Advance tax: Interest u/ss.234B and 234C: A.Y. 2007-08: Search and seizure: Cash seized of Rs.18 lakh and Rs.1.98 crore deposited by assessee on 31-1-2007 could be adjusted against advance tax liability for computing interest u/ss.234B and 234C.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“(i) The basic argument of the Revenue is that u/s.132B(1)(i), the amount seized during the course of search can be dealt with for discharging the existing liability under the Acts set out therein. In the present case, the tax liability in relation to the assessment year in question would get crystallised only after the assessment is completed and therefore, the request of the assessee for adjustment of the amounts in question towards the advance tax liability could not be entertained.

(ii) We see no merit in the above contention, because once the assessee offers to tax the undisclosed income including the amount seized during the search, then the liability to pay advance tax in respect of that amount arises even before the completion of the assessment. Section 132B(1)(i) of the Act does not prohibit utilisation of the amount seized during the course of search towards the advance tax payable on the amount of undisclosed income declared during the course of search.

(iii) In the present case, the assessee, prior to the last date for payment of last instalment of advance tax, had in fact by a letter dated 14-3-2007 requested the Assessing Officer to adjust the amount towards the existing advance tax liability. Since advance tax liability is to be computed and paid in accordance with the provisions of the Act even before the completion of the assessment, no fault can be found with the decision of the ITAT in holding that in the facts of the present case, the amounts in question were liable to be adjusted towards the existing advance tax liability.”