TMI Blog2012 (3) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... volved in this appeal is whether the seized cash of ₹ 90,31,000/- during the course of search and seizure be treated as advance tax and the assessee be given credit thereof in calculating the tax and interest liability u/s.234 B and 234C. 2. The facts in brief are that the appellant which is a partnership firm is engaged in the business of trading in glass beads. On 24.12.2008 a survey action was conducted on the assessee firm and simultaneously search and seizure action u/s.132 was also conducted at the residential premises of its partner. During the course of search and seizure operation a sum of ₹ 90,31,000/- belonging to the firm was seized and deposited into the account of the Income Tax Department. The said amount remained till the date of the assessment and no part thereof was released. In the course of search action, the assessee firm admitted that said seized amount be treated as additional income and such an offer was accepted by the Income Tax Authorities, which was also shown by the appellant in its income tax return for the Assessment Year 2009-10. The appellant from time to time requested and made a prayer before Investigation Wing i.e. ADIT, Unit III(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT vs. Garg Rice and General Mills, Kharar held that the seized cash should be adjusted against the advance tax payment if the appellant has requested for the same. 12. In the present case also there is a request of the appellant to adjust the cash seized towards the advance tax payment however it was not done and the appellant was further burdened with interest u/s.234B and 234C. Accordingly, following the above cases, the interest charged is deleted and the grounds of appeal of the appellant are allowed. 4. The learned DR strongly relied upon the order of the Assessing Officer and further relied upon the judgment of Hon'ble Madhya Pradesh High Court in the case of Ramjilal Jagannath And Others vs. ACIT reported in 241 ITR 758 . On the other hand, the learned AR reiterated the submissions made before the learned CIT(Appeals) and also the judgments relied upon by the assessee before the Ld. CIT(A). Besides this he further relied upon the judgment of Punjab and Haryana High Court in the case of CIT Ashok Kumar reported in (2011) 334 ITR 355. 5. We have carefully considered the submissions of both the parties and the orders of the authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied. 5.1 From the perusal of the said section, it is amply borne out that assets on cash which are seized u/s.132 can be adjusted against the amount of any existing liability under the Income Tax Act, Wealth Tax Act, Expenditure Tax Act, Interest Tax Act on the amount of liability determined on the completion of assessment u/s.153A and also the assessment of the year relevant to the previous year in which search is initiated, including penalty or interest payable in connection with such assessment. Here in this case, the assessment relates to the previous year in which search have been initiated. The advance tax is clearly a liability under the Income Tax Act by virtue of section 209 and 210. The word existing liability under the Income Tax Act as appearing in section 132B, sub-section (1) clause (i) will also cover the advance tax liability. The assessee has duly requested to adjust his liability for the advance tax prior to the due date of the third instalment i.e. 15.03.2009 in relation to the income which has been of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribe the dates and the amount of tax required to be paid by an assessee Therefore, the expression existing liability in section 132B(1)(i) cannot be read to exclude a particular tax liability, if it can be shown to have existed on a particular date. If the liability to pay advance tax had arisen, it would certainly constitute a part of the existing liability used in section 132B(l)(i) of the Act. 10. In our considered opinion, the doctrine of purposive construction has to prevail in this situation. In the present situation, it is evident that cash was seized from the assessee during search operation and, asessee requested the Department to adjust a part of such cash receipts against the liability of advance tax which arose on account of the income surrendered during the search operation. The Department does not deny possession of the cash since the time of search. Thus, we find no justification for the Revenue to interpret the expression existing liability in section 132B(l)(i) as not referring to liability of advance tax. Under the Income-tax Act, liability towards advance tax is a part of the scheme of recovery of taxes and such liability definitely falls in the expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in the case of Sudhakar M Shetty (supra) has clearly laid down that the Revenue is liable to adjust the sized amounted towards the liability of advance tax having regard to the provisions of section 132B of the Act. Before parting, we may refer to an observation made in the assessment order that the CBDT has purportedly clarified in its letter F. No. 286/15/2005-IT (Investigation-II), dated 13-7-2006 that the provisions of Income-tax Law do not permit application of the seized cash against advance tax liability of the assessee for the year in which search took place. In this regard it is to be noted that no such letter has been placed on record by the Revenue. In any case it is also not clear under which statutory powers, such a letter has been issued by the CBDT. Thus, in the absence of any details in this regard the observation of the Assessing Officer does not justify his stand. The action of the Assessing Officer is contrary to the law. In any case, in the present case there is no case set up by the Revenue that the cash seized was liable to be appropriated against any other liability under this Act when the assessee made the request to adjust the same against a ..... 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