Cash seized during search can be adjusted only against existing tax liability

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ITAT BANGALORE BENCH ‘A’

M.J. Ramani

v.

Deputy Commissioner of Income-tax

N. BARATHVAJA SANKAR, VICE-PRESIDENT
AND N.V. Vasudevan, JUDICIAL MEMBER

IT Appeal Nos. 383 & 384 (Bang.) of 2012
[ASSESSMENT YEARS 2008-09 & 2009-10]

Date of Pronouncement – 31.01.2013

 

In the present case, admittedly there is no past demand which has remained unpaid. Therefore only when the Assessee files a return of income quantifying his total income for the assessment years in question can it be said that there has arisen tax liability for the relevant AYs. The due date for filing return of income or the fact that advance tax was due on a particular date will not make the liability of the Assessee an “existing tax liability” on those dates. The Hon’ble Karnataka High Court in the case of CIT v. R.V. Raibagy & Co. & others ITR Case Nos. 4 to 10 of 2003 dated 29.3.2005 has also taken the view that adjustment of seized cash against tax due u/s.140A of the Act, on income declared in a return of income filed should be allowed. This decision supports the view taken by the CIT(A) in the present case. The decision of the Hon’ble Karnataka High Court in the case of Sri Raghavendra Traders v. Asstt. CIT ITA No.3197 of 2005 dated 20.7.2011 is a case arising u/s.158BFA(1) of the Act. There is no indication in this decision that adjustment of seized cash can be claimed even where there is no existing tax liability. The decisions of the Tribunal on which the CIT(A) has placed reliance clearly lay down that adjustment can be allowed when there is an existing tax liability. The CIT(A) has accordingly allowed adjustment of seized cash against tax liability as disclosed in the return of income filed on 29.4.2010 for both the Assessment years. The CIT(A) has not given any adjustment towards foreclosure of FD proceeds. The FD was not foreclosed and adjusted by the Department towards tax dues but was probably returned to the Assessee. We are of the view that the directions of the CIT(A) are just and proper and calls for no interference.