Heard Sri R.R. Agarwal, learned advocate assisted by Sri Suyash Agarwal, learned counsel for the petitioner and Sri Govind Krishna, learned counsel for the respondent.
The facts giving rise to the present writ petition lie in a very narrow canvass. The same are stated as under.
Search warrant dated 2.9.2002 was executed, at the residence and at the bank of the assessee on 4.9.2002. A total sum of ' 77 lacs were seized after such search. The assessee made an application disclosing the source of the aforesaid cash and requested for return of the assets, under section 132 (b) (i) of the Income Tax Act. This application of the assessee remained pending. The block assessment was completed on 30th September, 2004 and the assessing officer determined the assessee's liability at ' 95,59,525/-. It is not in dispute that a sum of ' 40,000/- was adjusted from the seized cash of ' 77 lacs on 29th December, 2005.
The assessee not being satisfied with the block assessment order, filed an appeal before the Commissioner of Income Tax (Appeals), Allahabad. The appeal was finally allowed vide order dated 18.8.2006 and the demand was reduced to ' 3,15,430/- under Section 158BC/251/154 of the Income Tax Act.
The balance amount of ' 37 lacs seized on 4.9.2002 was released in favour of the assessee petitioner under order of Commissioner of Income Tax (Appeal), Kanpur on 2.2.2007.
The assessee made an application for payment of interest both in respect of the pre-assessment period as well as in respect of the subsequent period after the block assessment.
The application of the petitioner for payment of interest for the pre-assessment period was disposed of vide order dated 31.5.2007 and it was held that the assessee was not entitled to interest under Section 132B (A) read with sub-section (B) of the Act. The application in that regard was rejected.
So far as the period subsequent to the block assessment order is concerned, the application made in that regard was held to be not maintainable on the ground that Sections 132B (4) (b) and Sections 143, 144 and 144A are not co-related and, therefore, joint application made by the petitioner under Section 132 (4) (b) read with Section 143 was not maintainable.
Not being satisfied with the aforesaid two orders, the assessee has filed this writ petition.
After the affidavits were exchanged, this Court on 15th April, 2015 passed an order requiring the counsel for the department to file an affidavit indicating as to whether the interest as admitted to be payable to the assessee under Section 243/244 Income Tax has actually been paid or not.
A supplementary affidavit has been filed on behalf of the department and in paragraph No.2 of the affidavit it has been stated that the admitted amount of interest i.e. ' 8,36, 500/- due to the petitioner has been paid vide cheque no. 295251 dated 1.5.2015. It has been then stated that no further interest is payable to the assessee petitioner.
Counsel for the assessee challenging the stand of the department submitted before the Court that the Apex Court in the Case of Chironji Lal Sharma HUF Vs. Union of India and others (2014) volume 360 ITR 237 (SC) has explained that Section 132B (4) (b) deals with pre-assessment period in the matter of search and seizure and Section 244A deals with post assessment period.
In the facts of the case it is submitted that on the sum of ' 37 lacs at least (out of the total seized amount of ' 77 lacs,) which being the aggregate exceeding the liability under Section 132 (b) (1) (i) of the Act the department is liable to pay interest at the rate prescribed on the said amount till the date of block assessment. He then submits that so far as the period subsequent to the assessment order as the merged in the order of the appellate authority where under the liability had been reduced to three lacs and adds in all, the assessee is entitled to interest at the rates which were applicable from time to time under Section 243 (244A) of the Income Tax Act.
According to the assessee payment of interest at the flat rate of .5% per month is totally unjustified. Reference is made to the judgment of the Division Bench judgment of this Court in the Case of Vijay Prakash Agrawal and others Vs. Commissioner of Income-Tax (Central) and another (2013) volume 355 ITR 114 (All) specifically paragraph Nos. 8,18 and 25 of the said judgment.
He lastly contended that there has been an inordinate delay in the matter of payment of interest to the assessee on the aforesaid amount, for which the assessee must be compensated in view of the law laid down by the Apex Court in the case of Sandvik Asia Ltd Vs. Commissioner of Income Tax-I, Pune and others SCC 2006 Volume 2 page 508. It is explained to the Court that in the subsequent judgment of the Apex Court in the Case of Commissioner of Income Tax Vs. Gujarat Flouro Chemicals (2013) 358 ITR 291 (SC) the Apex Court has considered the judgment of Sandvik Asia Ltd. (supra) and it has clarified that compensation over and above the rate of interest provided for under the Income Tax Act can be provided for only if there has been inordinate delay in payment of the money to the assessee.
Sri Govind Krishna, learned counsel for the department submits that no interest is payable on any amount for the pre assessment period and that the interest as paid as per the document dated 29th April, 2015 (Annexure SCA-2 to the supplementary affidavit) filed on 4.5.2015 at the flat rate of .5% per month under Section 243 and section 244A is strictly in accordance with the provisions applicable. He placed reliance upon the following judgments.
(i) 364 ITR page 555 Hemant Kumar Sindhi and another Vs. C.I.T. and others;
(ii) 358 ITR page 291 C.I.T. Vs. Gujarat Fluoro Chemicals;
(iii) 357 ITR page 534 Ram Kishan Gupta Vs. Union of India.
(iv) 236 ITR page 524 CIT V T.V. Sundaram Iyengar and Sons Ltd.
(v) 247 ITR page 226 Chennai Properties & Investment Ltd. V. CIT.
(vi) 171 ITR page 344 Bakelite Hylam Ltd. V. CIT
(vii) 137 ITR page 287 CIT V. S.C. Shah
(viii) 193 ITR Page 295 Empire Industries Ltd. V. CIT
(ix) 173 ITR page 545 CIT V Perfect Pottery Co. Ltd.
(x) 282 ITR Page 0198 Bhagwan Prasad Agarwal Vs. C.I.T.
We have heard learned counsel for the parties and perused the records.
It is not in dispute that the total amount of cash seized by the department under authorisation dated 2.9.2002, on 4.9.2002 was to the tune of ' 77 lacs. It is also not in dispute that after the assessment of the liabilities as were existing or were liable to be created under the block assessment, resulted in a surplus of 37 lacs in favour of the assessee subsequent to the passing of the judgment by the CIT (Appeals) Allahabad dated 18.8.2006.
On this a sum of ' 37 lacs, the assessee would be entitled to interest under Section 132B (4) in view of the law laid down by the Apex Court in the case of Chironji Lal Sharma (supra). The relevant portion whereof reads as follows:
"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 section 244 (A). The former deals with pre-assessment period in the matters of search and seizure and the latter deals with post-assessment period as per the order in appeal."
We are of the considered opinion that these 37 lacs of rupees retained under Section 132 of the Act exceed the amount required to meet the liability under Section 132B (1) (i) of the Act and the Department is, therefore, to make payment of interest at the rate applicable from the date of expiry of 120 days under Section 132 (4) of the Act to the date of regular assessment/re-assessment or last such assessment or re-assessment, as the case
may be.
Sri R.R. Agrawal, learned senior advocate appears to be justified in pointing out that although Section 132B (5) of the Act has been deleted by Finance Act No.2 of 2002 w.e.f. 1.6.2002 and on the same date Section 132B (4) has been introduced. The principal of law as laid down in the case of Chironji Lal Sharma HUF (supra) is not diluted in any manner because of the said amendment.
We, therefore, hold that the assessee is entitled to interest at the rates applicable on the sum of ' 37 lacs for the pre-assessment period in accordance with Section 132B (4) (b) at the rates applicable from time to time after expiry of 120 days from the date of the seizure till the date of the assessment.
So far as the prayer for interest under Section 243/244A of the Act is concerned, we find that two Division Benches of this Court in the case of Vijay Prakash Agarwal (supra) and in the case of Prayag Udyog P.Ltd. Vs. Union of India and others (2012) Volume 348 ITR Page 217 have laid down that the assessee would be entitled interest at the rate's which were applicable from time to time on the amount due from the date of block assessment till the date of actual payment which aspect of the matter has been ignored by the authorities while making payment of interest at the flat rate of .5% per month to the assessee.
In view of the above the assessee is held entitled to interest at the rate's applicable from time to time under Section 243A on this sum of ' 37 lacs from the date the money became refundable till the date of actual refund.
Let fresh quantification be done by the authorities concerned within four weeks.
The amount of interest so calculated after deducting the amount, already paid towards interest, may be released in favour of the petitioner within four weeks of such quantification.
This takes the Court to the last issue raised on behalf of the assessee, namely, the payment of compensation for the inordinate delay in the payment of interest under Section 132 (b) (4) and Section 244A of the Income Tax Act. This Court may record that in the case of Sandvik Asia Ltd. (supra) the Apex Court had held the assessee as entitle for interest on the failure of the department to pay the interest under the Income Tax Act within time permitted.
But the Apex Court in the case of Commissioner of Income Tax Vs. Gujarat Flouro Chemicals (2012) 348 ITR 319 (SC) in paragraph Nos. 5,6, 7 and 8 has held as follows:
"5. Since there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this court had thought it fit that the assessee should be properly and adequately compensated and, therefore, in paragraph 51 of the judgment, the court while compensating the assessee had directed the Revenue to pay a compensation by way of interest for two periods, namely; for the assessment years 1977-78, 1978-79, 1981-82, 1982-83 in a sum of ' 40,84,906 and interest at 9 per cent. from March 31, 1986 to March 27, 1998, and in default, to pay the penal interest at 15 per cent. per annum for the aforesaid period.
6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik case ((supra)) this court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period.
7. As we have already noticed, in Sandvik case ((supra)) this court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and, therefore, directed the Revenue to pay compensation for the same not an interest on interest.
In view of above, we are of the opinion that this Court has to examine as to whether there has been unexplained inordinate delay in the matter of payment of interest within the statutory period by the department or not.
From the facts which have been noticed hereinabove, it is apparent that the assessee became entitled to payment of interest at least for the pre-assessment period from the date his appeal by CIT was allowed and the liability was reduced to 3,15,415/- only. This payment of interest has been denied to the assessee without any justifiable cause even after expiry of 9 years from the date interest was payable. Similarly, we find that for the post-assessment period, the assessee should have been paid interest on the sum of ' 37 lacs refunded to him on 2.2.2007 from the date of the appellate order till the date of money was so returned. It has taken nearly 8 years for the department to make the payment of the interest and that too on wrong calculation.
Counsel for the department has highly relied upon the judgment of the Apex Court in the case of Commissioner of Income Tax Vs. Gujarat Flouro Chemicals (supra) for the purpose that there may not be a direction for payment of interest over interest and that Sandvik Asia Ltd (supra) has not laid down any such law. We only record that we are not directing payment of interest over interest, we have only provided that the assessee must be compensated for retention of money i.e. interest due under Section 132B (4) and Section 244B of the Income Tax Act by the department for long duration, namely, 9 and 8 years. Such payment of compensation has been recognized and accepted in the case of Sandvik Asia Ltd (supra), as also in the subsequent judgment of the Apex Court in the case of Gujarat Flouro Chemicals (II) (supra). The relevant paragraphs of the said judgment have already been quoted above.
We are of the opinion that the department was legally not justified in retention of the amount of interest which was payable to the assessee both under Section 134B (4) as well as under Section 243A for the period of nearly 9 and 8 years respectively.
In our opinion the case of the assessee falls within the category of cases where there has been inordinate delay on the part of the department to pay the statutory interest, therefore, the assessee is entitled to be compensated for such wrongful retention of the money by the department.
In the facts of the case we hold that the assessee is entitled to be compensated at the same rates i.e. 9% as was provided for by the Apex Court in the case of Sandvik Asia Ltd (supra).
We provide that compensation shall also be determined as directed hereinabove and payment thereof shall be made within the same period as provided for payment of interest as directed above.
For the reasons narrated above, the orders impugned dated 31.5.2007 passed under Section 132B (4) (b) of the Income Tax Act and order dated 31.5.2007 passed under Section 243 of the Income Tax cannot be legally sustained and are hereby quashed.
The other judgments cited by the learned counsel for the petitioner are clearly distinguishable in the facts of the present case.
In the facts of the present case, we also find it a fit case for exercising jurisdiction under Article 226 of the Constitution of India and not to relegate the petitioner to the alternative remedy.
In result the writ petition succeeds and is hereby allowed as indicated above.