Satpaul D. Agarwal Huf v. Assistant Commissioner Of Income Tax

M. A. Bakshi, JM.

We find it convenient to dispose of these two cross-appeals, one by the assessee and one by the revenue for assessment year 1989-90, by this consolidated order.

2. We first take up the appeal of the assessee. The dispute in this appeal is relating to the levy of interest under section 234A, 234B and 234C. The assessing officer had made assessment under section 143(3) and levied interest. The assessee appealed to the Commissioner (Appeals) and inter alia objected to the action of the assessing officer in not treating a sum of Rs. 1,50,000 being the cash seized during the search on 25-11- 1988, as tax paid in advance for purposes of levy of interest under section 234A, 234B and 234C.

3. Rival contentions have been heard and records perused. There was a search and seizure action in this case on 25th/26th Nov., 1988. Out of the cash of Rs. 1,75,000 found a sum of Rs. 1,50,000 was seized. During the course of search, the assessee disclosed income of Rs. 3,73,815 of taxation on account of value of jewellery. On 15-3-1989, a request was made to the assessing officer for adjustment of the sum of Rs. 1,50,000 against the taxes that may be found due in the course of proceedings under section 132(5). An order under section 132(5) was passed on 23-3-1989, and since the likely liability of the assessee was more than the cash seized, the Assistant Commissioner directed for retention of the seized assets. The assessee filed the return of income and sought the adjustment of Rs. 1,50,000 against the tax liability. Whereas the cash seized has been adjusted against the demand, the amount has not been treated as payment of advance-tax. It is the case of the assessee that the amount had been paid during the year under appeal and the request has also been made for appropriation of the said amount towards the tax liability. Reliance has been placed on the decision of the Tribunal in the case of Rohit M. Jhaveri v. ITO 22 BCAJ 269, in support of the contention that when there is a request of the assessee to treat the seized cash as payment towards advance tax of the same year, it should have been accepted as such.

4. The learned Departmental Representative relied upon the orders of the revenue authorities.

5. We have given our careful consideration to the rival contentions. It is not disputed that a sum of Rs. 1,50,000 has been seized during the previous year relevant to assessment year 1989-90. The assessee had also made a request for adjustment of the said amount towards the tax liability. Section 132(5) empowers the revenue, to retain any seized assets or cash seized on the date of search if it is found that the tax liability of the assessee exceeds the value of such seized assets.

Though the assessing officer has to wait for adjustment of seized assets till the finalisation of the assessment, yet in the case of cash it cannot be said that the assessee had defaulted in payment of taxes when the amount had been retained by the revenue department. Respectfully following the decision of the Bombay Bench of the Tribunal in the case of Rohit M. Jhaveri (supra), we hold that the cash seized by the search party that was required to be adjusted against the taxes due should be treated as advance-tax for purposes of computation of interest under section 234A, 234B and 234C. It is the claim of the assessee that if the amount of Rs. 1,50,000 is treated as advance tax, then no interest under section 234A, 234B and 234C would be chargeable. This claim may be examined by the assessing officer by treating the amount of Rs. 1,50,000 as advance-tax. For that purpose, the issue is remitted to the file of the assessing officer to be decided afresh in accordance with law.

6. We now take up the appeal of the revenue. The only issue involved in this appeal is relating to the deduction under Chapter VI-A. The assessee made certain investments during the year under appeal and claimed deduction under Chapter VI-A. The assessing officer denied the deduction on the ground that investment had not been made out of the income chargeable to tax of the current year. The Commissioner (Appeals) has allowed the deduction on finding that the investment had been made by the assessee out of the income of earlier years chargeable to tax. In this connection, reliance has been placed on the decision of the Punjab High Court in the case of Ravi Kumar Mehra v. CIT (1988) 172 ITR 108 (P&H) and the decision of the Tribunal in the case of ITO v. Sunil Krishna Ganguly (1988) 27 ITD 137 (Cal-Trib).

7. Since finding of fact recorded by the Commissioner (Appeals) is not rebutted by any evidence and the issue being covered by the decisions referred to above, we respectfully following the same, dismiss the appeal of the revenue.

8. In the result, whereas the appeal of the assessee is allowed, the appeal of the revenue is dismissed.