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TMI Blog2011 (12) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... are challenged; (2) whether the cash seized could be held as advance-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 towards advance-tax by the assessing officer?; and (3).Whether cash seized from third party which was found to be the cash of the assessee could be adjusted as advance-tax payment. 3. The brief facts of the case are that a search was 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 advance-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 advance-tax liability as advance-tax paid on 21-02-2008. The assessing officer charged interests u/s 234A, 234B and 234C by ignoring the cash seized which was adjusted against the advance-tax liability, though there was specific request from the assessee to treat the cash seized and adjusted subsequently as the advance-tax payment on 21-02-2008 vide his letter da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of interests u/s 234A, 234B and 234C. it is well settled position 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 conferring a right of appeal it should be construed in a reasonable and liberal manner. The 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. The appellate authority, on appeal, has the power to confirm, reduce, increase or annul the assessment. Clause (a) of section 246(1) is in two parts. The first part deals with an order against an assessee where the assessee denies his liability 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, namely, that an appeal against such order shall lie only where the assessee objects to the amount of income assessed or where the assessee objects to the amount of tax determined or where the assessee objects to the amount of loss computed or where the assessee objects to the status under which he is assessed. Here it is useful t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability of the assessee. Where the Income-tax Officer considers that there is a case for levying of interest under sub-section (8) of section 139 or under section 215, what he does in practice, is to make an order levying such interest after completing the assessment of the assessee's total income and the tax payable by him. Now, the question is whether orders levying interest under sub-section (8) of section 139 and under 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 assessee denies his liability to be assessed under the Act or against any assessment order under sub-section (3) of section 143 or section 144, where the assessee objects 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 assessed. 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 himself 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidually. The expression 'denial of liability' is comprehensive enough to take into only the total denial of liability but also the liability under particular circumstances:" In view of above observations, it could be held that 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 liability to pay interest, in our opinion, would certainly be a partial denial to be assessed under the Act as envisaged by section 246(1) of the Act because on acceptance 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 question 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 partakes the nature of substantive law and not adjectival law. 11. In the case under consideration, the CIT(A) relied upon certain judgments; however, on consideration of facts we find those judgments do not help the revenue. The judgment of the Apex Court relied upon by revenue in case of Central Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period, as the case may be, and to include therein a provision for release of assets seized during search, if the nature and source of acquisition of assets is explained to the satisfaction of the assessing officer, after recovery therefrom of any existing liability. Section 132B(1)(i) empowers the assessing officer to recover the prescribed liability out of the assets seized u/s 132 of the Act and even the liability to pay advance-tax as per the statutory provisions and there is no plausible reason ascribing a restricted meaning to the expression 'existing liability' appearing in section 132B(1)(i) of the Act. 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 the advance-tax had arisen it would certainly constitute a part of existing liability 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 which the assessee was in default or was deemed to be in default as well as the liability in respect of regular assessment or re-assessment fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hetty v. ACIT held that the department has to adjust the seized amount towards the advance-tax from the date when it was seized and accordingly directed the assessing officer to adjust the seized cash from the date of seizure. In the case under consideration we find that the assessee claimed adjustment of seized cash in the return of income filed by the assessee. The assessee also made the request for the adjustment of cash seized against the advance-tax with effect from 21-02-2008 vide letter dated 30-07-2009. To maintain consistency we follow the above order of ITAT and we issue similar direction to assessing officer that should adjust the seized cash against advance-tax liability 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, this issue becomes academic as the cash seized from third party was found to be the 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 same character, we have to hold that it does not affect processing of such seized cash. The same is to be treat ..... 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