The main legal point established in the judgment is that seized cash cannot be treated as payment of advance tax on the date of seizure and can only be applied towards existing liability after assessment.

Vibhu Bakhru, J.

1. These appeals are filed by the Revenue under Section 260A of the Income Tax Act (hereafter ‘Act’) impugning a common order dated 11th July, 2001 passed by the Income Tax Appellate Tribunal (hereafter ‘The Tribunal’) in respect of the six separate appeals being ITA Nos. 1780/Del/1995, 5933/Del/1995 5931/Del/1995, 1874/Del/1995, 6082/Del/1995 and 6084/Del/1995; ITA Nos. 1780/Del/1995, 5933/Del/1995 and 5931/Del/1995, were filed by Shri Gian Chand Gupta, Smt. Usha Rani Gupta and Shri Sri Chand Gupta ( hereafter collectively referred to as the ‘Assessees’) respectively against separate orders passed by the Commissioner Income Tax (Appeals) [hereafter ‘CIT(A)’] and ITA Nos. 1874/Del/1995, 6082/Del/1995 & 6084/Del/ 1995 were cross appeals preferred by the Revenue against the orders of CIT (A). The CIT(A) had by separate orders disposed of the appeals preferred by the Assessees against the orders passed by the Assessing Officer (hereafter the ‘AO’) rejecting the respective applications filed by the said Assessees under Section 154 of the Act.

2. The present appeals involve a common question concerning the treatment of the currency seized during the search and seizure operations conducted under Section 132 of the Act. The Assessees claim that the amounts seized during the search ought to be accounted for as payment of advance tax on the date of seizure and interest chargeable under Section 234A, 234B and 234C of the Act ought to be computed accordingly. The Revenue disputes this contention. According to the Revenue, the currency seized during the search operations under section 132 of the Act, cannot be treated as payment of tax till the filing of the return by the Assessee surrendering the seized amount as payment of tax or a demand being raised pursuant to a regular assessment.

3. In view of the above controversy, this Court, by an order dated 12th February, 2004 framed the following question of law for determination:-

“Whether the Tribunal was right in holding that amount retained u/s 132(5) of the Income-tax Act, 1961 amounts to payment of taxes and should be taken into consideration while calculating interest payable u/s 234A, 234B and 234C of the Income-tax Act, 1961?”

4. It is relevant to note that all parties had agreed before the Tribunal that the facts and the questions of law involved in all the appeals were common and a decision in the case of Sh. Gian Chand Gupta (hereafter the ‘Assessee’) [ITA 1780/Del/1995 and 1874/Del/1995] would cover the issues in all the appeals. Thus, for the purposes of addressing the disputes in the present appeal, the facts pertaining to the case of Sh. Gian Chand Gupta, (the Respondent/Assessee in ITA No. 20/2002) are briefly stated as under:-

4.1 The search and seizure operations were conducted under Section 132 of the Act at the premises of the Assessee on 14th January, 1991. During the course of the search, Indian currency amounting to Rs.25,62,500/- was found and seized by the concerned officers.

4.2 On 10th May, 1991 an order under Section 132(5) of the Act was made estimating the income of the Assessee at Rs.1,95,93,756/-. Accordingly, the AO passed an order retaining the cash seized to be dealt with in accordance with provisions of Section 132B of the Act.

4.3 The Assessee filed his return of income on 26th April, 1993 declaring a total income of Rs.56,56,380/- for the relevant period (i.e. Previous Year 1990-1991 relevant to the Assessment Year 1991-92). The said return was processed under Section 143(1)(a) of the Act on 27th September, 1993 and a demand of Rs.58,49,796/- was raised. This demand included interest payable under Section 234A, 234B & 234C of the Act. The cash seized during search operations was appropriated against the aforesaid demand.

4.4 Aggrieved by the same, the Assessee filed an application on 19th January, 1994 under Section 154 of the Act for rectification of the said demand. The Assessee contended that the cash seized on 14th January, 1991 ought to