KAPOOR INDUSTRIES LIMITED,MEHRAULI V. CPC, BENGALURU(CURRENTLY ASSESSED WITH DCIT, CC-01, NEW DELHI), NEW DELHI

ITA 4498/DEL/2025

AI Insights

Kapoor Industries Limited appealed against the orders of the Centralized Processing Centre (CPC), Bengaluru, and the Commissioner of Income Tax (Appeals) [CIT(A)], which denied the credit of seized cash towards self-assessment tax. The company argued that the cash, seized during a search operation, was recorded in its books as income from domestic sales of defective goods and should be adjusted against its self-assessment tax liability for AY 2024-25. The CPC and CIT(A) had treated the cash as advance tax, which is not permissible under Section 132B of the Income Tax Act for adjustment against advance tax liabilities. The Tribunal, referencing several judicial precedents, concluded that the seized cash could be adjusted against the self-assessment tax liability, as it was an existing liability at the time of seizure.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785799 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2024-2025
• Appeal Filed On: 21-07-2025
• Other Referred Cases: Assistant Commissioner of Income-tax vs. Narendra N. Thacker, Sh. Sajjan Singh vs ACIT, Gaurav Ajmera vs DCIT, Arun Bansal vs ACIT, Kushal Narayan Patel vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADJOURNMENT BY
• Assessee Lawyers: PAVAN VED; WAY
• Keywords: Business income; Documents seized; Gift; Principle of natural justice
• Section: 154; 132; 153A; 234B

Judgement Text

"ITA No. 4498/Del/2025 THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No. 4498/Del/2025 (Assessment Year 2024-25) Kapoor Industries Limited 29A-2/1, Desu Road, Mehrauli Delhi-110030 PAN-AAECK6613N vs CPC, Bengluru APPELLANT RESPONDENT Appellant by Shri Pavan Ved, Adv., Shri Mohit Gupta, CA, Shri Mirza Baig, CA and Shri Sarthak, CA Respondent by Adjournment by CIT DR Date of Hearing 15.10.2025 Date of Pronouncement 31.10.2025 ORDER PER MANISH AGARWAL, AM : This appeal is preferred by the captioned assessee against the order of Ld. Commissioner of Income Tax (Appeals) Delhi-23 [CIT(A) in short] dated 14.07.2025 passed u/s 250 of the Income Tax Act, 1961 (the Act, in short) arising out of the intimation order u/s 143(1) of the Act dated 07.11.2024 of Centralized Processing Centre (CPC), Bengaluru for A.Y. 2024-25. Printed from counselvise.com ITA No. 4498/Del/2025 2. When the matter was called up for hearing, the revenue has sought adjournment in terms of the adjournment application dt. 15.10.2025 received through mail wherein the ld. CIT DR sought adjournment on the medical grounds. It is seen that it is early hearing granted matter by the orders of coordinate bench dt.12.09.2025 when the coordinate bench has accepted the request of the assessee for early hearing and case was fixed for hearing out of turn on 14.10.2025. On 14.10.2025, on the written request by the ld. CIT DR matter was adjourned to 15.10.2025. It was made clear by the bench to both the parties that being early hearing granted matter, no further adjournment was granted. Thus, the adjournment application filed by the ld. CIT DR is rejected and Sr. DR, Shri Rajesh Kumar Dhanesta was requested to assist the bench on behalf of the revenue. Case was heard and reserved for orders. 3. With this background, we proceed to decide the appeal of the assessee. 4. Brief facts of the case are that assessee is a company engaged in the business of manufacturing and export of fabric towels and filed its return of income on 28.10.2024 in ITR -6, declaring total income at Rs. 215,77,45,000/- on which total tax liability was worked out at Rs. 54,30,61,262/- and interest u/s 234 was calculated at Rs. 69,96,882/-. The CPC, Bengaluru while processing the return u/s 143(1) of the Act on 7.11.2024 has created the demand of Rs. 3,74,28,230/- by not allowing the credit of Rs. 17,66,50,000/- claimed by the assessee as payment of tax being the amount seized during the course of search u/s 132 of the Act from Printed from counselvise.com ITA No. 4498/Del/2025 the locker in the name of Shri Ashish Kapoor, director of the assessee company. Against the said intimation an appeal was filed before the ld. CIT(A), who vide impugned order dt. 14.7.2025 has dismissed the appeal of the assessee. 5. Aggrieved by the said order, assessee filed the present appeal before the Tribunal by taking following grounds of appeal: 1. “That on the facts and circumstances of the case, the order passed by the Centralized Processing Center, Income Tax Department, Bengaluru (hereinafter referred as “CPC”) u/s 143(1) of the Act dated 07.11.2024 as well as order u/s 250 of the Act dated 14.07.2025 passed by the Ld. CIT(A), Delhi-23 are bad in law, void-ab-initio and violative of principles of natural justice. 2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in upholding the erroneous demand of Rs. 3,74,28,230/- created by CPC vide order u/s 143(1) of the Act dated 07.11.2024 as against refund due of Rs. 13,92,21,770/- claimed in the return of income filed for AY 2024-25. 3. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in confirming the action of the CPC of not allowing the Tax Credit of the Self-Assessment tax amounting to Rs. 17,66,50,000/- on account of mismatch of challan particularly when the Ld. CIT(A) was well aware of the facts that cash seized was already lying in the possession of the tax department. 4. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law by misconstruing the unambiguous provisions contained in Sec. 132B of the Act particularly when the Tax Credit of the seized cash was made towards the liability of Self-Assessment Tax for A.Y. 2024-25 under the Income Tax Act. 5. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in not allowing the benefit of adjustment of Cash seized against the self-Assessment tax liability for A.Y. 2024-25 under the Income Tax Act. 6. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in not deciding the matter and dismissing the appeal by not acting as a quasi-judicial authority particularly when the requisite powers have been granted to the Ld. CIT(A) to decide the issue after Printed from counselvise.com ITA No. 4498/Del/2025 considering all the facts of the case coupled with the applicable law and the legal precedence in force. 7. That the order passed by the Ld. CIT(A) u/s 250 of the Act as well as the order passed by the CPC u/s 143(1) of the Act are absolutely wrong, void ab initio, bad on facts & in law (as elaborated above) and hence, the credit of Self-Assessment tax paid amounting to Rs. 17,66,50,000/- deserves to be allowed along with the issuance of due refund of Rs. 13,92,21,770/- as against erroneous demand created of Rs. 3,74,28,230/- vide order u/s 143(1) of the Act dated 07.11.2024. 8. That on the facts and circumstances of the case, the CPC has erred in law in levying wrong excess interest u/s 234B & 234C of the Act. 9. That the appellant craves to add, amend, alter or withdraw any Ground or Grounds of Appeal.” 6. Before us, Ld. AR for the assessee submits that a search action was carried out by the Investigation Wing of department on South Delhi Vaults at W-113, Greater Kailash -2, New Delhi on 14.5.2024 wherein three lockers were found belonging to the assessee company. From these three lockers bearing Nos. 575, 576 and 587 cash amount of Rs. 7,34,00,000/-, Rs. 6,85,00,000/- and Rs. 3,47,50,000/- were found which were seized by the department in terms of the panchnama created on the same day which are available in the paper book pages 375 to 390 filed by the assessee. Ld. Ar submits that in all the lockers, the signing authority was the director of the assessee company namely Mr. Ashish Kapoor, which were used by assessee company. Ld. AR submits that since the said cash was of the assessee company and was kept in the safe vaults for the safety purposes, thus the credit of such cash seized was claimed against the total tax liability computed in terms of the return of income filed. Printed from counselvise.com ITA No. 4498/Del/2025 7. Ld. AR further placed reliance on the detailed written submission and Summary of Arguments placed before us. The relevant contents of written submissions so filed are reproduced as below: A. CASE BACKGROUND “The present appeal has been filed against the non-allowability of tax credit of cash seized towards Self-Assessment Tax Liability for AY 2024- 25 by CPC vide order u/s 143(1) of the Act dated 07.11.2024 and thereby erroneous creation of demand of Rs. 3,74,28,230/-. The facts with regard to the aforesaid matter are mentioned hereunder: - i. That the assessee company has filed its income tax return for AY 2024- 25 on 28.10.2024 vide Ack.no. 656898631281024 claiming a refund of Rs. 13,92,21,770/-. Copy of ITR Ack. & ITR Form are enclosed at Page Nos. 109-241 of Paper-Book (PB). ii. That the aforesaid return has been processed vide Intimation Order u/s 143(1) of the Act dated 07.11.2024 bearing DIN no. CPC/2425/A6/520588909 wherein a demand of Rs. 3,74,28,230/- has been created due to non-allowability of Tax Credit of Self- Assessment Tax amounting to Rs. 17,66,50,000/- claimed in the return of income filed for AY 2024-25. Copy of the Intimation Order u/s 143(1) of the Act is enclosed at Page Nos. 268-286 of PB. iii. That the credit of Self-Assessment Tax amounting to Rs. 17,66,50,000/- has not been given due to the non-availability of Tax Challan for the purposes of filing in the return of income filed for AY 2024-25. iv. That the said Self-Assessment Tax of Rs. 17,66,50,000/- actually represents the Cash pertaining to the assessee company recorded in its books of accounts as Sales of Defective Goods for FY 2023-24, which cash was found & seized during the course of search and was in possession of the tax department at the time of filing of the return of income. v. That a search & seizure action was conducted u/s 132 of the Act at South Delhi Vaults, W-113, Greater Kailash -2, New Delhi in the month of May’2024 by Investigation Wing, New Delhi wherein five lockers under the signing authority of the director of the assessee company namely Mr. Ashish Kapoor, which were used by Kapoor Industries Group, were operated, the same are detailed hereunder: Printed from counselvise.com ITA No. 4498/Del/2025 S. No. Locker No. Cash Found & Seized (in INR) Document s Found & Seized Seizure pertains to (A) (B) (C) (D) (E) 1 575 7,34,00,000 NA Kapoor Industries Ltd. (Appellant) 2 576 6,85,00,000 NA Kapoor Industries Ltd. (Appellant) 3 587 3,47,50,000 NA Kapoor Industries Ltd. (Appellant) 4 581 NA NA Found Empty 5 582 NA Documents seized (refer Page Nos. 436- 690 of PB) Kapoor Industries LLP (group entity of Kapoor Industries Group) Total 17,66,50,00 0 Copy of Panchnamas evidencing the aforementioned seizure are enclosed at Page Nos. 375-404 of PB. vi. That the aforesaid five lockers were maintained under the signing authority of the director of the assessee company, Mr. Ashish Kapoor who maintained such lockers for safe-keeping of the assets & documents pertaining to the business entities of Kapoor Industries Group (relevant Page Nos. 480-483, 515 & 522-527 of the PB). vii. That the aforesaid cash amounting to Rs. 17,66,50,000/- pertaining to the appellant company was seized during the course of aforesaid search action wherein the lockers (Nos. 575, 576 & 587) under the signing authority of the director of the assessee company, Mr. Ashish Kapoor were also operated. viii. That the aforesaid lockers were maintained at South Delhi Vaults for the purpose of safe-keeping of cash generated out of the domestic sales of defective goods made during FY 2023-24 duly accounted for in the books of accounts of the assessee company and offered to tax. Copy of the Audited Financial Statements are enclosed at Page Nos. 1-106 of PB wherein such domestic cash sales are duly recorded. ix. That there is no facility in the income tax return form to claim adjustment of cash seized towards Self-Assessment Tax paid, i.e., the cash already in possession with tax department as Self-Assessment Tax paid, therefore, due to the limitation of the return form, the appellant company showed the cash seized as self-assessment tax in AY 2024-25 in view of the self-assessment tax adjustment letter dated 30.09.2024 (enclosed at Page Nos. 415-418 of the PB as referred Printed from counselvise.com ITA No. 4498/Del/2025 herein in subsequent paras below). However, the tax credit of the self- assessment tax in the shape of cash seized was not given. x. That having aggrieved with the aforesaid non-allowability of adjustment of cash seized towards Self-Assessment tax paid of Rs. 17,66,50,000/- for AY 2024-25 in case of the assessee company, namely, M/s. Kapoor Industries Ltd. by the CPC, the assessee company filed an appeal before the Ld. CIT(A)-23, Delhi. Moreover, the cash so found & seized pertaining to the assessee company was duly forming part & disclosed in the books of accounts of the assessee company for FY 2023-24 relevant to AY 2024-25. xi. That complete facts were submitted before the Ld. CIT(A) during the course of hearing of the appeal, however, the Ld. CIT(A) without considering the submissions of the assessee company, mechanically dismissed the appeal of the assessee company vide order u/s 250 of the Act dated 14.07.2025 and upheld the wrong demand of Rs. 3,74,28,230/- created by CPC vide order u/s 143(1) of the Act dated 07.11.2024 by resorting to erroneous interpretation of Sec. 132B of the Act against the legislative intent of the said provision of the statute. As a matter of fact, the Ld. CIT(A) misconstrued “the request of the appellant to adjust the seized cash towards Self-Assessment Tax Liability” wrongly as “Advance Tax Liability”. xii. That the Ld. CIT(A) completely ignored the fact that under the Income Tax Act, 1961, provisions regarding payment of self assessment tax are contained in Chapter XIV u/s 140A while the provisions regarding payment of advance tax are contained in Part C of Chapter XVII under section 207 to Section 219. The requirement of payment of advance tax before the end of relevant Financial Year is on estimated income relating to that F.Y. while self assessment tax is paid after the end of the F.Y. at the time of filing of return of income for that F.Y. on the basis of actual tax liability determined by the assessee relating to the income earned during the previous year. Thus, the nature of self assessment tax and advance tax is different and the said Explanation 2 has specifically referred and covered only advance tax payable. Therefore, the self assessment tax is of distinct nature and cannot be brought within the ambit of the said Explanation 2 to section 132B which only prohibits the adjustment towards advance tax and not towards the self-assessment tax. xiii. Having aggrieved, the assessee company has filed the present appeal against the denial of adjustment of cash seized towards the self- assessment tax liability of appellant company for AY 2024-25 by the Ld. CIT(A) as well as by Ld. CPC. xiv. The assessee has made a request for early fixation before the Hon’ble ITAT, Delhi vide its letter dated 09.09.2025 highlighting extraordinary urgency in the matter so far as that appellant company is facing a Printed from counselvise.com ITA No. 4498/Del/2025 huge financial crisis due to the exorbitant tariffs imposed by the US government on India which is resulting in cancellation of orders by our American Customers due to the reason that most of the appellant’s business income is derived by exports to USA, the copy of the letter dated 09.09.2025 is enclosed herewith at Page Nos. 22-35 of these written submissions. The Hon’ble ITAT was kind enough to grant early hearing on 14.10.2025 considering the genuine difficulty of the appellant company. B. WRITTEN SUBMISSIONS The Ld. CPC as well as the Ld. CIT(A) has erred in law & on facts in denying the adjustment of cash seized amounting to Rs. 17,66,50,000/- towards of Self-Assessment Tax Liability for AY 2024-25 of the appellant company in view of the following facts & legal position: 1) That the above-named company had imported new Dyeing machines from M/s. Danitech Engineering & Solutions, Italy (hereinafter referred as Danitech) which would help the company in enhancing its production capacity and in reduction of water consumption by 50% which contribute towards the vision & mission of the company for environment friendly sustainable business development. However, during the course of production, it was observed that the said machines are producing defective goods as the goods produced were having a color/fading effect which made such goods unfit for International Market. 2) That numerous complaints were made to the suppliers who supplied the said new machines and multiple visits were made by the engineers to repair the said machines, however, even after number of efforts, the defect could not be removed completely. 3) That following multiple emails, calls & meetings raising concerns about continuous machine failures, satisfactory resolution was not found by Danitech & there were uneven dyeing results in the machines. Consequently, management decided to proceed with production w.e.f. April 2023 using the defective machines, considering that only by using the machine, the root causes of machine failures would be found & rectified for the long run. This decision was also based on the fact that no other competing technology offered 50% water reduction, hence the only solution was to learn by trial & errors. Therefore, the production was continued through the said new machines due to which defective goods were produced along the way which were not upto the international quality standards and thus, could not be exported. 4) In order to minimize the business losses, the company sold such defective goods in the domestic market in Cash through over the counter sales. The company has recorded the domestic sales of defective goods, as aforesaid, to the tune of Rs. 17,75,02,500/- during Printed from counselvise.com the year ended 31.03.2024. This fact has also been disclosed in the Audited Financial Statements (AFS) as well as in the Statutory Audit Report (SAR) enclosed at 2 & 69). Relevant Extracts of the above SAR & AFS are also imag a. Relevant image of SAR b. Relevant image of AFS ITA No. 4498/Del/2025 d 31.03.2024. This fact has also been disclosed in the Audited Financial Statements (AFS) as well as in the Statutory Audit enclosed at Page Nos. 1-106 of PB (Relevant Page Nos. Relevant Extracts of the above SAR & AFS are also imaged hereunder: Relevant image of SAR Relevant image of AFS ITA No. 4498/Del/2025 d 31.03.2024. This fact has also been disclosed in the Audited Financial Statements (AFS) as well as in the Statutory Audit 106 of PB (Relevant Page Nos. ed hereunder: Printed from counselvise.com ITA No. 4498/Del/2025 5) That the appellant company for the purpose of safe-keeping of cash generated through the afore-mentioned domestic sales, authorized its director, namely, Mr. Ashish Kapoor to keep the cash in his safe custody, who, in turn, kept the same in private vaults/lockers under his signing authority maintained with South Delhi Vaults for safe- keeping purposes. Copy of Board Resolution dated 05.04.2023 authorizing Mr. Ashish Kapoor to safe-keep the liquid assets including cash of the appellant company is enclosed at Page Nos. 374 of PB. 6) The during May 2024, the Income Tax Department conducted search operation on South Delhi Vaults wherein the Lockers (Nos. 575, 576 & 587) under the signing authority of the director of the appellant company were also maintained where the cash pertaining to the company generated out of the aforementioned domestic sales of defective goods was found & seized by the tax department. 7) That already ill health of the director, Mr. Ashish Kapoor was further deteriorated after the aforesaid search & seizure action as he was under severe stress, anxiety and mental imbalance and later in the month of July’ 2024, he suffered a heart attack & was admitted to hospital, the evidence to this effect is enclosed at Page Nos. 417- 418 of PB. 8) That after being discharged from the hospital and gradually recovering from the severe ill health, Mr. Ashish Kapoor resumed his office duties and immediately thereafter filed a letter dated 30.09.2024 before the Jurisdictional Assessing Officer, Ld. DCIT, Circle-13(1), New Delhi wherein a request for adjustment of such cash seized towards the self-assessment tax lability of the appellant company for AY 2024-25 was made along with the copy of the audited financial statements (copy of the said letter dated 30.09.2024 along with discharge summary of the hospital are enclosed at Page Nos. 415-418 of the PB). However, in the order u/s 143(1) of the Act dated 07.11.2024, the credit of Cash Seized against Self-Assessment Tax Liability for AY 2024-25 was not allowed and thereby erroneous demands were created. 9) That the Ld. CIT(A) as well dismissed the appeal of the assessee company and erroneously upheld the non-allowability of adjustment of Cash seized towards the Self-Assessment Tax for AY 2024-25 by mis-construing the provisions contained in Sec. 132B of the Act, i.e., the Ld. CIT(A) has misconstrued “the request of the appellant to adjust the seized cash towards Self-Assessment Tax Liability” wrongly as “Advance Tax Liability”. 10) That it is important to reflect upon the relevant provisions of Sec. 132B of the Act which are reproduced herein below: - Printed from counselvise.com ITA No. 4498/Del/2025 “132B. (1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:— 11) From the perusal of the aforesaid contents of Sec. 132B of the Act, it can be clearly seen that the amount of any existing liability under the Income Tax Act can be adjusted against seized assets. In the instant case, the assessee company has correctly adjusted its Cash Seized towards its liability for payment of Self-Assessment Tax which is a liability under the Act existing as on the date of seizure of Cash as the cash was seized in the Month of May 2024 and the Self-Assessment Tax Liability for FY 2023-24 arose since the end of FY 2023-24, i.e., w.e.f. 01.04.2024. Hence, the Ld. CIT(A) has erred in law in not allowing the Tax Credit of the Cash Seized against Self-Assessment Tax Liability by wrongly observing that the cash seized cannot be adjusted against Advance Tax Liability which is not the case of the assessee company. 12) To support the aforesaid view, reliance is placed on the following judicial pronouncements:  Hon’ble ITAT, Kolkata in case of Assistant Commissioner of Income-tax vs. Narendra N. Thacker [2017] 82 taxmann.com 64 [2016] 45 ITR(T) 188 vide order dt. 28-09-2015 held (authored by Hon’ble VP, Delhi ITAT Zone, then Hon’ble JM, Kolkata ITAT Bench): “7. We find that the subsequent action of Learned AO in revoking the credit given for seized cash towards existing tax liability under proceedings u/s 154 of the Act is illegal. The provisions of section 132B of the Act makes it clear that the terms 'existing liability' does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII. But this (i) the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) 79a[the Interest-tax Act, 1974 (45 of 1974) and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015)], ……………………………………………………… Explanation 2.—For the removal of doubts, it is hereby declared that the \"existing liability\" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII. Printed from counselvise.com ITA No. 4498/Del/2025 amendment was brought in the statute by Finance Act 2013 with effect from 1.6.2013 only. Hence it can be safely concluded that what is precluded in the statute is adjustment of seized cash towards advance tax liability only and not self assessment tax or regular tax and that too only with effect from 1.6.2013. We hold that the action of the assessee in seeking to adjust the seized cash with self assessment tax payable along with the return of income is in order and in accordance with section 132B of the Act as admittedly self assessment tax payable becomes 'existing liability' on the part of the assessee to settle. Similarly, we hold that the action of the Learned AO in adjusting the seized cash towards the tax liability determined pursuant to completion of section 153A assessment also is in order and is in accordance with the provisions of section 132B of the Act. ………………………………………………… 11. Moreover, even if we hold that the said amendment in section 132B of the Act is to be construed as retrospective in operation, still it will not disturb the impugned case as in the facts of the instant case, the assesee never requested for adjustment of seized cash towards advance tax liability. He only requested for adjustment of seized cash towards self assessment tax. It is beyond doubt that the terms ' advance tax' and 'self assessment tax' are distinct and separate.”  Hon’ble ITAT, Delhi in case of Sh. Sajjan Singh vs ACIT in ITA no. 6440/DEL/2016 vide order dated 18.01.2018 held following the judgement of Narendra N. Thacker (supra) as under: “8. The ld DR could not controvert that how the above decision does not cover the issue in favour of the assessee. No other contrary decision was also brought to our notice. In view of this, we do not find any infirmity in the order of the ld CIT(A) in directing the ld Assessing Officer to give credit of seized cash toward self-assessment tax paid of Rs. 5371411/- as self-assessment tax and also not to charge interest u/s 234B of the Act from the date of seizure to the date of assessment. Accordingly, the appeal of the revenue is dismissed.”  Hon’ble ITAT, Indore in case of Gaurav Ajmera vs DCIT [2024] 167 taxmann.com 293 vide order dated 10.06.2024 held: “6.4 Applying the decision of ITAT, Kolkata and Board Circular No. 2/2015 cited above, we find that the cash seized by department in present case on 14.11.2016 and agreed by assessee to be adjusted against tax liability of assessee, is in the nature of self-assessment payment before due date of Printed from counselvise.com ITA No. 4498/Del/2025 filing of return for AY 2017-18 which deserves to be allowed in computation of interest u/s 234A. Therefore, we remit this issue also back to the AO with a direction that the AO shall give benefit of cash seized and available with department in calculation of interest and re-compute interest u/s 234A accordingly.”  Hon’ble ITAT, Delhi in case of Arun Bansal vs ACIT in ITA No. 2615/Del/2022 vide order dated 29.05.2023 held: “7. Undisputedly, the cash seized was in the possession of the department from the date of search itself, i.e., 01.12.2018. It is a fact that the assessee has also requested the Assessing Officer to adjust the self assessment tax liability on the income declared of Rs.1,07,00,000/- from the seized amount. However, assessee’s request was never accepted. On a reading of section 132B of the Act, though it transpires that the assets seized can be adjusted against any existing liability under the Act and advance tax may not be an existing liability, however, in our view, self assessment tax is certainly an existing liability created on 1st April once the financial year ends. Therefore, the Assessing Officer should have adjusted the tax liability relating to the undisclosed income declared by the assessee by way of self assessment tax on 1st April, 2019.”  Hon’ble ITAT, Mumbai in case of Kushal Narayan Patel vs ITO [2025] 170 taxmann.com 170 (Mumbai - Trib.) vide order dated 22.11.2024 held as under: “4.2 Further, we find that Kolkata bench of the Tribunal in the case of Asstt. CIT v. Narendra N. Thacker [2017] 82 taxmann.com 64 (Kolkata - Trib.)/[2016] 45 ITR(T) 188 (Kolkata - Trib.) has held that the action of the assessee in seeking to adjust the seized cash with the self-assessment tax payable along with the return of income is in order and in accordance with section 132B of the Act as admittedly self-assessment tax payable become existing liability on the part of the assessee. In our opinion, once the assessee accepts the asset in the form of cash as unexplained and offers the same for tax, the revenue can't sit over his request and on the other hand charge interest for nonpayment of taxes. Until, the cash seized is adjusted against the taxes, the Revenue is mere custodian and required to adjust against the taxes as and when requested for adjustment and any delay on the part of the Revenue, the assessee should not be penalized. 4.3 In view of the precedents discussed above, it is evident that self-assessment tax liability could be treated as part of the 'existing liability'.” Printed from counselvise.com ITA No. 4498/Del/2025 12) In view of the above, it can be seen that the Ld. CIT(A) has erred in law in wrongly not allowing the Tax Credit of Self-Assessment Tax in the shape of cash seized by wrongly observing that the Cash Seized cannot be adjusted against Advance Tax Liability particularly when the assessee company has adjusted the Cash Seized towards the existing liability of Self-Assessment Tax and not for “Advance Tax Liability” for AY 2024-25. Thus, the Ld. CIT(A) has wrongly dismissed the appeal of the assessee company and wrongly upheld the demand created by CPC. Accordingly, keeping in view the aforesaid facts & settled law, it is undeniably clear that credit of Cash Seized amounting to Rs. 17,66,50,000/- towards the Self-Assessment Tax Liability deserves to be allowed to the appellant company and oblige. 13) Without prejudice to above, it is further most respectfully submitted that the very order u/s 143(1) of the Act dated 07.11.2024 suffers from material irregularity in view of the fact that if the department is challenging the payment of tax then the department should have issued a notice u/s 139(9) treating the return of income as defective and provide an opportunity to the assessee company to remove the said defect instead of passing the final intimation order u/s 143(1) of the Act. 14) That if the CPC would have issued a notice u/s 139(9) of the Act instead of passing an order u/s 143(1) of the Act dated 07.11.2024 then there would not be any issue of non-allowability of credit of cash seized as the request of the assessee company was already available on record in view of the letter dated 30.09.2024 wherein request for adjustment of cash seized towards Self-Assessment Tax Liability for AY 2024-25 was made much before the filing of return of income on 28.10.2024. 15) That as a matter of fact, since there is no notice of defect u/s 139(9) of the Act, either by the Ld. AO or by the CPC, therefore, the return of the assessee company has been duly accepted by the Ld. AO and thus, there is no occasion to not grant the credit of seized cash towards Self-Assessment Tax Liability of the assessee company for AY 2024- 25. 16) That it is also pertinent to mention here that the request of the assessee company made by the letter dated 30.09.2024 has neither been rejected nor acted upon by the department. At this juncture, it is worthwhile to place reliance on the judgement delivered by the Hon’ble Supreme Court of India in the case of Mangalam Publications vs. CIT [2024] 158 taxmann.com 564 (SC) wherein the Hon’ble Court vide order dated 23.01.2024 held at Para 43 as under: Printed from counselvise.com ITA No. 4498/Del/2025 “Though under sub-section (9)(f) of section 139, such returns could have been treated as defective returns by the assessing officer and the assessee intimated to remove the defect failing which the returns would have been invalid, however, the materials on record do not indicate that the assessing officer had issued any notice to the assessee bringing to its notice such defect and calling upon the assessee to rectify the defect within the period as provided under the aforesaid provision. In other words, the assessing officer had accepted the returns submitted by the assessee for the three assessment years under question. --------------------------- The assessing officer has the discretion to intimate the assessee about the defect(s) and it is only when the defect(s) are not rectified within the specified period that the assessing officer may treat the return as an invalid return. Ascertaining the defects and intimating the same to the assessee for rectification, are within the realm of discretion of the assessing officer. It is for him to exercise the discretion. The burden is on the assessing officer. If he does not exercise the discretion, the return of income cannot be construed as a defective return. As a matter of fact, in none of the three assessment years, the assessing officer had issued any declaration that the returns were defective.” 17) Furthermore, in another case, the Hon’ble Supreme Court of India while dealing with SLP in the case of ACIT vs. Marico Ltd. [2020] 117 taxmann.com 244 (SC) confirmed the view taken by the Hon’ble Bombay High Court in Marico Ltd. v. Asstt. CIT [2019] 111 taxmann.com 253 (Bombay) that “The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/forming an opinion.” 18) From the perusal of the facts & law stated at Paras 16 & 17 above, it is unambiguously clear that non-rejection of the assessee’s submission by the department tantamount to acceptance of the very submission of the assessee. Therefore, when the Ld. AO has not rejected the request dated 30.09.2024 of the assessee company, it indicates that the Ld. AO has accepted the said request which acceptance is also evident from the fact that the Ld. AO has not selected the return of income filed for AY 2024-25 for scrutiny assessment u/s 143(2) of the Act which is a matter of record. Thus, when the request of the assessee company so made vide letter dated 30.09.2024 for adjustment of cash seized pertaining to the assessee company towards the existing liability duly covered u/s 132B of the Act, i.e., the Self-Assessment tax Liability for AY 2024-25 is accepted then there is no occasion left for not allowing the aforesaid Printed from counselvise.com ITA No. 4498/Del/2025 adjustment of cash seized and therefore, the act of the department of non-allowability of the credit of cash seized towards the Self- Assessment tax Liability for AY 2024-25 is sheerly bad in law, violative of principles of natural justice and void-ab-initio. 19) In view of the afore-stated detailed facts and law, it is undisputedly clear that the Ld. CPC as well as the Ld. CIT(A) have erred in law & on facts in denying the adjustment of cash seized amounting to cash amounting to Rs. 17,66,50,000/- towards Self-Assessment Tax Liability for AY 2024-25 of the appellant company and that the said adjustment deserves to be allowed to the appellant company. C. URGENCY IN THE MATTER The revenue of the assessee company is primarily derived from exports to United States of America. Due to the imposition of 50% Tariffs by the US Govt., the US Customers are canceling the orders which are ready for shipment and thus, creating huge financial loss to the assessee company (copies of evidences on sample basis are already enclosed at Page Nos. 22-35 of these written submissions). Furthermore, due to the erroneous demand of Rs. 3,74,28,230/-, the refunds due to the assessee company amounting to Rs. 13.92 Crores has been wrongly wiped off which has created further financial difficulty. Due to the aforesaid huge demand of Rs. 3,74,28,230/-, the assessee company is also facing difficulty in raising funds through banks & financial institutions as the banks / financial institutions are also reluctant to sanction the financial support which is required for up-keep of the financial buoyancy. The afore-mentioned circumstances have pushed the appellant company into serious financial crisis and genuine hardship and therefore, the appellant warrants urgent relief in the matter. D. PRAYER In view of the afore-stated facts, settled law and genuine financial hardship being faced by the appellant company, it is hereby most humbly prayed before your honor that requisite relief may kindly be granted by allowing the due adjustment of cash seized amounting to Rs. 17,66,50,000/- against the self-assessment tax liability for AY 2024-25 and quash the order passed u/s 143(1) of the Act by the CPC wherein an erroneous demand of Rs. 3,74,28,230/- has been created as against the returned refund of Rs. 13,92,21,770/- as well as quash the impugned order of the Ld. CIT(A) disputed in this appeal before your honors wherein the credit of seized cash towards self-assessment tax liability has not been allowed, keeping in view the facts of the matter and the well-settled judicial precedence and oblige.” Printed from counselvise.com ITA No. 4498/Del/2025 8. It is thus, requested by ld. AR that the credit so claimed by the assessee be allowed as the ownership of the cash found and seized as of the assessee is not doubted by the AO and the adjustment is claimed against the existing and ascertained tax liability. He prayed accordingly. 9. Per contra, ld. Sr. DR on behalf of the revenue relied upon the orders of the authorities below and submits that assessee was claiming adjustment of the cash seized which is against the provisions of section 132B of the Act as per which the existing tax liability does not include advance tax liability. He thus requested for the confirmation of the orders of the lower authorities. 10. Heard the arguments of both the parties and perused the material available on record. The sole issue involved in the instant appeal is whether the adjustment of cash seized during the search at Rs. 17,66,50,000/- can be allowed as adjustment against the Self- Assessment Tax Liability for A.Y. 2024-25 or not? It is the claim of the assessee during the search u/s 132 of the Act at South Delhi Vaults, five lockers were found wherein the director of assessee company Shri Ashish Kapoor is the signing authority and since beginning of the proceedings it was claimed that these lockers were used by the assessee company to keep its cash for safety purposes. Out of the five locker, total cash of Rs. 17,66,50,000/- was found and seized which was pertaining to the assessee and is duly recorded in its books of accounts. Regarding the source of such cash, it was explained that it was generated from the domestic sales of defective goods made during FY 2023-24 by the appellant company and such Printed from counselvise.com ITA No. 4498/Del/2025 sales have duly been accounted for in the books of accounts maintained by the assessee company in regular course of business and part of the total sales offered to tax in AY 2024-25 i.e. the year under appeal. 11. It is further seen that a request was also made vide letter dated 30.09.2025 to the Jurisdictional Assessing Officer (JAO) for adjustment of the cash so seized the Self-Assessment Tax Liability for A.Y. 2024-25 and a copy of the Audited Financial Statements for FY 2023-24 relevant to AY 2024-25 before filing of return of income, copy of the same is available at paper book pages 415-418. 12. It is also a matter of fact that while dismissing the appeal of the assessee, ld. CIT(A) has wrongly treated the claim of the assessee as towards advance tax. It is seen that the said cash was seized on 14.5.2024 i.e. after the expiry of the financial year relevant to assessment year under appeal and the assessee in its return claimed the said cash as payment u/s 140A of the Act as part of the self- assessment tax. The Ld. CIT(A) completely ignored the fact that under the Income Tax Act, 1961, provisions regarding payment of self-assessment tax are contained in Chapter XIV u/s 140A whereas the provisions regarding payment of advance tax are contained in Part C of Chapter XVII under section 207 to Section 219. The requirement of payment of advance tax is before the end of relevant Financial Year on estimated income of that year, whereas self- assessment tax is paid at the time of filing of return of income based on the tax liability computed on the income declared in the return of income which is going to be filed. Thus, the nature of self- Printed from counselvise.com ITA No. 4498/Del/2025 assessment tax is different from advance tax and Explanation 2 to Section 132B specifically debars the adjustment towards advance tax liability only. Therefore, self-assessment tax liability cannot be brought within the ambit of Explanation 2 to section 132B of the Act. 13. Another important factor is that no notice u/s 139(9) of the act was issued either by CPC or by the JAO, treating the return of income filed by the assessee as defective in absence of the payment of the self-assessment tax u/s 140A of the Act and the specific request made by the assessee vide letter dated 30.09.2024 towards the appropriation of cash seize against the self-assessment tax was also neither decided nor rejected. Once the return of income filed by the assessee is treated as the failed return, it could be presumed that the request so made by the assessee for the appropriation of the cash seized is deemed to be accepted by the JAO/CPC. The Hon’ble Supreme Court of India while dealing with SLP in case of ACIT V. Marico Ltd. (2020) 117 taxmann.com 244(SC) confirmed the view taken by the Hon’ble Bombay High Court in the case of Marico Ltd. v. Asstt. CIT [2019] 111 taxmann.com 253 (Bombay) that non- rejection of the explanation of the assessee would tantamount to the Assessing Officer accepting the view of the assessee. 14. It is further observed by us, that the cash so found and seized is duly recorded in the books of accounts and the circumstances leading to generation of the same was duly stated by the auditors in item No. 22 of Notes on Clauses of Audited Financial Statements as at 31.2.2024 and reproduced herein above in the written submission Printed from counselvise.com ITA No. 4498/Del/2025 filed by the assessee. As observed above, the ld. CIT(A) had treated the said claim of the assessee as payment of advance tax however, as could be seen that the assessee had requested for the appropriation of the cash seized against the existing and admitted tax liability in the shape of self-assessment tax which in no circumstances could be held as unascertained liability. Moreover, nowhere in the proceedings, lower authorities alleged that this cash has not belonged to the assessee thus when the ownership of such cash is accepted, claim of the assessee for appropriation of the same against the self-assessment tax liability cannot be denied. 15. The Co-ordinate Bench of ITAT, Kolkata in case of Assistant Commissioner of Income-tax vs. Narendra N. Thacker reported in [2017] 82 taxmann.com 64 [2016] 45 ITR(T) 188 vide its order dt. 28-09-2015 held that the existing tax liability includes the self- assessment tax liability, the relevant observations of the bench are reproduced as under: “7. We find that the subsequent action of Learned AO in revoking the credit given for seized cash towards existing tax liability under proceedings u/s 154 of the Act is illegal. The provisions of section 132B of the Act makes it clear that the terms 'existing liability' does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII. But this amendment was brought in the statute by Finance Act 2013 with effect from 1.6.2013 only. Hence it can be safely concluded that what is precluded in the statute is adjustment of seized cash towards advance tax liability only and not self assessment tax or regular tax and that too only with effect from 1.6.2013. We hold that the action of the assessee in seeking to adjust the seized cash with self assessment tax payable along with the return of income is in order and in accordance with section 132B of the Act as admittedly self assessment tax payable becomes 'existing liability' on the part of the assessee to settle. Similarly, we hold that the action of the Learned AO in adjusting the seized cash towards the tax liability determined pursuant to Printed from counselvise.com ITA No. 4498/Del/2025 completion of section 153A assessment also is in order and is in accordance with the provisions of section 132B of the Act. ………………………………………………… 11. Moreover, even if we hold that the said amendment in section 132B of the Act is to be construed as retrospective in operation, still it will not disturb the impugned case as in the facts of the instant case, the assesee never requested for adjustment of seized cash towards advance tax liability. He only requested for adjustment of seized cash towards self assessment tax. It is beyond doubt that the terms ' advance tax' and 'self assessment tax' are distinct and separate.” 16. Similar view is expressed by various benches of the Tribunal in following cases: - Sh. Sajjan Singh vs ACIT ITA no. 6440/DEL/2016 dt. 18.01.2018 (ITAT Delhi) - Gaurav Ajmera vs DCIT reported in [2024] 167 taxmann.com 293 (ITAT, Indore) - Arun Bansal vs ACIT, ITA No. 2615/Del/2022 dt. 29.05.2023 (ITAT Delhi) - Kushal Narayan Patel vs ITO reported in [2025] 170 taxmann.com 170 (Mumbai - Trib.) 17. In view of above discussions, we are of the considered view that self-assessment tax liability is an existing liability as envisaged u/s 132B of the Act and by respectfully following the aforesaid judicial pronouncements, appropriation of the money lying seized with the revenue of the cash as requested by the assessee is allowed towards self-assessment tax liability for F.Y. 2023-24 being an existing liability as per provisions of Section 132B of the Act, we order accordingly. Therefore, all the grounds of appeal taken by the assessee are allowed. Printed from counselvise.com ITA No. 4498/Del/2025 18. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 31.10.2025. Sd/- Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER Date:- 31.10.2025 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "