NEW DELHI, DEC 04, 2013: THE issues before the Bench are - Whether in case of refund of excess amount the provisions of Sec 132(4)(b) have any application to decide the interest liability for the pre-assessment period and Whether provisions of Sec 132(4)(b) deal with pre-assessment period and provisions of Ss 240 and 244A deal with post-assessment period. And the verdict goes in favour of the assessee.
Facts of the case
The Revenue conducted a Search & Seizure on the premises of the assessee, an HUF, and seized cash of Rs. 2,35,000/-. On 31.5.1990, an order under Section 132(5) of the Income Tax Act, 1961 came to be passed. The Assessing Officer calculated the tax liability and the cash seized in the search from the assessee's house was appropriated. However, the order of the Assessing Officer was finally set-aside by the Income Tax Appellate Tribunal on 20.2.2004. The Revenue accepted the order of the Tribunal. Consequently, the appellant was refunded the amount of Rs. 2,35,000/- along with interest from 4.3.1994 (date of last of the regular assessments by the Assessing Officer) until the date of refund.
The assessee claimed that he was entitled to interest under Section 132B(4)(b) of the Act 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) of the Act 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 claimed interest under Section 132B(4)(b) of the Act from 1.12.1990 to 4.3.1994.
Having heard the parties, the Apex Court held that,
++ a close look at the provisions and, particularly, clause (b) of Section 132B(4) of the Act clearly shows that where the aggregate of the amounts retained under Section 132 of the Act 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) of the Act 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 of the Act 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), according to Mr. Arijit Prasad, the counsel for the revenue on the ground that the refund of excess amount is governed by Section 240 of the Act and Section 132B(4)(b) of the Act has no application;
++ but, in our view, 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) of the Act. We, accordingly, allow the appeal and set-aside the impugned order and hold that the appellant is entitled to the simple interest at the rate of fifteen percent per annum under Section 132B(4)(b) of the Act from 1.12.1990 to 4.3.1994.
++ the revenue shall calculate the interest payable to the assessee as above and pay the same to the assessee within two months from today. No costs.
Regards
Prarthana Jalan
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