Allahabad High Court
Baqri Bibi And Ors. (Legal ... vs Income-Tax Officer And Ors. on 22 August, 1996
Equivalent citations: (1997)143CTR(ALL)8, [1997]225ITR191(ALL), [1997]95TAXMAN241(ALL)
JUDGMENT M.C. Agarwal, J.
1. By this petition under Article 226 of the Constitution of India, the petitioner seeks a writ of certiorari to quash an order dated July 25, 1984, a copy of which is annexure "6" to the writ petition, by which the Income-tax Officer, C. C. I., Varanasi, rejected the claim of the petitioner for grant of interest under Sections 132B and 244 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). A writ of mandamus is also sought for a direction to the respondents to grant interest to the petitioners under the aforesaid sections.
2. We have heard Sri Z.K. Hasan, learned counsel for the petitioners, and Sri Bharat Ji Agarwal, learned senior standing counsel for the respondents.
3. The case of the petitioners is that their residential premises were searched on August 2, 1975, by the Income-tax Officer and cash amounting to Rs. 25,165 and gold ornaments weighing about 970 kgs. were seized under the provisions of Section 132 of the Act.
4. The Income-tax Officer passed an order dated October 29, 1975, in terms of Section 132(5) of the Act retaining the ornaments and cash aforesaid. The petitioners preferred an appeal to the Central Board of Direct Taxes, who by order dated September 25, 1975, allowed the appeal and directed the Income-tax Officer to return the ornaments. As regards the cash, it was directed that it will be treated as undisclosed income and the Income-tax Officer will calculate the tax on that income and retain the assets to that extent and release the balance.
5. According to the petitioners, after the aforesaid order of the Central Board of Direct Taxes, the petitioners wrote several letters between 1978 and 1983 to the Income-tax Officer to refund the aforesaid amount, but to no avail. Ultimately, they filed Writ Petition No. 231 of 1984, in this court on February 14, 1984, in which a month's time was granted to counsel for the Income-tax Department for filing a counter-affidavit. The Income-tax Officer without filing a counter-affidavit immediately released the ornaments and cash to the extent of Rs. 19,866 unconditionally. Then, by application dated May 9, 1984, the petitioners asked the Income-tax Officer, respondent No. 1, to pay interest to the petitioners under Sections 132B and 244 of the Act on the amount of Rs. 19,866. This request of the petitioners has been rejected by the impugned order dated July 25, 1984, saying that Section 132B came into force with effect from October 1, 1975, and was not retrospective and that Section 244 of the Act was also not applicable to the facts of the case. It is thereafter that the petitioners filed the present writ petition.
6. In the counter-affidavit, the basic facts are not denied. It is alleged that the various letters mentioned by the petitioners in para 5 of the writ petition by which a refund of the amount is said to have been claimed were not received in the office of respondent No. 1. It is claimed that Sections 132B and 244 of the Act are not applicable to the facts of the case.
7. As regards Section 132B(4) of the Act, it would be proper to examine the various provisions of law.
8. A search is conducted under Section 132 of the Act and under Subsection (5), the Income-tax Officer has to hold an inquiry and to determine to what extent, the property seized during the search and seizure operations is required to be retained to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii). The relevant portion of Sub-section (5) of Section 132 of the Act is as under :
" (5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in Sections 132A and 132B referred to as the assets) is seized under Sub-section (1) or Sub-section (1A), the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Deputy Commissioner,--
(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him ;
(ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act ;
(iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment ;
(iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in Clause (a) of Sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized :"
9. Under Sub-section (11) of Section 132, as it stood at the relevant time, an appeal against an order under Section 132(5) lay to the Board and on such appeal being preferred by the petitioners, an order was passed by the Board in exercise of the powers contained therein. Sub-section (12) of Section 132 of the Act reads as under :
" (12) On receipt of the application under Sub-section (10) the Board, or on receipt of the application under Sub-section (11) the Chief Commissioner or Commissioner, may, after giving the applicant an opportunity of being heard, pass such orders as it or he thinks fit. "
10. Section 132B of the Act provides for the manner in which the retained assets shall be applied and Sub-section (4) thereof provides for the payment of interest. Section 132B(1)(i) and (4) stand as under ;
" 132B(1) . . .
(i) The amount of the existing liability referred to in Clause (iii) of the said sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in Clause (i) of that sub-section relates (including any penalty levied or interest payable in connection with such assessment or reassessment) and in respect of which he is in default or is deemed to be in default may be recovered out of such assets. . . .
(4) (a) The Central Government shall pay simple interest at the rate of fifteen per cent. per annum on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (iii) of Sub-section (5) of that section exceeds the aggregate of the amounts required to meet the liabilities referred to in Clause (i) of Sub-section (1) of this section.
(b) Such interest shall run from the date immediately following the expiry of the period of six months from the date of the order under Sub-section (5) of Section 132 to the date of the regular assessment or reassessment referred to in Clause (i) of Sub-section (1) or, as the case may be, to the date of the last of such assessments or reassessments."
10. The short contention of the Income-tax Officer in rejecting the claim for interest under Section 132B of the Act was that it came into effect from October 1, 1975, and did not appear to have retrospective effect for an earlier assessment year. This contention was not seriously pressed before us and, in our view, it has no force because a provision for payment of interest was inserted, for the first time, as Section 132A by the Income-tax (Amendment) Act, 1965. In the year 1975, that provision was renumbered as Section 132B and, therefore, it cannot be said that the provision for payment of interest by the Central Government was inserted, for the first time, with effect from October 1, 1975. Such liability for payment of interest was there from the year 1965, that is, from before the seizure of the cash in question and, in any case, even if such a provision was inserted, for the first time, with effect from October 1, 1975, even then liability would extend to all sums that had not already been paid and were outstanding on such date. The reason given by the Income-tax Officer for rejecting the claim of the petitioner was, therefore, in our view, wholly untenable.
11. Sri Bharat Ji Agarwal, learned counsel for the respondents, however, placed reliance on Gulbanu Razack v. Asst. CIT, [1990] 186 ITR 226, in which a Division Bench of the Andhra Pradesh High Court held that interest under Section 132B(4) was not payable in respect of a refund directed under Section 132(11) of the Act.
12. In our view, the exercise of power by the Board or by the Commissioner of Income-tax under Section 132(11) or (12) of the Act has little relevance to a claim for interest under Section 132B(4). We have reproduced above the language of the relevant provisions of the law. Clause (a) of Sub-section (4) of Section 132B of the Act specifies the amount on which interest has to be granted. Such amount is the amount by which the aggregate of money retained under Section 132 . .--exceeds the aggregate of the amounts required to meet the liabilities referred to in Clause (i) of Sub-section (1) of this section. The money retained under Section 132 of the Act can differ from stage to stage and the Income-tax Officer initially orders the retention of a certain amount and after an appeal to the Board or the Chief Commissioner, the amount ordered to be retained may be lowered or if the order of the Chief Commissioner or the Board is not complied with, may remain the same.
13. Whether there is any excess is to be determined with reference to Section 132B(1)(i) of the Act which refers to the existing liabilities and the amount of the liability determined on the completion of the regular assessment or reassessment. Thus, the claim for interest has to be settled when the liabilities get crystallised on the making of an assessment/ reassessment. Clause (b) of Sub-section (4) provides that the starting point for the grant of interest is the date of the order under Sub-section (5) of Section 132 of the Act. This is the date on which the Income-tax Officer makes his initial order under Section 132(5) of the Act ordering the retention of the assets and not the consequential order passed by him to give effect to an appellate order of the Chief Commissioner or the Board. The last date up to which the interest has to be granted is the date of the regular assessment or reassessment, referred to in Section 132B(1)(i) of the Act. Therefore, the appellate order passed under Section 132(11) is not the basis for the grant of interest and the amount on which interest is payable under Section 132B(4) is not the amount ordered to be refunded by the appellate authority under Section 132(11) or (12).
14. A perusal of the impugned order passed by the Income-tax Officer would show that he has summarily rejected the petitioners' claim for an untenable reason and has not dealt with the claim on the merits dealing with the relevant facts, namely, (i) how much of the amount of Rs. 25,165 was ordered to be retained under Section 132(5), (ii) how much of the said sum was in excess of the amount required to meet the liability referred to in Clause (i) to Sub-section (1) of Section 132B, (iii) if there was an excess, up to what date, the excess, that is, the amount refundable was retained by the Department, and (iv) what, if any, is the amount of interest payable under Section 132B(4) of the Act.
15. Since these facts have not been determined and the impugned order proceeded on an untenable ground, we have to quash the same and direct the Assessing Officer to re-examine the claim of the petitioners for grant of interest under Section 132B(4) in accordance with law and to make a speaking order keeping in view our observations, made above.
16. As regards the petitioners' claim for interest under Section 244 of the Act, the same has also to be examined by the Assessing Officer in the light of the relevant facts. Section 244 provides that where a refund is due to the assessee in pursuance of an order referred to in Section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at 15 per cent. per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted.
17. Section 240 provides that where, as a result of any order passed in appeal or other proceeding under the Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided under this Act, refund the amount to the assessee without his having to make any claim in that behalf.
18. Assessment proceedings come within the purview of "other proceeding", as mentioned in Section 240 and if in a case of search and seizure under Section 132, an assessment is, ultimately, made, a part of the amount retained under Section 132(5) of the Act may become refundable to the assessee if the demand ultimately raised is lower than the amount retained, and the Assessing Officer will have to pass an order directing a refund of such excess and Sections 240 and 244 may come into operation. In the present case, there is no mention, either in the writ petition or in the counter-affidavit, whether any assessment was made and with what result. Therefore, the question whether the petitioners are entitled to any interest under Section 244, as claimed by them, has also to be examined with reference to the assessment, if any, made and it cannot be said without examining the facts that Section 244 of the Act did not come into play.
19. We, accordingly, allow this writ petition with costs to the petitioners and quashing the impugned order dated July 25, 1984, we direct the Assessing Officer, respondent No. 1, or such officer, as may, at present, be the Assessing Officer of the petitioners, to re-examine the claim of the petitioners for grant of interest under Sections 132B(4) and 244 of the Act and to dispose of the same by a speaking order after giving the petitioners a reasonable opportunity of hearing and keeping in view observations, made above.