Interest under section 234A is charged for delay in filing of the return from the prescribed due date. The cash was seized from the possession of the assessee before due date of filing of return under section 139(1) in the relevant assessment year when such seizure took place. Thus, it could be safely concluded that revenue was in possession of the seized cash from the date of such seizure for adjustment towards existing liability of the assessee. Therefore, the tax payable by the assessee on the returned income was eligible for appropriation from the seized cash. Once the same was appropriated, there will be no resultant tax liability. Thus, there could be no charging of interest under section 234A.
FULL TEXT OF THE ITAT JUDGMENT
1. This appeal by the assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-7, Kolkata [in short the ld CIT(A)] in Appeal No.572/CIT(A)- 7/Cir-25/14-15 dated 10.05.2016 against the order passed by the ACIT, Circle-52, Kolkata [ in short the ld AO] under section 143(3) read with Section 153A of the Income Tax Act, 1961 (in short “the Act”) dated 27.03.2014 for the Assessment Year 2011-12.
2. The only issue involved is whether the seized cash of Rs. 66,80,000/- on 23.04.2011 is eligible to be given credit before charging interest u/s 234A and 234B of the Act, in the facts and circumstances of the case.
3. The brief facts of this issue is that there was a search & seizure operation on 23.04.2011 by the Police Department during the election period and cash of Rs. 66,80,000/- was seized thereon. The said cash was handed over by the Police Department to the Income Tax Department u/s 132A of the Act. The assessee vide letter dated 14.07.2011 before the DDIT(Inv.), Unit-IV(1), Kolkata agreed to offer the seized cash as his undisclosed income towards the unexplained creditors and other liabilities appearing in his books for the assessment year 2011-12. The assessee also pleaded that the same may be treated as disclosure of income u/s 132(4) of the Act and pleaded for immunity from levy of penalty explanation 5 Clause (ii) of Section 271(1)(c) of the Act, in view of satisfying all the three conditions prescribed therein. The ld. AO later issued notice u/s 153A of the Act to the assessee. The assessee in response to the said notice u/s 153A of the Act, filed his return of income for the Assessment year 2011-12 on 21.03.2013 disclosing total income of Rs. 68,80,442/- and also pleaded for adjustment of self-assessment tax from the seized tax available with the Income Tax department. The ld. AO completed the assessment u/s 143(3) read with Section 153A of the Act on 27.03.20 14 determining the total income of Rs. 76,84,845/- after making an addition of Rs. 8,04,403/- as unexplained cash credit u/s 68 of the Act. The ld. AO determined the tax payable of Rs. 22,11,739/- and charged interest u/s 234A, B & C to the tune of Rs. 9,51,628/- without giving credit for the seized cash of Rs. 66,80,000/- available with the Department. The assessee pleaded that the interest u/s 234A and 234B ought not to have been charged by the ld. AO inasmuch as there was no tax payable by the assessee after adjusting the seized cash with the tax payable by the assessee. The Ld. CIT(A) granted partial relief to the assessee by observing as under:
“The appellant has admitted the seized cash of Rs. 66,80,000/- as undisclosed income on 23.04.2011 for the assessment year 2011-12. There was no tax liability as on the date of the cash seized. The appellant has furnished the return of income u/s 139(1) on 27.03.2012 admitting the seized cash as his undisclosed income which resulted into the self assessment tax payable. Hon ’ble ITAT, Kolkata, “B” Bench in the order cited (supra) held that the action of the assessee in seeking to adjust the seized cash with self assessment tax payable along with the return of income is in order and in accordance with section 132B of the Act as admittedly self assessment tax payable becomes ‘existing liability’ on the part of the assessee to settle.
Respectfully following the decision of Hon ’ble ITAT, Kolkata, “B” Bench and the judgments cited (supra) I direct the assessing officer to adjust the tax liability on the additional income of Rs. 66,80,000/- as self assessment tax from the date of furnishing the return of income u/s 139(1) for the assessment year 2011-12 i.e. 27.03.2012 from the seized cash and re-compute the interest u/s 234A,B and C accordingly. Thus, grounds no. 3 & 4 are allowed for statistical purposes.”
4. Aggrieved, the assessee is in appeal before us on the following grounds:
1. For that the order of the Ld. CIT(A) is arbitrary, illegal and bad in law.
2. For that the Ld. CIT(A) has erred in not giving the credit of seized money amounting to Rs. 66,80,000/- seized on 23.04.2011 as pre paid taxes.
3. For that the Ld. CIT(A) has erred in not allowing the adjustment of self assessment tax liability from seized amount from the date of seizure of amount but has considered the credit of same from the date of submission of original return of income thereby charging interest u/s 234A and 234B.
4. For that on facts and circumstances of the case the order of the CIT(A) be modified and the assessee be given the relief prayed.
5. For that the assessee craves leave to add, submit, amend, alter, delete and/or rescind any ground or grounds of appeal before or at the time of hearing.
5. We have heard the rival submissions. We find that the assessee had to pay tax on the undisclosed income declared by him in the return of income. Admittedly, the assessee had not made any payment towards self-assessment tax but had only pleaded to appropriate the same out of seized cash available with the Department from 23.04.2011 onwards. According to the assessee, once the seized cash is adjusted towards taxes payable by the assessee on the assessed income, there will be no tax that will be left, in order to be eligible to be charged with interest u/s 234A and 234B of the Act. We find that the assessee had already made 132(4) disclosure statement before the DDIT(Inv.) vide letter dated 13.07.2011 filed on 14.07.2011 giving his acceptance for offering of Rs. 66,80,000/- as undisclosed income and giving his consent for appropriation of the said seized cash towards the tax liability for the Assessment year 2011-12. We find that the interest u/s 234A of the Act is chargeable only for the period of delay in filing the return of income. The due date of filing return of income for the assessment year 2011-12 u/s 139(1) of the Act in this case falls on 3 1.07.2011. The assessee had filed his return of income on 21.03.2013 in response to 153A notice. The cash was seized from the possession of the assessee on 23.04.2011. Hence, it could be safely concluded that the income tax department was in possession of the seized cash of Rs. 66,80,000/- from 23.04.2011 onwards for adjustment towards existing liability of the assessee. Hence, the tax payable by the assessee on the returned income is eligible for appropriation from the seized cash. Once the same is appropriated, there will be no resultant tax liability. Hence, there could be no charging of interest u/s 234A of the Act. Accordingly, we direct the ld. AO to delete the charging of interest u/s 234A of the Act.
5.1. It could be seen from the facts narrated above, that the seized cash was available with the possession of the income tax department only from 23.04.2011 onwards. The interest u/s 234B of the Act is chargeable from the first day of the assessment year i.e. from 01.04.2011 onwards. Hence, we hold that the interest u/s 234B of the Act would be eligible to be charged on the assessee for the month of April, 2011 only i.e. for one month on the tax finally assessed by the ld. AO. When the seized cash of Rs. 66,80,000/- is in the possession of the income tax department from 23.04.2011 onwards, it would be unfair and unjust to charge interest on the assessee u/s 234B of the Act, merely because, the seized cash was given credit on a later date by the ld. AO. It would be just and fair to conclude that the assessee could not be fastened with interest liability for the delayed adjustment of seized cash by the ld. AO. Hence, we direct the ld. AO to charge interest u/s 234B of the Act on the tax payable on the assessed income for one month only i.e. for April, 2011.
5.2. With regard to interest u/s 234C of the Act , it is levied for deferment of payment of advance tax for the period of 01.04.2010 to 31.03.2011. In the instant case, since, the cash was seized after the expiry of the previous year i.e. after 31.03.2011, the assessee cannot claim non-chargeability of interest u/s 234C on that account. Hence, interest u/s 234C of the Act is leviable in this case.
6. Accordingly, grounds raised by the assessee are partly allowed.
7. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 04.04.2018