IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES , JAIPUR Jh BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM ITA No. 161/JP/2016 Assessment Year : 2012-13 DCIT Late Smt. Sudha Patni Central Circle-2 Vs. (Thru: L/h Shri Mahendra Kr.Patni) Jaipur 248, Musagron Ka Chowk, Haldiyon Ka Rasta, Jaipur vksj Revenue by:Shri Rajender Singh, Addl. CIT- DR Assessee by: Shri Vijay Goyal , CA Date of Hearing : 13/10/2016 Date of Pronouncement : 18/10/2016 ORDER PER BHAGCHAND, AM Revenue has filed appeal against order of ld. CIT(A), Jaipur-4 dated 23-12-2015 for assessment year 2012-13 raising therein following grounds of appeal. 1. Whether on facts and circumstances of case, ld. CIT(A) was right in deciding that amount lying in PD Account can be justified as advance tax liability being existing liability of assessee. 2 ITA No. 161/JP/2016 DCIT , Central Circle- 2, Jaipur vs. Late Smt. Sudha Patni, Jaipur . 2. Whether on facts and circumstances of case ld. CIT(A) was right in treating appeal maintainable u/s 249(4) of I.T. Act without appreciating fact that amount lying in PD account cannot be adjusted against existing liability of assessee and as per explanation-2 of Section 132B of I.T. Act existing liability doesn t include advance tax payable in accordance with provisions of Part-C of Chapter-XVII. 3. Whether on facts and circumstances of case ld. CIT(A) was right in ignoring instruction F.No.286/108/2005-IT(Inv-II) dated 13-07-2006 wherein it has been clarified that seized cash can t be adjusted against advance tax liability of assessee for year in which search took place. 2.1 At outset of hearing, ld. AR of assessee supported order of ld. CIT(A) and submitted that ld. CIT(A) had decided appeal of assessee in view of decision of Hon'ble ITAT Agra Bench in case of ACIT vs. Sunil C Gupta( ITA No. 290/Agra/2013 dated 28-02-2014). 2.2 ld. DR relied on order of AO and submitted that ld. CIT(A) had erred in allowing appeal of assessee for which Department is in appeal with above grounds of appeal before ITAT. 2.3 We have heard rival contentions and perused materials available on record. facts as emerges from order of ld. CIT(A) is reproduced for convenience and brevity of case. 3 ITA No. 161/JP/2016 DCIT , Central Circle- 2, Jaipur vs. Late Smt. Sudha Patni, Jaipur . facts of case are that Smt. Sudha Patni, herein referred as assessee / appellant assessee. search and seizure operation u/s 132 of Act was carried out on 29-06-2011 at Locker No. 378 (owned by assessee) situated at Ganpati Lockers (P) Ltd. and valuable inventorised and seized as under:- Jewellery valued by DVO at Rs. 2,84,19,380/- Cash amounting to Rs. 46,22,500/- Aforementioned contents inventorised were found to be belonging to assessee. In sworn statement recorded on oath u/s 132(4) of Act on 03-08-2011, assessee admitted that al jewellery items so inventorised from Locker No. 378 belonged to her which was received as gift from time to time and cash found in locker was received as sale proceeds of 20 gold biscuits (sold in April 2011). assessee admitted in sworn statement recorded on oath u/s 1342(4) of Act that all valuables and cash which were found inventorised and seized from this locker belonged to her. Accordingly, assessee surrendered sum of Rs. 3,30,41,880/- (jewellery valued at Rs. 2,84,19,330/-and cash amounting to Rs. 46,22,500/- refer pg 2 of assessment order) as her undisclosed income for A.Y. 2012- 13.However, assessee e-filed her return of income declaring total income at Rs. 2,71,91,880/- (inclusive of valuables and cash inventorised from locker at Rs. 2,71,91,880/- on 3-08-2012 for A.Y. 2012-13). Later on, AO completed assessment proceedings u/s 143(3) vide order dated 10-03-2014 at total income of Rs. 2,71,91,880/- and also simultaneously initiated penalty proceedings u/s 271AAA of Act. AO finally created total tax liability against assessee at Rs. 60,90,769/-. In response to this, assessee had in fact requested AO to give credit of amount lying in PD Account against seized cash amounting to Rs. 46,22,500/-. In said letter, assessee had also objected to fact that interest u/s 234B & 234C were calculated without allowing credit of seized cash lying in PD Account. total tax liability as per order passed u/s 143(3) of Act has been computed as under:- Assessed Income Rs. 2,71,91,880/- Tax thereof Income tax Rs. 80,02 564/- Surcharge Rs. 2,40,077/- Total tax liability Rs. 82,42,641/- Less: Prepaid taxes (-) Rs. 40,64,240/- 4 ITA No. 161/JP/2016 DCIT , Central Circle- 2, Jaipur vs. Late Smt. Sudha Patni, Jaipur . Balance payable Rs. 41,78,401/- Interest u/s 234B(3) Rs. 16,07,399/- Interest u/s 234C(3) Rs. 3,04,969/- Tax payable Rs. 60,90,769/- On receipt of assessment order alongwith demand notice dated 10-03-2014, assessee requested for adjustment of seized cash amounting to Rs. 46,22,500/- lying PD account for advance tax Sept. 2011 liability. In this regard, assessee has assessment order submitted letters requesting for treating same against advance tax liability of Sept. 2011. However, AO did not agree to assessee's contention. In meantime assessee also filed application u/s 154 of Act for rectification of demand notice wherein credit of seized cash lying in PD A/c was not allowed for advance tax adjustment. However, AO vide order passed u/s 14 of Act dated 30-09-2014 has rejected assessee's application dated 20-03-2014. It is noted from records that ld. CIT(A) had allowed appeal of assessee in view of decision dated 28-02-2014 of ITAT Agra Bench in case of ACIT vs. Sunil C Gupta in ITA No. 290/Agra/2013 wherein Hon'ble Bench held that cash seized to be adjusted against advance tax liability as Explanation 2 to Section 132B of Act is enacted w.e.f. Ist June, 2013 and in this case ITAT upheld observation of ld. CIT(A) which is as under:- 3.4 I have carefully considered assessment order as well as written submission of appellant, Remand report and rejoinder on this issue remand report and rejoinder. In this case Search and Seizure Operation was carried out in premises of Shri Sunil Chand Gupta on 10.03.2010 wherein cash amounting to Rs.4,31,36,000/- was seized from residence and locker and was deposited by department in PD account on 10.03.2010 and 19.03.2010. During course of search assessee s statement was recorded u/s 134 of I.T. Act wherein assessee offered to pay tax on income of Rs.10 crore for F.Y. 2009-2010. estimated tax liability on income of Rs.10 crore worked out to about Rs.3 crore 5 ITA No. 161/JP/2016 DCIT , Central Circle- 2, Jaipur vs. Late Smt. Sudha Patni, Jaipur . approx. Since liability to pay tax had arisen and cash being seized by department, appellant requested department to adjust Rs.3 crore out of Rs.4,31,36,000/- seized and deposited in PD account. It is seen that assessee made written request on 29.03.2010 to Chief Commissioner of Income Tax which was duly received and also to Additional Director of Income Tax Investigation, Agra. It also seen that similar request for adjustment letters were written to DCIT Circle-1, Agra on 29.03.2010 which was duly received in office on same day. Further, another letter was written to CIT-1 on 21.03.2010. Letter dated 05/07/2010 was also written to DCIT Central Circle stating that return of income for A.Y. 2010-11 had been filed on 30/6/10 with tax payable of Rs.2,92,25,240/- and therefore requesting AO once again for adjustment of tax liability with cash lying in PD account. In circumstances, assessee had done all it could do so as to ensure that cash lying in PD account would be adjusted towards advance tax liability. However, it seen that no action was ITA No.290 /Agra/2013 A.Y. 2010-11 5 taken on assessee s petition by any of authorities before whom assessee has filed petition. To my mind, it is apparent injustice to appellant to hold on cash belonging in assessee in Government Account and at same time charge interest for non-payment of advance tax on due dates. It is clear that appellant s application for adjustment has been submitted before various authorities, seized cash should have been either been adjusted as requested by assessee to meet advance tax obligations or Assessee should have been informed reasons why request made by assessee cannot be acceded to. Hon ble Bombay High Court in case of CIT Vs. Shri Jyotindra B. Modi in order dated 21.09.2011 has clearly held that once assessee officers to tax undisclosed income including amount seized during search, than liability to pay advance tax in respect of that amount arises even before completion of assessment. Hon ble High Court further held that section 132B(1) of Act, thus not prohibit utilization of amount seized during course of search towards advance tax liability. Hon ble High Court of Punjab & Haryana in case of CIT Vs. Ashok Kumar reported in 334 ITR 355 has also held on similar facts that assessee was entitled to adjustment of seized cash against advance tax liability and therefore, no interest could be charged u/s 234A & 234B in event of department no responding to assessee s request for adjustment of cash 6 ITA No. 161/JP/2016 DCIT , Central Circle- 2, Jaipur vs. Late Smt. Sudha Patni, Jaipur . seized against advance tax liability. In view of following judgments, action of AO in charging interest under 234A, 234B & 234C is not justified and hence, directed to be deleted... In light of above facts and circumstances of case and also respectfully following decision of ITAT Agra Bench in case of ACIT vs. Sunil C Gupta (Supra), we find no infirmity in order of ld. CIT(A) which is sustained. Thus appeal of Revenue is dismissed. 3.0 In result, appeal of Revenue is dismissed. Order pronounced in open Court on 18/10/2016. Sd/- Sd/- (KUL BHARAT) (Bhagchand) Judicial Member Accountant Member Jaipur Dated:- 18/10/ 2016 Mishra Copy of order forwarded to: s 1. Appellant- DCIT, Central Circle- 2, Jaipur 2. Respondent- Late Smt. Sudha Patni, Thru: L/h Shri Mahendra Kr. Patni), Jaipur 3. CIT(A). 4. CIT, 5. DR, ITAT, Jaipur 6.Guard File (ITA No.161/JP/2016) By order, Assistant. Registrar DCIT, Central Circle-2, Jaipur v. Sudha Patni