November 26, 2013 LD/62/49 Chironjilal Sharma HUF vs. UOI (SC) Section 132B read with Section 132 of the Income-tax Act, 1961
Where in search, cash seized was in excess of tax liability, appellant would be entitled to interest for the period from expiry of period of six months from the date of order under Section 132(5) to the date of regular assessment order.
Search was conducted in the house of the appellant on 31.1.1990 and a cash amount of R2,35,000/- was recovered. On 31.5.1990, an order under Section 132(5) came to be passed. The Assessing Officer calculated the tax liability and the cash seized in the search from the appellant's house was appropriated. However, the order of the Assessing Officer was finally set-aside by the Tribunal on 20.2.2004. The revenue accepted the order of the Tribunal. Consequently, the appellant has been refunded the amount of R2,35,000/- along with interest from 4.3.1994 (date of last of the regular assessments by the Assessing Officer) until the date of refund. The appellant (assessee) claims that he is entitled to interest under Section 132B(4)(b) which was holding the field at the relevant time for the period from expiry of period of six month's from the date of order under Section 132(5) to the date of regular assessment order. In other words, the order under Section 132(5) having been passed on 31.5.1990, six months expired on 30.11.1990 and the last of the regular assessments was done on 4.3.1994, the assessee claims interest under Section 132B(4)(b) from 1.12.1990 to 4.3.1994.
The Supreme Court held as follows:
A close look at section 132B and, particularly, clause (b) of Section 132B(4) clearly shows that where the aggregate of the amounts retained under Section 132 exceeds the amounts required to meet the liability under Section 132B(1)(i), the department is liable to pay simple interest at the rate of fifteen percent on expiry of six months from the date of the order under Section 132(5) to the date of the regular assessment or re-assessment or the last of such assessments or reassessments, as the case may be. It is true that in the regular assessment done by the Assessing Officer, the tax liability for the relevant period was found to be higher and, accordingly, the seized cash under Section 132 was appropriated against the assessee's tax liability but the fact of the matter is that the order of the Assessing Officer was over-turned by the Tribunal finally on 20.2.2004. As a matter of fact, the interest for the post assessment period i.e. from 4.3.1994 until refund on the excess amount has already been paid by the department to the assessee. The department denied the payment of interest to the assessee under Section 132B(4)(b), on the ground that the refund of excess amount is governed by Section 240 and Section 132B(4)(b) has no application. But, Section 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and Section 240 or for that matter 244(A). The former deals with pre assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal. The view of the department is not right on the plain reading of Section 132B(4) (b) as indicated above. The appellant is entitled to the simple interest at the rate of fifteen percent per annum under Section 132B(4) (b) from 1.12.1990 to 4.3.1994.