGED; (2) WHETHER THE CASH SEIZED COULD BE HELD AS ADVANC E-TAX FROM THE DATE OF SEIZURE OR FROM THE DATE WHEN ASSESSEE MADE REQUEST FOR ADJUSTMENT OR SHOULD IT BE FROM THE DATE OF ADJUSTMENT OF THE CASH SEIZED T OWARDS ADVANCE-TAX BY THE ASSESSING OFFICER?; AND (3).WHETHER CASH SEIZED FRO M THIRD PARTY WHICH WAS FOUND TO BE THE CASH OF THE ASSESSEE COULD BE ADJUS TED AS ADVANCE-TAX PAYMENT. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH WA S CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 21-02-2008 AND CASH OF RS.20 30 000 WAS SEIZED. THE ASSESSEE TREATED THE SAID SEIZED CASH AS ADVANC E-TAX PAID AND ADJUSTED THE SAME AGAINST TAX LIABILITY. HOWEVER THE ASSESSING OFFICER DID NOT ALLOW ADJUSTMENT OF CASH SEIZED AGAINST TAX LIABILITY NOR DID HE TREAT THE CASH SEIZED ON 21-02-2008 WHICH WAS LATER ADJUSTED AGAINST THE ADV ANCE-TAX LIABILITY AS ADVANCE-TAX PAID ON 21-02-2008. THE ASSESSING OFFI CER CHARGED INTERESTS U/S 234A 234B AND 234C BY IGNORING THE CASH SEIZED WHI CH WAS ADJUSTED AGAINST THE ADVANCE-TAX LIABILITY THOUGH THERE WAS SPECIFI C REQUEST FROM THE ASSESSEE TO TREAT THE CASH SEIZED AND ADJUSTED SUBSEQUENTLY AS THE ADVANCE-TAX PAYMENT ON 21-02-2008 VIDE HIS LETTER DATED 30-07-2009. ON AP PEAL THE CIT(A) DISMISSED THE ASSESSEES APPEAL ON THE GROUND THAT THE SAME I S NOT MAINTAINABLE. THE CIT(A) RELIED UPON THE JUDGMENT OF THE APEX COURT I N THE CASE OF CENTRAL PROVINCES MANGANESE ORE CO LTD VS CIT 27 TAXNMAN 27 5 (SC) AND IN THE CASE ITA NO.1172/RJT/2010 3 OF MP HIGH COURT IN THE CASE OF VINEET TALKIES VS X I 19 TAXMAN 35 (MP) AND CIT VS SARASWATI INDUSTRIAL SYNDICATE LTD 45 TAXMAN 11 (P&H). THE CIT(A) ALSO DISMISSED THE ASSESSEES APPEAL ON MERIT ON THE GRO UND THAT THE CASH OF RS.9 30 000 WAS SEIZED FROM THE PREMISES OF SHRI SU BHASH RAJNIKANT SARDA AND CASH OF RS.11 LAKHS WAS SEIZED FROM THE PREMISES OF M/S SARDA FOREX EXCHANGE PVT LTD WHEREAS THE REQUEST LETTER DATED 30-07-2009 TO THE ASSESSING OFFICER WAS SIGNED BY SHRI SRIRAM SUBHASH SARDA AND MANAGING DI RECTOR OF SARDA FOREX PVT LTD. THE CIT(A) WAS OF THE VIEW THAT THE SEIZED CA SH OF OTHER PERSONS CANNOT BE ADJUSTED AGAINST THE LIABILITY OF THE ASSESSEE AS A DVANCE-TAX. THEREFORE THE ASSESSING OFFICER WAS JUSTIFIED IN NOT ALLOWING CRE DIT OF RS.20 30 000 SEIZED FROM OTHER PERSONS AS ADVANCE-TAX LIABILITY OF THE ASSES SEE AND HAS THEREFORE RIGHTLY CHARGED INTERESTS U/S 234A 234B AND 234C OF THE AC T. 5. THE LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND SUBMITTED THAT THE APPEAL IS MAINTAINABLE. FOR THIS PROPOSITION HE RELIED UPON THE FOLLOWING JUDGEMENTS: CENTRAL PROVINCES MANGANESE ORE CO LTD VS CIT 160 I TR 961 (SC) JALGAON DIST.CENTRRAL CO-IO BANK LTD VS ITO 70 ITD 290 (PUNE) TRINITY FORGE VS ACIT 73 TTJ 582 (PUNE) THE LD.AR FURTHER SUBMITTED THAT THE INTERESTS U/S 234A 234B AND 234C ARE NOT CHARGEABLE AS THE SEIZED CASH IS ADJUSTABLE AS ADVA NCE-TAX. FOR THIS PROPOSITION HE RELIED UPON THE FOLLOWING DECISIONS: ITA NO.1172/RJT/2010 4 CIT VS ASHOK KUMAR 334 ITR 355 (P&H) NIKKA MAL BABU RAM VS ACIT 41 SOT 407 (CHD) SUDHAKAR M SHETTY VS ACIT 10 DTR 173 (MUM) SATYA PRAKASH SHARMA VS ACIT 20 DTR 561 (DEL) SATPAUL D AGARWAL (HUF) VS ACIT 62 TTJ 98 (MUM) CIT CS KESAR KIMAM KARYALAYA 278 ITR 596 (DEL) 6. THE LD.DR ON THE OTHER HAND RELIED UPON THE ORDE R OF CIT(A) AND SUBMITTED THAT THE CASH SEIZED FROM OTHER PARTIES I S NOT ADJUSTABLE AGAINST THE ADVANCE-TAX LIABILITY OF THE ASSESSEE. 7. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PART IES RECORD PERUSED AND HAVE GONE THROUGH THE DECISIONS CITED. 8. THE FIRST ISSUE IS WHETHER APPEAL IS MAINTAINABL E AGAINST LEVY OF INTERESTS U/S 234A 234B AND 234C. IT IS WELL SETTLED POSIT ION THAT THERE IS NO INHERENT RIGHT OF APPEAL. THAT RIGHT HAS TO BE SPECIFICALLY CONFERRED BY THE STATUTE. IT IS EQUALLY WELL SETTLED THAT IF THERE IS A PROVISION C ONFERRING A RIGHT OF APPEAL IT SHOULD BE CONSTRUED IN A REASONABLE AND LIBERAL MANNER. TH E POWER OF THE INCOME-TAX OFFICER IS TO MAKE ASSESSMENT UNDER SECTION 143 OF THE INCOME-TAX ACT. IT IS THAT ASSESSMENT WHICH IS THE SUBJECT MATTER OF APPEAL. T HE APPELLATE AUTHORITY ON APPEAL HAS THE POWER TO CONFIRM REDUCE INCREASE OR ANNUL THE ASSESSMENT. ITA NO.1172/RJT/2010 5 CLAUSE (A) OF SECTION 246(1) IS IN TWO PARTS. THE F IRST PART DEALS WITH AN ORDER AGAINST AN ASSESSEE WHERE THE ASSESSEE DENIES HIS L IABILITY TO BE ASSESSED. THE SECOND PART DEALS WITH AN ORDER OF ASSESSMENT UNDER SECTION 143(3) OR SECTION 144. IN THE SECOND PART THERE IS A RESTRICTION NA MELY THAT AN APPEAL AGAINST SUCH ORDER SHALL LIE ONLY WHERE THE ASSESSEE OBJECT S TO THE AMOUNT OF INCOME ASSESSED OR WHERE THE ASSESSEE OBJECTS TO THE AMOUN T OF TAX DETERMINED OR WHERE THE ASSESSEE OBJECTS TO THE AMOUNT OF LOSS CO MPUTED OR WHERE THE ASSESSEE OBJECTS TO THE STATUS UNDER WHICH HE IS AS SESSED. HERE IT IS USEFUL TO REFER THE JUDGMENT OF THE APEX COURT IN THE CASE OF CENTRAL PROVINCES MANGANESE ORE CO. LTD. V. COMMISSIONER OF INCOME-TA X [1986] 160 ITR 961 (SC). IN THAT CASE THE ASSESSEE WAS ASSESSED TO INC OME-TAX FOR THE ASSESSMENT YEAR 1967-68 THE RELEVANT PREVIOUS YEAR BEING THE YEAR ENDED DECEMBER 31 1966. INTEREST UNDER SUB-SECTION (8) OF SECTION 139 OF THE INCOME-TAX ACT 1961 AMOUNTING TO RS. 56 391 AND INTEREST UNDER SECTION 215 OF THAT ACT AMOUNTING TO RS. 9 42 336 SUBSEQUENTLY REDUCED TO RS. 5 07 880 WERE LEVIED ON THE ASSESSEE. ACCORDING TO THE ASSESSEE THERE WAS AMPL E AND CLEAR JUSTIFICATION FOR THE DELAY IN FURNISHING THE RETURN UNDER SECTION 13 9 AND FOR THE PAYMENT OF ADVANCE TAX UNDER SECTION 212 AT A FIGURE LESS THAN 75 PER CENT. OF THE ASSESSED TAX. ON MARCH 22 1971 THE ASSESSEE PREFERRED AN A PPEAL UNDER CLAUSE ( C ) OF SECTION 246 OF THE ACT BEFORE THE APPELLATE ASSISTA NT COMMISSIONER OF INCOME- TAX NAGPUR RAISING OBJECTION TO THE TOTAL INCOME A SSESSED AND ALSO INCLUDING GROUNDS OBJECTING TO THE INTEREST CHARGED UNDER SEC TIONS 139 AND 215 OF THE ACT. THE APEX COURT HAD CONSIDERED THE NATURE OF THE LEV Y OF INTEREST UNDER SUB- ITA NO.1172/RJT/2010 6 SECTION (8) OF SECTION 139 AND UNDER SECTION 215. I T WAS HELD THAT IT IS NOT CORRECT TO REFER TO THE LEVY OF SUCH INTEREST AS A PENALTY. THE EXPRESSION 'PENAL INTEREST' HAS ACQUIRED USAGE BUT IS IN FACT AN INACCURATE DE SCRIPTION OF THE LEVY. HAVING REGARD TO THE REASON FOR THE LEVY AND THE CIRCUMSTA NCES IN WHICH IT IS IMPOSED IT IS CLEAR THAT INTEREST IS LEVIED BY WAY OF COMPENSA TION AND NOT BY WAY OF PENALTY. THE INCOME-TAX ACT MAKES A CLEAR DISTINCTION BETWEE N THE LEVY OF A PENALTY AND OTHER LEVIES UNDER THAT STATUTE. INTEREST IS LEVIED UNDER SUB-SECTION (8) OF SECTION 139 AND UNDER SECTION 215 BECAUSE BY REASON OF THE OMISSION OR DEFAULT MENTIONED IN THE RELEVANT PROVISION THE REVENUE IS DEPRIVED OF THE BENEFIT OF THE TAX FOR THE PERIOD DURING WHICH IT HAS REMAINED UNP AID. THE VERY PERIOD FOR WHICH INTEREST IS LEVIED UNDER THE RELEVANT PROVISION POI NTS TO THE NATURE OF THE LEVY. IF THAT IS BORNE IN MIND IT WILL BE APPARENT THAT THE LEVY OF INTEREST IS PART OF THE PROCESS OF ASSESSMENT. ALTHOUGH SECTION 143 AND SEC TION 144 DO NOT SPECIFICALLY PROVIDE FOR THE LEVY OF INTEREST AND THE LEVY IS I N FACT ATTRIBUTABLE TO SUB-SECTION (8) OF SECTION 139 OR SECTION 215 IT IS NEVERTHELE SS A PART OF THE PROCESS OF ASSESSING THE TAX LIABILITY OF THE ASSESSEE. WHERE THE INCOME-TAX OFFICER CONSIDERS THAT THERE IS A CASE FOR LEVYING OF INTER EST UNDER SUB-SECTION (8) OF SECTION 139 OR UNDER SECTION 215 WHAT HE DOES IN P RACTICE IS TO MAKE AN ORDER LEVYING SUCH INTEREST AFTER COMPLETING THE ASSESSME NT OF THE ASSESSEE'S TOTAL INCOME AND THE TAX PAYABLE BY HIM. NOW THE QUESTIO N IS WHETHER ORDERS LEVYING INTEREST UNDER SUB-SECTION (8) OF SECTION 139 AND U NDER SECTION 215 ARE APPEALABLE UNDER SECTION 246 OF THE INCOME-TAX ACT? CLAUSE (C) OF SECTION 246 PROVIDES AN APPEAL AGAINST AN ORDER WHERE THE ASSES SEE DENIES HIS LIABILITY TO BE ITA NO.1172/RJT/2010 7 ASSESSED UNDER THE ACT OR AGAINST ANY ASSESSMENT OR DER UNDER SUB-SECTION (3) OF SECTION 143 OR SECTION 144 WHERE THE ASSESSEE O BJECTS TO THE AMOUNT OF INCOME ASSESSED OR TO THE AMOUNT OF TAX DETERMINED OR TO THE AMOUNT OF LOSS COMPUTED OR TO THE STATUS UNDER WHICH HE IS ASSESSE D. INASMUCH AS THE LEVY OF INTEREST IS A PART OF THE PROCESS OF ASSESSMENT IT IS OPEN TO AN ASSESSEE TO DISPUTE THE LEVY IN APPEAL PROVIDED HE LIMITS HIMSE LF TO THE GROUND THAT HE IS NOT LIABLE TO THE LEVY AT ALL. THE COURT HELD THAT THE LEVY OF PENAL INTEREST UNDER SECTION 139 OR SECTION 215 IS MADE IN THE REGULAR ASSESSMEN T ORDER; THE DEMAND NOTICE ISSUED PURSUANT TO THE ASSESSMENT ORDER IS FOR THE TOTAL AMOUNT OF LIABILITY IMPOSED INCLUSIVE OF TAX AND INTEREST. 9. WHILE LEVY OF PENAL INTEREST UNDER SECTION 18A O F THE 1922 ACT UP TO APRIL 1 1952 WAS AUTOMATIC AS WAS NOTICED BY CHAGLA C J. IN RAMNATH'S CASE [1955] 27 ITR 192 (BOM) UNDER THE ACT SUCH LEVY IS NOT A UTOMATIC; DISCRETION IS VESTED IN THE INCOME-TAX OFFICER TO WAIVE OR REDUCE PENAL INTEREST IN THE CASES AND CIRCUMSTANCES MENTIONED IN RULE II7A AND RULE 40 OF THE INCOME-TAX RULES 1962. IF THE CASE OF THE ASSESSEE FALLS WITHIN THE SCOPE OF THE SAID RULES THE INCOME- TAX OFFICER IS BOUND BY LAW TO CONSIDER WHETHER THE ASSESSEE WAS ENTITLED TO WAIVER OR REDUCTION OF INTEREST. IT IS THEREFORE CLEAR THAT LEVY OF PENAL INTEREST UNDER SECTIONS 139 AND 215 IS PART OF THE ASSESSMEN T. WHEN SUCH PENAL INTEREST IS LEVIED THE ASSESSEE IS 'ASSESSED ' MEANING THE REBY HE IS SUBJECTED TO THE PROCEDURE FOR ASCERTAINING AND IMPOSING LIABILITY O N HIM. IF THE ASSESSEE DENIES HIS LIABILITY TO BE ASSESSED UNDER THE ACT HE HAS A RIGHT OF APPEAL TO THE ITA NO.1172/RJT/2010 8 APPELLATE ASSISTANT COMMISSIONER AGAINST THE ORDER OF ASSESSMENT. WHERE PENAL INTEREST IS LEVIED UNDER SECTION 215 BY THE ORDER O F ASSESSMENT THE ASSESSEE MAY ALTOGETHER DENY HIS LIABILITY TO PAY SUCH INTER EST ON THE GROUND THAT HE WAS NOT LIABLE TO PAY ADVANCE TAX AT ALL OR THAT THE AM OUNT OF ADVANCE TAX DETERMINED BY THE INCOME-TAX OFFICER AS PAYABLE OUGHT TO BE RE DUCED. IN EITHER CASE HE DENIES HIS LIABILITY WHOLLY OR PARTIALLY TO BE AS SESSED. SIMILARLY WHERE INTEREST IS LEVIED UNDER SECTION 139 OF THE ACT THE ASSESSEE M AY DENY HIS LIABILITY TO PAY SUCH INTEREST ON THE GROUND THAT THE RETURN WAS NOT BELATED OR THAT THE PENAL PROVISION WAS NOT ATTRACTED AT ALL TO HIS CASE. IN SUCH A CASE ALSO HE DENIES HIS LIABILITY TO BE ASSESSED TO INTEREST. 9. IN VIEW OF THE LAW LAID DOWN BY THE APEX CURT IN CIT VS KANPUR COAL SYNDICATE (1964) 53 ITR 225 (SC) WE DO NOT FIND ANY JUSTIFICATION TO CONSTITUTE THE EXPRESSION DENYING HIS LIABILITY TO BE ASSESSE D AS DENIAL OF THE TOTAL LIABILITY FOR THE APEX COURT HAS OBSERVED: WHAT IS THE SUBSTANCE OF THE OBJECTION OF THE ASSE SSEE? THE ASSESSEE DENIES HIS LIABILITY TO BE ASSESSED UNDER THE ACT IN THE CIRCUMSTANCES OF THE CASE AND PLEADS THAT THE MEMBE RS OF THE ASSOCIATION SHALL BE ASSESSED ONLY INDIVIDUALLY. T HE EXPRESSION DENIAL OF LIABILITY IS COMPREHENSIVE ENOUGH TO TA KE INTO ONLY THE TOTAL DENIAL OF LIABILITY BUT ALSO THE LIABILITY UN DER PARTICULAR CIRCUMSTANCES: IN VIEW OF ABOVE OBSERVATIONS IT COULD BE HELD THA T THE EXPRESSION DENIES THE LIABILITY TO BE ASSESSED UNDER THE ACT REFERS ONLY TO TOTAL DENIAL OF LIABILITY. THE DENIAL MAY BE TOTAL AS WELL AS PARTIAL AND THE LIAB ILITY TO PAY INTEREST IN OUR ITA NO.1172/RJT/2010 9 OPINION WOULD CERTAINLY BE A PARTIAL DENIAL TO BE ASSESSED UNDER THE ACT AS ENVISAGED BY SECTION 246(1) OF THE ACT BECAUSE ON A CCEPTANCE OF ADJUSTMENT OR SEIZED AMOUNT AGAINST ADVANCE TAX PAID / LIABILITY CREATED THERE IS NO AMOUNT TO PAY BY THE ASSESSEE. THEREFORE THERE WILL BE NO Q UESTION OF LEVY OF INTEREST U/S 234A 234B AND 234C. 10. THE APEX COURT IN THE CASE OF JK SYNTHETICS LTD V CTO 119 CTR 222 (SC) LAID DOWN THE LAW THAT LEVY OF INTEREST PARTAK ES THE NATURE OF SUBSTANTIVE LAW AND NOT ADJECTIVAL LAW. 11. IN THE CASE UNDER CONSIDERATION THE CIT(A) REL IED UPON CERTAIN JUDGMENTS; HOWEVER ON CONSIDERATION OF FACTS WE FIND THOSE JU DGMENTS DO NOT HELP THE REVENUE. THE JUDGMENT OF THE APEX COURT RELIED UPO N BY REVENUE IN CASE OF CENTRAL PROVINCES MANGANESE ORE CO LTD (SUPRA) AS D ISCUSSED IS IN FAVOUR OF ASSESSEE. THE JUDGMENT OF MADHYA PRADESH HIGH COUR T IN THE CASE OF VINEET TEXTILES VS CIT (SUPRA) IS ALSO NOT HELPFUL TO REVE NUE AS IN THE JUDGMENT ITSELF IT WAS OBSERVED THAT THERE IS DIVERGENCE OF OPINION AM ONGST DIFFERENT HIGH COURTS. AS SUCH WHEN DIVERGENT OPINIONS OF THE DIFFERENT H IGH COURTS ARE AVAILABLE ON THE ISSUE IN THE INTEREST OF SUBSTANTIAL JUSTICE A ND KEEPING IN VIEW THE LEGAL PRECEDENTS WE HAVE TO NECESSARILY FOLLOW THE JUDGM ENT WHICH FAVOURS THE ASSESSEE. THEREFORE THE JUDGMENT IN THE CASE OF VINEET TEXTILES VS CIT (SUPRA) ALSO DOES NOT HELP THE REVENUE. THE JUDGMENT OF PU NJAB & HARYANA HIGH COURT IN THE CASE OF SARASWATI INDUSTRIES SYNDICATE LTD V S CIT 178 ITR 419 (P&H) (ON ITA NO.1172/RJT/2010 10 MERITS) HAS BEEN REVERSED BY THE APEX COURT IN 237 ITR 1 (SC). THEREFORE IN THE LIGHT OF THE FACTS AND ABOVE DISCUSSION THIS JU DGMENT ALSO DOES NOT HELP THE REVENUE. 12. IN THE LIGHT OF ABOVE DISCUSSION WE FIND THAT C HARGING OF INTEREST UNDER SECTION 234A 234B AND 234C IS VERY MUCH PART AND PARCEL OF ASSESSMENT PROCEEDINGS AND IS AN ORDER AGAINST THE ASSESSEE TO WHICH THE ASSESSEE DENIES HIS LIABILITY TO BE ASSESSED. THEREFORE APPEAL AG AINST CHARGING OF INTEREST UNDER THOSE SECTIONS IS MAINTAINABLE AS IN THE CASE OF AN ASSESSMENT ORDER. 13. NOW COMING TO THE SECOND ISSUE WHETHER CASH SEI ZED COULD BE ADJUSTED AGAINST THE ADVANCE-TAX AND OTHER DEMANDS. TO EXAM INE THIS ISSUE WE WOULD LIKE TO REFER TO SECTION 132B PRIOR TO ITS SUBSTITU TION WITH EFFECT FROM 01-06-2002 BY THE FINANCE ACT 2002 WHICH PROVIDES FOR APPLICATIO N OF SEIZED OR REQUISITIONED ASSETS. AS PER SUB SECTION (1) TO THIS SECTION T HE ASSETS RETAINED UNDER SUB SECTION (5) OF SECTION 132 COULD BE APPROPRIATED AG AINST THE DISCHARGE OF EXISTING LIABILITY AS PER CLAUSE (III) OF THE SUB SECTION A S WELL AS AGAINST THE AMOUNT OF LIABILITY DETERMINED ON COMPLETION OF REGULAR ASSES SMENT OR RE-ASSESSMENT FOR ALL THE ASSESSMENT YEARS RELEVANT TO THE PREVIOUS YEARS . CLAUSE (I) OF SUB SECTION (1) OF THE NEWLY INSERTED SECTION HAS BEEN ENACTED TO HARMONISE THE PROVISION CONTAINED IN SECTION 132B WITH THE PROVISIONS FOR A SSESSMENT U/S 153A AND THE ASSESSMENT OF THE YEAR RELEVANT TO THE PREVIOUS YEA R IN WHICH SEARCH IS INITIATED OR REQUISITION IS MADE OR THE AMOUNT OF LIABILITY D ETERMINED ON COMPLETION OF THE ITA NO.1172/RJT/2010 11 ASSESSMENT UNDER CHAPTER XIVB FOR THE BLOCK PERIOD AS THE CASE MAY BE AND TO INCLUDE THEREIN A PROVISION FOR RELEASE OF ASSETS S EIZED DURING SEARCH IF THE NATURE AND SOURCE OF ACQUISITION OF ASSETS IS EXPLA INED TO THE SATISFACTION OF THE ASSESSING OFFICER AFTER RECOVERY THEREFROM OF ANY EXISTING LIABILITY. SECTION 132B(1)(I) EMPOWERS THE ASSESSING OFFICER TO RECOVE R THE PRESCRIBED LIABILITY OUT OF THE ASSETS SEIZED U/S 132 OF THE ACT AND EVEN TH E LIABILITY TO PAY ADVANCE-TAX AS PER THE STATUTORY PROVISIONS AND THERE IS NO PLA USIBLE REASON ASCRIBING A RESTRICTED MEANING TO THE EXPRESSION EXISTING LIAB ILITY APPEARING IN SECTION 132B(1)(I) OF THE ACT. THE EXPRESSION EXISTING LIA BILITY IN SECTION 132B(1)(I) CANNOT BE READ TO EXCLUDE A PARTICULAR TAX LIABILIT Y IF IT CAN BE SHOWN TO HAVE EXISTED ON A PARTICULAR DATE. IF THE LIABILITY TO PAY THE ADVANCE-TAX HAD ARISEN IT WOULD CERTAINLY CONSTITUTE A PART OF EXISTING LIABI LITY AS PER SECTION 132B(1)(I). ACCORDING TO THE SCHEME OF SECTION 132B THE SEIZED ASSETS TO BE APPLIED TO THE DISCHARGE OF EXISTING LIABILITIES IN RESPECT OF WHI CH THE ASSESSEE WAS IN DEFAULT OR WAS DEEMED TO BE IN DEFAULT AS WELL AS THE LIABILIT Y IN RESPECT OF REGULAR ASSESSMENT OR RE-ASSESSMENT FOR THE YEARS RELEVANT TO THE PREVIOUS YEARS TO WHICH THE INCOME RELATED AND IN RESPECT OF WHICH TH E ASSESSEE WAS IN DEFAULT OR WAS DEEMED TO BE IN DEFAULT. HOWEVER DURING THE S EARCH MONEY HAD BEEN SEIZED AND RETAINED BY THE REVENUE SUCH MONEY CAN BE APPLIED FOR THE DISCHARGE OF BOTH THE LIABILITIES. ON THE OTHER HA ND IF MONEY SEIZED WAS NOT SUFFICIENT FOR THE PURPOSE OF DISCHARGE OF THE LIAB ILITIES THE ASSETS OTHER THAN MONEY WHICH HAD BEEN RETAINED WOULD BE DEEMED TO BE RESTRAINT AS IS SUCH RESTRAINT WAS EFFECTED BY THE ASSESSING OFFICER U/S 226(5) OF THE ACT. THE ITA NO.1172/RJT/2010 12 ASSESSING OFFICER THEN COULD SELL ASSETS IF HE FIN DS IT NECESSARY FOR THE PURPOSES OF RECOVERY OF THE AFORESAID LIABILITIES. IF ANY A SSETS OR PROCEEDS THEREOF REMAINED AFTER THE LIABILITIES HAD BEEN DISCHARGED THEY WOULD BE REQUIRED TO BE FORTHWITH PAID OR MADE TO THE PERSON FROM WHOSE CUS TODY THEY HAD BEEN SEIZED. THERE IS A PROVISION IN SUB SECTION (4) OF SECTION 132B FOR INTEREST TO BE PAID BY THE CENTRAL GOVERNMENT AS COMPENSATION FOR THE RETE NTION OF MONEY SEIZED AND PROCEEDS OF THE ASSETS SHOWN IN EXCESS OF THE TOTAL TAX LIABILITIES AGAINST WHICH THEY HAD NOT BEEN APPLIED. WHERE THE CHARACTER OF THE AMOUNT RETAINED U/S 132B AND THE PROCEEDS IF ANY OF THE ASSETS SOLD FOR TH E PURPOSE OF RECOVERY OF EXISTING LIABILITY REFERRED TO IN THAT SECTION EXIS TED THE CHARACTER OF THE EXISTING LIABILITY IN DEFAULT AND THE LIABILITY DETERMINED A T REGULAR ASSESSMENT THE CENTRAL GOVERNMENT WOULD BE UNDER OBLIGATION TO PAY SIMPLE INTEREST ON THE AMOUNT OF SUCH EXCESS. WHEN UNDER THE SCHEME OF SECTION 132B THE CENTRAL GOVERNMENT IS UNDER OBLIGATION TO PAY SIMPLE INTEREST ON EXCES S AMOUNT THE SAME SCHEME OF THE PROVISION IS APPLICABLE WHEN INTEREST IS TO BE RECOVERED FROM THE ASSESSEE MAY BE U/S 234A 234B OR 234C. THUS THE CASH SEIZ ED DURING THE COURSE OF SEARCH IS REQUIRED TO BE ADJUSTED AGAINST TAXES DUE INCLUDING ADVANCE-TAX FOR THE PURPOSE OF COMPUTATION OF INTEREST U/S 234A 234B A ND 234C. THIS VIEW IS FORTIFIED BY VARIOUS DECISIONS OF ITAT IN THE CASE OF SATPAL D AGARWAL HUF VS ACIT 62 TTJ (MUM) 98; SATYAPRAKASH SHARMA VS ACIT 2 0 DTR (DEL TRIB) 561; SUDHAKAR M SHETTY VS ACIT 10 DTR (MUM TRIB) 173; NI KAMAL BABURAM VS ACIT 41 SOT 407 (CHD) AND THE JUDGMENT OF PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS ASHOK KUMAR 334 ITR 355 (P&H). ITA NO.1172/RJT/2010 13 14. THE ITAT MUMBAI BENCH IN THE CASE OF SUDHAKAR M SHETTY VS ACIT HELD THAT THE DEPARTMENT HAS TO ADJUST THE SEIZED AMOUNT TOWARDS THE ADVANCE-TAX FROM THE DATE WHEN IT WAS SEIZED AND ACCORDINGLY DI RECTED THE ASSESSING OFFICER TO ADJUST THE SEIZED CASH FROM THE DATE OF SEIZURE. IN THE CASE UNDER CONSIDERATION WE FIND THAT THE ASSESSEE CLAIMED ADJ USTMENT OF SEIZED CASH IN THE RETURN OF INCOME FILED BY THE ASSESSEE. THE ASSESS EE ALSO MADE THE REQUEST FOR THE ADJUSTMENT OF CASH SEIZED AGAINST THE ADVANCE-T AX WITH EFFECT FROM 21-02- 2008 VIDE LETTER DATED 30-07-2009. TO MAINTAIN CON SISTENCY WE FOLLOW THE ABOVE ORDER OF ITAT AND WE ISSUE SIMILAR DIRECTION TO ASS ESSING OFFICER THAT SHOULD ADJUST THE SEIZED CASH AGAINST ADVANCE-TAX LIABILIT Y FROM THE DATE OF SEIZURE ITSELF. 15. AS REGARDS THE THIRD ISSUE WHETHER CASH SEIZED FROM THIRD PARTY CAN BE ADJUSTED AGAINST THE LIABILITY OF THE ASSESSEE THI S ISSUE BECOMES ACADEMIC AS THE CASH SEIZED FROM THIRD PARTY WAS FOUND TO BE TH E CASH OF THE ASSESSEE AND THIS FACT IS NOT DISPUTED. UNDER THE CIRCUMSTANCES CASH SEIZED FROM THIRD PARTY OR CASH SEIZED FROM THE ASSESSEE WOULD RETAIN THE S AME CHARACTER WE HAVE TO HOLD THAT IT DOES NOT AFFECT PROCESSING OF SUCH SEI ZED CASH. THE SAME IS TO BE TREATED AS CASH SEIZED FROM THE ASSESSEE. IN THE C ASE UNDER CONSIDERATION THEE AO HIMSELF HAS GIVEN CREDIT OF THAT AMOUNT AGAINST LIABILITY CREATED AGAINST ASSESSEE. A COPY OF LETTER DATED 21-03-2011 OF AO ADDRESSED TO THE ASSESSEE FILED BY THE LD.AR HAS BEEN PLACED ON RECORD. AS T HE AMOUNT SEIZED HAS BEEN ADJUSTED AGAINST THE DEMAND CREATED AGAINST ASSESSE E THE INTEREST UNDER SECTIONS 234A 234B AND 234C HAVE TO BE CALCULATED AS PER THE ABOVE DISCUSSION. THE AO IS DIRECTED ACCORDINGLY. ITA NO.1172/RJT/2010 14 16. IN THE LIGHT OF ABOVE DISCUSSION WE HOLD THAT U NDER THE FACTS AND CIRCUMSTANCES THE APPEAL IS MAINTAINABLE AGAINST T HE LEVY OF INTEREST U/S 234A 234B AND 234C OF THE ACT. THE CASH SEIZED IS ADJUS TABLE AGAINST THE DUE LIABILITY OF ADVANCE-TAX. THE CASH SEIZED FROM THIRD PARTY WHICH WAS ULTIMATELY FOUND BELONGING TO THE ASSESSEE IS ADJUSTABLE AGAINST TH E DEMAND CREATED ON THE ASSESSEE. 17. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE AS M ENTIONED ABOVE. SD/- SD/- (D.K. TYAGI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : 21-12-2011 PK/- ORDER PRONOUNCED IN OPEN COURT ON 02-12-2011 SD/- SD/- (T.K. SHARMA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CIT(A)-IV AHMEDABAD 4. THE CIT CENTRAL-II AHMEDABAD 5. THE DR I.T.A.T. RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT