In N. Venkatanathan v. DCIT, the ITAT Mumbai noted that assessee is entitled to adjustment of cash seized and offered for taxation towards its liability for taxes including advance tax.
In the instant case, AO rejected assessee’s plea of adjusting the same against advance tax liability authorities below on the ground that the cash seized cannot be adjusted before the completion of assessment.
After considering arguments of both sides, the bench noted that assessee has offered the amounts seized as undisclosed income during search and the revenue has also accepted the same as assessee’s income. “In such situation, when assessee has requested to adjust the cash seized against the assessee’s liability towards tax the authorities below have erred a not adjusting the cash seized against the tax liability including of tax liability.”
The bench further noticed the decision of the Bombay High Court in the case of CIT vs. Shri Jyotindra B. Mody wherein it was held that once assessee offers to tax undisclosed income including the amounts seized during search, the liability to pay advance tax in respect of that amount arises even before completion of the assessment. The Hon’ble High Court, in this case, further held that section 132 B(1) of the Act does not prohibit utilization of amounts seized during the course of search towards the advance tax liability.
A similar decision was delivered by the Punjab and Haryana High Court recently in the case of Principal CIT vs. S.K. Khindri in ITA 25 of 2016 vide order 28.02. .
Based on the above decisions, the bench held that the provision of Explanation 2 to Section 132(B)(4) which excludes advance tax from the ambit of existing liability is applicable from 1st June 2013 and not applicable to the assessment years involved in this appeal.
Read the full text of the Order below.
