Advance Tax Liability can be adjusted against Cash Seized by Income Tax Dept. from Assessee: HC

Facts of the case: 

  • The assessee is a private limited company which is engaged in the business of trading random slabs of marbles and granites. A proceeding u/s 122 of the Act was initiated and cash amounting to Rs.4.77 Crores was seized by the department.
  • Assessee disclosed Rs.50 Lakhs and stock of Rs.1.40 Crores as additional income for AY 2007-08 and sent a communication dated 15.03.2007, 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 AY 2007-08.
  • AO dismissed assesee’s appeal and computed the interest u/s 234B and 234C, aggrieved assessee has now further appealed the matter before HC.

Contention of Assessee:

  •  Assessee contended that provisions of Section 132B of IT Act have a prospective application, as per the explanation 2 of section 132B advance tax liability can be adjusted against the cash lying in the account of revenue.
  • In support of aforesaid contention, reference has been made to decision of division bench of this court in ‘M/S Shri Raghavendra Traders Santhepet, Hassan V. Assistant Commissioner of Income Tax’, 2011. Therefore, Date of payment of advance tax is to taken on which request to adjust against advance tax payable cash seized was made i.e. 15.03.2017 and hence no interest u/s 234B and 234C should not be levied.

Contention of Department:

  • Revenue contended that the assessee did not make computation of advance tax as required u/s 209(1)(a) 210(1) of the Act to calculate the amount of advance tax. Therefore, it is justified in taking the view that for the purposes of adjustment of the cash seized against the advance tax payable can be treated as tax paid on the date of filing of the return.


  • HC, Karnataka decided the judgement in favor of the assessee and stated that as per Explanation 2 to Section 132B the above captioned position has been settled by Circular No.20/2017 dated 12.06.2017.
  • Relying upon the decision made by Allahabad HC in Commissioner of Income Tax, Kanpur V. Sh Sunil Chandra Gupta’, 2015, It is evident that Advance tax liability can be adjusted against the cash lying in the account of revenue.
  • Also, it is pertinent to note that in course of proceedings where a certain cash is seized by Revenue, date of payment of advance tax is to be taken as date on which request was made to adjust cash seized against advance tax payable for AY in question.

Source: Marble Centre International (P.) Ltd. V. Assistant Commissioner of Income-tax [2020] 117 208 (Karnataka)