Anilkumar D. Gajjar vs Commissioner of Income Tax

C.K. THAKKER, J.—This petition is filed by the petitioner for directing the respondent-authorities to pay interest of Rs. 1,734 to the petitioner for wrongful retention and delayed payment of Rs. 7,750. It is the case of the petitioner that on January 7, 1982, the residential premises of the petitioner were searched by the authorities in the exercise of the power u/s 132 of the Income Tax Act, 1961 ("the Act"). The raiding party seized cash amount of Rs. 51,000. On March 15, 1984, the Income Tax Officer, Central Circle, Rajkot, passed an order releasing an amount of Rs. 43,250 but retained Rs. 7,750. An assessment order was passed on March 15, 1984, wherein it was observed by the Income Tax Officer that the petitioner had failed to explain an amount of Rs. 16,474 in connection with two cash entries of Rs. 1,474 and Rs. 15,000, respectively, in the accounts of Asha Industries and Esvi Industries, respectively, in which the petitioner was a partner. The said amount was, therefore, added and the petitioner was held liable to pay tax of Rs. 4,950. According to the petitioner, the said amount was tax liability of the fir, Vina Engineering Works, Rajkot, in which the petitioner was a partner and the amount was paid. In fact, the second respondent in appeal reduced the amount of Rs. 16,474 by an order dated August 1, 1986. The petitioner, therefore, intimated the Department and contended that an amount of Rs. 7,750 was required to be released immediately. On September 20, 1986, a letter was addressed by the petitioner to the Commissioner (Central), Central Range II, Ahmedabad, respondent No. 1 herein to release the amount. On September 30, 1986, the first respondent addressed a letter to the petitioner (annexure "E") stating that the necessary directions had already been issued to the Income Tax Officer to release Rs. 7,750. By a communication dated October 13, 1986, respondent No. 2 sent a cheque of Rs. 7,750 to the petitioner. According to the petitioner, he was entitled to interest in accordance with the provisions of section 132B(4)(a) and (b), read with sections 240 and 243, of the Act as the amount was retained by the Department. Since the amount was paid but the interest was not paid, he wrote a letter on October 27, 1986, claiming interest of Rs. 1,734. The said letter was received by the Department but the first respondent asked the petitioner to contact the second respondent. The petitioner, therefore, wrote a letter to the second respondent also for awarding interest, but there was no reply. On February 28, 1987, the petitioner addressed a letter to the Chairman, Central-Board of Direct Taxes, Income Tax Department, New Delhi, for non-payment of interest. But the Chairman also did not reply. In these circumstances, the petitioner was constrained to approach this court. Initially, notice was issued and thereafter the matter was admitted.

Today the matter was called out for final hearing. Mr. D.U. Shah, learned counsel for the petitioner, submitted that it is no doubt true that the Department has paid an amount of Rs. 7,750 to which the petitioner was entitled. He, however, submitted that the petitioner is entitled to interest in accordance with the provisions of section 132B(4). The relevant part of section 132B reads as under :

"Application of retained assets. - (1) The assets retained under sub-section (5) of section 132 may be dealt with in the following manner, namely :- ......

(4)(a) The Central Government shall pay simple interest at the rate of twelve per cent. per annum on the amount by which the aggregate of money retained u/s 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."

Mr. Shah submitted that the petitioner is also entitled to interest on delayed refunds in accordance with section 243. Counsel stated that it is an admitted fact that the petitioner was entitled to refund of the sum of Rs. 7,750. The respondent authorities were satisfied and accordingly an order was passed and the amount was paid. But the respondents have committed an illegality in not awarding interest to him. Mr. Thakore, learned counsel for the Revenue, could not point out anything from which it can be said that the petitioner was not entitled to interest in accordance with the provisions of section 132B(4) read with section 243. Since the petitioner is entitled to interest and as it is not paid, the petition requires to be allowed by directing the respondent-authorities to pay the interest to the petitioner according to law.

In our opinion, Mr. Shah is also right in contending that even after various requests and repeated communications, the petitioner is deprived of this legitimate claim of interest and was obliged to approach this court. He, therefore, submitted that the petitioner may be awarded interest at the rate of 15 per cent. from the date of filing of the petition.

In the result, this petition is allowed. It is directed that the respondent-authorities will pay interest to the petitioner for retention of an amount of Rs. 7,750 and for delayed refund in accordance with law. It is further directed that the authorities will pay interest at the rate of 15 per cent. On the above amount from the date of filing of the petition, i.e., from August 12, 1983, till the date of payment. The Department will also pay costs to the petitioner which is quantified at Rs. 1,500. Rule is made absolute to the above extent.