K.devaraj v. The Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 13.4.2010 CORAM THE HON'BLE MR.JUSTICE M.JEYAPAUL W.P.No.4234 of 2002and W.P.M.P.Nos.5975 and 5976 of 2002 K.Devaraj Petitioner vs. The Commissioner of Income Tax,No.4, Williams Road,Cantonment,Tiruchirapalli. Respondent Writ Petition filed under Article 226 of the Constitution ofIndia praying to issue a writ of certiorarified mandamus to call forthe records of the impugned order No.C.No.6097B(33)/1998-99 dated15.6.2001 passed by the respondent and quash the same and direct therespondent to consider the petitioner's plea for the grant ofinterest on the refunded amount. For petitioner : Mr.S.JayakumarFor respondent : Mr.RavikumarORDER The petitioner was assessed to Income Tax on the file of theAssessing Officer falling within the jurisdiction of the respondent.Therewasasearchconductedinthepetitioner'sresidential/business premises on 4.12.1998. A sum of Rs.17,50,000/=was seized from him. It was kept in the Commissioner's PersonalDeposit Account for being adjusted towards the tax liability of thepetitioner. The block assessment for the period 1989-90 to 1999-2000 was completed under section 158BC of the Income Tax Act, 1961on 22.12.2000. A sum of Rs.12,87,660/= was determined as amount oftax payable by the petitioner. The said tax liability was adjustedfrom and out of the monies seized from the petitioner. The balanceof Rs.4,62,340/= was refunded to the petitioner on 4.4.2001. Thepetitioner prayed for interest vide his representation dated17.4.2001 invoking the provision under section 132B of the IncomeTax Act. The respondent passed the impugned order dated 16.6.2001rejecting the claim of interest made by the petitioner. It is submitted by the petitioner that as the Department had the benefitof the money of Rs.4,62,340/= for two long years, the petitioner isentitled to interest on the said amount. Under general law also,the petitioner is entitled to interest for the amount held in excessby the respondent, it is contended. 2. The respondent would contend in the counter that thepetitioner is not entitled to any interest under section 132B(4) ofthe Income Tax Act as the search was conducted on 4.12.1998 wellbeyond the deadline viz., 1[st] July 1995 fixed under the aforesaidprovision of law. Section 244A of the Income Tax Act would apply ina case of return of the excess prepaid Tax amount. Therefore, therespondent would contend that the impugned order was passed rightlyby the respondent. 3. Learned counsel appearing for the petitioner would submitthat the respondent never considered the provision under section158BH of the Income Tax Act which states "save as otherwiseprovided in this Chapter all other provisions of this Act, shallapply to assessment made under this Chapter". The respondent shouldhave also adverted to the provision under section 158BC(d) whichsays that the provisions under section 132B shall be applied to dealwith the assets seized under section 132 of the Act. Evenotherwise, the petitioner is entitled to interest under general law,he argues. 3. Learned counsel appearing for the petitioner would submitthat the respondent never considered the provision under section158BH of the Income Tax Act which states "save as otherwiseprovided in this Chapter all other provisions of this Act, shallapply to assessment made under this Chapter". The respondent shouldhave also adverted to the provision under section 158BC(d) whichsays that the provisions under section 132B shall be applied to dealwith the assets seized under section 132 of the Act. Evenotherwise, the petitioner is entitled to interest under general law,he argues. 4. Learned counsel appearing for the respondent would contendthat the provisions under section 132B(4)(a) and (b) whichcontemplate payment of simple interest by the Central Governmentwould arise only when the respondent had to deal with the moneyseized in the search which was held prior to 1[st] July 1995. As thesearch was held on 4.2.1998 under section 132 of the Income Tax Actin the residential and business premises of the petitioner, thequestion of payment of interest as adumbrated under section 132B(4)(a) and (b) would not arise. It is his further submission that theprovision under section 158BC(d) stipulates that the assets seizedunder section 132 shall be dealt with in accordance with theprovisions of section 132B. The provision under section 132BHspeaks about the application of other provisions of the Income TaxAct with respect to the assessment made under Chapter XIV-B exceptas otherwise provided in the said chapter. Inasmuch as the searchwas conducted well after the 1[st] of July 1995, the cut off datereferred to in section 132(5) of the Income Tax Act, the petitioneris not entitled to invoke the provision under section 132(5) of theIncome Tax Act and claim interest. When the Act specificallyprovides for payment of interest only with respect to the moneyseized as on a particular cut off date, this court cannot directpayment of interest under the general law, he submits. 5. The search was conducted under section 132 of the Income TaxAct in the residential and business premises of the petitioner on4.12.1998 and a cash amount of Rs.17,50,000/= was seized at the timeof search. The respondent passed an order of assessment undersection 158BC read with section 143(3) on 22.12.2000. The total taxpayable by the petitioner was assessed at Rs.12,87,660/= for theblock period 1989-90 to 1999-2000. The respondent issued a refundcheque on 4.4.2001 for a sum of Rs.4,62,340/= after deducting a sumof Rs.12,87,660/= from the amounts seized and kept in theCommissioner's Personal Deposit Account. 6. The cumulative reading of section 132(5) read with section132B(4)(a) and (b) would disclose that the Central Government isbound to pay simple interest on the excess amount seized andretained by the respondent as a result of a search initiated beforethe 1[st] day of July 1995. The said cut off date was not at allextended by the legislature inspite of many an amendment later onintroduced to the Income Tax Act, 1961. Admittedly, the search inthe residential and business premises of the petitioner wasconducted under section 132 of the Income Tax Act on 4.12.1998. Itis true that the respondents retained an excess amount till theorder of assessment was passed under section 158BC read with section143(3) of the Income Tax Act. 6. The cumulative reading of section 132(5) read with section132B(4)(a) and (b) would disclose that the Central Government isbound to pay simple interest on the excess amount seized andretained by the respondent as a result of a search initiated beforethe 1[st] day of July 1995. The said cut off date was not at allextended by the legislature inspite of many an amendment later onintroduced to the Income Tax Act, 1961. Admittedly, the search inthe residential and business premises of the petitioner wasconducted under section 132 of the Income Tax Act on 4.12.1998. Itis true that the respondents retained an excess amount till theorder of assessment was passed under section 158BC read with section143(3) of the Income Tax Act. 7. A new Chapter viz., XIV-B to deal with the procedure forassessment of search cases was inserted by the legislature by theFinance Act, 1995 with effect from 1.7.1995. Section 158BA (1)would read that where a search is initiated under section 132 afterthe 30[th] July 1995, the Assessing Officer shall proceed to assess theundisclosed income in accordance with the provisions of Chapter XIV-B. Section 158BC(d) mandates the Assessing Authority to deal withthe money or assets seized under section 132 subject to suchmodifications as may be necessary. The saving provision undersection 158BH which figures in the very same Chapter reads that allother provisions of the Income Tax Act shall apply to the assessmentmade under Chapter XIVB except as otherwise provided in the saidChapter. 8. As per the aforesaid provision of law found in Chapter XIV-B, the Assessing Authority is bound to deal with the assets seizedduring search under section 132 of the Income Tax Act, applying theprovision under section 132B, subject to such modifications as maybe necessary. But, the payment of interest as contemplated undersection 132B(4)(a) of the Act would arise only when the money wasseized in the search initiated before 1[st] July 1995 as per section132(5) of the Income Tax Act. 9. As rightly submitted by the learned counsel appearing forthe respondent, when the legislature intended not to make any https://hcservices.ecourts.gov.in/hcservices/ provision for payment of interest by the Central Government for themoney seized during the course of search conducted under section 132of the Income Tax Act after 1[st] July 1995, this court cannot directthe respondent to pay any interest for the amount seized duringsearch after the assessment was made for the block period concernedin the guise of applying the general law. 10. Further, it is not a case where there was no tax liabilityfound during the block period after the search and seizure was madeunder section 132 of the Income Tax Act. The major part of theamount seized during the search by the authority of the Income TaxDepartment was adjusted towards the tax liability of the petitioner.A small portion viz., a sum of Rs.4,62,340/= was refunded to thepetitioner after making adjustment of the major portion of theamount seized by the Department from the petitioner. Therefore, thequestion of applying the general law for payment of interest on theamount excessively retained by the Department beyond the cut offdate viz., 1.7.1995 contemplated under the provision of section 132(5) of the Income Tax Act does not arise for consideration. 10. Further, it is not a case where there was no tax liabilityfound during the block period after the search and seizure was madeunder section 132 of the Income Tax Act. The major part of theamount seized during the search by the authority of the Income TaxDepartment was adjusted towards the tax liability of the petitioner.A small portion viz., a sum of Rs.4,62,340/= was refunded to thepetitioner after making adjustment of the major portion of theamount seized by the Department from the petitioner. Therefore, thequestion of applying the general law for payment of interest on theamount excessively retained by the Department beyond the cut offdate viz., 1.7.1995 contemplated under the provision of section 132(5) of the Income Tax Act does not arise for consideration. 11. The learned counsel appearing for the petitioner refers toan unreported decision of this court in B.PANMAL BAFNA AND 5 OTHERSv. THE COMMISSIONER OF INCOME Tax AND TWO OTHERS (W.P.No.8041 of1994 dated 5.9.2001). In the said case, a search was conducted on13.11.1994 and some assets were seized by the Income Tax Department.Inasmuch as the search was initiated prior to 1.7.1995 ascontemplated under section 132(5) of the Income Tax Act and theamount retained in excess by the Department was not paid withinterest in accordance with section 132B(4)(a) of the Income TaxAct, the petitioner therein sought for a direction to the Income TaxDepartment to pay interest on the amount retained by them. Theaforesaid decision will not apply to the case on hand as the searchwas made on 4.12.1998 well beyond the cut off date, 1.7.1995. 12. The ratio laid down by the Supreme Court in SANDVIK ASIALTD. v. COMMISSIONER OF INCOME Tax AND OTHERS ((2006) 280 ITR 643(SC)) was relied upon by the learned counsel appearing for thepetitioner. That was a case where the prepaid tax in excess of thetax liability was retained by the Income Tax Department for about 17long years. Though the petitioner therein was entitled to intereston the property tax under section 214 and 244 of the Income Tax Act,without any justification the prepaid tax amount in excess of thetax liability was retained by the Department. But, in the instantcase, interest is claimed for the excess amount seized in the searchconducted by the Department long after 1[st] July 1995. Therefore, theaforesaid ratio also will not apply to the facts and circumstancesof this case. 13. In view of the above facts and circumstances, I hold thatthe petitioner is not entitled to any interest on the excess amount seized in the search conducted under section 132 of the Income TaxAct, as the search was made well beyond the cut off date referred tounder section 132(5) of the Act. The respondent has rightlyrejected the plea for interest made by the petitioner. Whilepassing the impugned order, the respondent has rightly applied therelevant provisions of law and dismissed the plea for interest onthe amount seized in the search conducted and refunded afterassessment was made. 14. Therefore, the writ petition stands dismissed. There is noorder as to costs. The connected W.P.M.Ps also stand dismissed. ssk. Sd/-Asst. Registrar//True Copy//Sub Asst. RegistrarToThe Commissioner of Income Tax,No.4, Williams Road,Cantonment,Tiruchirapalli.+ 1 cc to Mr. J. Naresh Kumar, Advocate SR No.24453+ 2 ccs to Mr. T. Ravikumar, Advocate SR No.24113TS(CO)SR/6.5.2010 ORDER IN W.P.No.4234 of 2002