INCOME TAX ACT, 1961

Interest under section 234B - Chargeability -Adjustment of cash seized
Tribunal noted that assessees had made a request for adjustment of seized cash before the date on which advance tax became due. It was also noted that ultimately the liability of assessees towards advance tax was less than the amount found refundable to them. It was also noted that since the question of charging interest under sections 234B and 234C was highly debatable, it would be appropriate not to charge interest from the assessees. Revenue contended that substantial questions of law arose for consideration inasmuch as assessees were liable to pay interest under the provisions of sections 234B and 234C of the Act. It was also contended that cash belonging to the partners of assessees could not be adjusted against the liability of the assessees. Held:There was no dispute that the offer for adjustment of the seized cash was made by assessees before the advance tax liability became due. Therefore, it is not as if the assessees had any intention of shirking their advance tax liabilities. Adjustment of the cash seized against the liability of the firm was concerned, Tribunal rightly held that there was no difference between a firm and its partners. Its partners constitute a firm and they were liable to make good any demand of taxes on behalf of the firm. Partners had categorically prayed that the cash seized from their premises, which also happened to be the premises of the firm, should be adjusted against the advance tax liability of the firm/assessee. Hence, there was nothing to prohibit assessees from making a request for adjustment of the cash seized against advance tax liabilities, equity demands that cash amount ought to have been adjusted as prayed for by assessees to save it from any liability of interest.

Income-tax Act, 1961, Section 234B

A.Y. :1994-95
Decision: In favour of assessee.

CIT v. K.K. Marketing