The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the cash seized during search cannot be adjusted against the self-assessed existing tax liability as per the provisions of section 132B of the Income Tax Act, 1961.
Search action was conducted on the assessee, Shri Jagdishbhai R. Patel from 1.7.2013 to 5.7.2013 in consequent to which, cash of Rs.65 lakhs was seized. The assessee admitted during the course of search in a statement given on oath that cash belonged to him. Thereafter for the impugned year, a return of income was filed by the assessee on 31.8.2015 showing a total income of Rs.65,40,060/- which was accepted by the AO vide his order dated 4.2.2016. The AO also initiated penalty proceedings under section 271AAB of the Act and levied penalty at the rate of 30% of the undisclosed income noting that the assessee had not filed return of income before the specified date i.e. 31.7.2015. Accordingly, penalty of Rs.19,50,000/- was levied on the undisclosed income of Rs.65 lakhs.
The assessee contended that section 139(1) invariably included section 139(4) in section 139(1) of the Act. He further contended that he had disclosed in his statement an amount of Rs.65 lakhs. He offered the same for taxation in the return of income and taxes on the same have also been paid by way of adjustment of seized cash.
While dismissing the appeal preferred by the assessee, Smt.Annapurna Gupta, Accountant Member and Shri Siddhartha Nautiyal, Judicial Member observed that the “penalty @ 30% was required to be levied as per the section on account of the above failure of the assessee. The Ld.CIT(A) rejected both the contentions of the assessee of treating belated return filed u/s 139(4) of the Act as being filed u/s 139(1) of the Act and treating cash seized to be treated as adjusted against taxes due thus tantamounting to taxes also being paid by the assessee on the undisclosed income by the specified date. The Ld.CIT(A) rejected the first contention pointing out the clear wording of the section requiring return to be filed as allowed u/s 139(1) of the Act. As for adjustment of cash seized against taxes to be paid he noted that section 132B of the Act allows adjustment of amounts seized against existing liabilities of tax only and self-assessment tax be adjusted against the same. We find no infirmity in the well reasoned order of the Ld.CIT(A) as above.”
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