Advance tax – Interest for default in payment of advance tax – Sections 132, 132B, 234B and 234C – Computation of interest – Assessee paying four instalments of advance tax prior to search and seizure and communication sent to adjust advance tax against cash seized during search – Date of communication to be taken as date of payment of advance tax

9. Marble Centre International P. Ltd. vs. ACIT [2020] 425 ITR 654 (Kar.) Date of order: 11^th June, 2020 A.Y.: 2007-08

Advance tax – Interest for default in payment of advance tax – Sections 132, 132B, 234B and 234C – Computation of interest – Assessee paying four instalments of advance tax prior to search and seizure and communication sent to adjust advance tax against cash seized during search – Date of communication to be taken as date of payment of advance tax

The assessee was in the business of trading. A search and seizure action was conducted u/s 132 in the business premises of the assessee and residential premises of its director and accountant. During the course of the search, Rs. 4.77 crores in cash was seized by the Department. Prior to the seizure of the cash, the assessee had paid advance tax in four instalments on 15^th June, 2006, 14^th September, 2006, 14^th December, 2006 and 8th March, 2007. The assessee agreed to disclose Rs. 50 lakhs and stock of Rs. 1.40 crores as additional income for the A.Y. 2007-08 and sent a communication dated 15^th March, 2007 in which a request was made to treat Rs. 50 lakhs out of the cash seized as advance tax payable by the assessee for the A.Y. 2007-08. Notices under sections 142(1) and 143(2) were issued and the assessee furnished the details called for. An order dated 31^st December, 2008 was passed u/s 143(3). The assessee claimed that the date of the request letter, 15^th March, 2007, should be taken as the date of payment of advance tax of Rs. 50 lakhs out of the seized amount. The claim was not accepted.

The Commissioner (Appeals), inter alia, held that the assessee was entitled to relief in respect of the interest from the date of filing of the return till the date of the order of assessment and partly allowed the appeal. The Tribunal dismissed the appeal filed by the assessee.

The Karnataka High Court allowed the appeal filed by the assessee and held as under:

‘i)   The date of payment of tax by the assessee was 15^th March, 2007, i.e., the date on which the request was made by the assessee to adjust the cash seized against the advance tax payable towards the tax for the A.Y. 2007-08. The assessee had offered a sum of Rs. 50 lakhs on 15^th March, 2007 towards the advance tax payable for the A.Y. 2007-08. According to the statement of income prior to the seizure of cash, the assessee had also paid advance tax in four instalments. However, the Department did not adjust these amounts even though the cash was available with it. The date of payment of tax shall be taken as 15^th March, 2007, i.e., the date on which the request was made by the assessee to adjust the cash seized against the advance tax payable for the A.Y. 2007- 08.

ii)   In view of the preceding analysis, we hold that the Tribunal ought to have held the date of payment of tax by the assessee as 15^th March, 2007, i.e., the date on which the request was made by the assessee to adjust the cash seized against the advance tax payable towards the tax for the A.Y. 2007-08.’