Gurvinder Singh vs Director of Income Tax (Investigation)

Ram Surat Ram (Maurya), J.—Heard Sri Rakesh Kumar, counsel for the petitioner and Sri Govind Krishna, senior standing counsel for the Revenue. This writ petition has been filed for quashing the order dt. 14th Sept., 2010 passed by ITO, Agra (respondent 4) by which, the application of the petitioner for payment of interest has been rejected and for a mandamus directing the respondents to rectify the order dt. 23rd April, 2010 and allow the interest on the amount retained and refunded, under s. 244A of the IT Act, 1961 (hereinafter referred to as the ''Act'').

Gurvinder Singh (the petitioner), while traveling in the bus, was intercepted by police authorities at Transport Nagar, Jaipur on 13th Aug., 1996, From his possession, cash of Rs. 4,68,000 and silver ornaments of 211 gms. were seized. On receiving information from police, Additional Director of income tax (Investigation-IV), Jaipur (hereinafter referred to as Addl. Director of IT), contacted the police authorities and recorded statement of the petitioner under s. 131 of the Act on 14th Aug., 1996. In his statement recorded by Addl. Director of IT, the petitioner has stated that Rs. 3,68,000 and silver ornaments of 211 gms. belonged to him while Rs. 1 lakh was taken by him on loan from one Maan Singh. Thereafter, the petitioner filed an application for releasing the aforementioned amount before the criminal Court along with his affidavit and affidavits of other persons, in which, it has been stated that cash amounting to Rs. 3,35,000 were given to him by Dharampal Singh, Leeladhar, Banne Singh and Mahesh Kumar for bringing marbles from Makrana and Rs. 1 lakh was taken by him from Maan Singh as loan and remaining amount of Rs. 33,000 and silver ornaments of 211 gms. belonged to him.

The Addl. Director of IT requisitioned the cash amount of Rs. 4,68,000 and silver ornaments of 211 gms. on 12th May, 1998 from the police authorities. Thereafter, notice under s. 158BC was issued to the petitioner on 14th July, 1998 (served on 3rd Aug., 1998), to show the income for the block period from 1st April, 1988 to 12th May, 1998 and file the return of income tax. In compliance of the aforesaid notice, the petitioner filed his return of the aforesaid block period. The AO by order dt. 9th May, 2000 held that the subsequent statements of the petitioner given before the criminal Court as well as in the assessment proceedings were afterthought and the first statement recorded by Addl. Director of IT was the correct statement. Accordingly, the undisclosed income of the petitioner for the block period was held to be Rs. 5,38,400 and on which, income tax of Rs. 3,23,040 has been assessed. On the basis of the aforesaid order, demand of Rs. 3,23,040 was raised against the petitioner. The petitioner moved an application dt. 23rd May, 2000 before respondent 4 requesting to adjust the amount of income tax from his seized money. On the basis of the aforesaid application, the amount of Rs. 3,23,040 was adjusted as income tax and the remaining amount was refunded to the petitioner along with interest under s. 132B of the Act.

The petitioner filed an appeal from the order dt. 9th May, 2000 before the CIT(A)-II, Agra, which was dismissed. The petitioner filed a second appeal before the Tribunal, Agra Bench, Agra. The Tribunal vide order dt. 24th March, 2008 held that authorization under s. 132 was illegal. Accordingly, subsequent proceedings of seizure on its basis was void ab initio and unlawful. The order of the Tribunal has become final between the parties. On the basis of the order of the Tribunal, the petitioner moved an application before the authorities for refund of the remaining amount along with interest. When no order was passed on the application of the petitioner, he filed Writ Petn. No. 1340 of 2009 before this Court in which an interim order dt. 27th Jan., 2010 was passed directing the authorities to pass appropriate order on the application of the petitioner. In compliance of the aforesaid order, respondent 4 vide order dt. 23rd April, 2010 directed for refund of the money. The petitioner filed an application dt. 21st May, 2010 under s. 154 of the Act for rectifying the order dt, 23rd April, 2010 by awarding interest under s. 244A of the Act on the aforesaid amount. The application was rejected by respondent 4 by order dt. 14th Sept., 2010. Hence, this writ petition has been filed.

The counsel for the petitioner stated that the seizure of the amount was found illegal by the Tribunal, as such the amount of income tax deducted vide order dt. 9th May, 2000, from the seized money was income tax paid by the petitioner and the petitioner is entitled for interest under s. 244A of the Act on this amount. Respondent 4 has illegally rejected the application of the petitioner claiming the interest.

In reply to the aforesaid arguments, senior standing counsel argued that the amount adjusted towards income tax was lying in P.D. account of CIT(A), Jaipur, as such, no interest was payable on it. He submitted that s. 244A of the Act is applicable where income tax was voluntarily paid on the basis of demand made in regular assessment proceeding. In this case, the income tax was not voluntarily paid, as such s. 244A is not applicable. He submitted that seized amounts are governed by the provisions of s. 132B of the Act and respondent-2 has already refunded the amount along with interest after deducting the amount of income tax. Accordingly, s. 244A is not applicable for the remaining amount and no interest is payable on it. He submitted that as the matter was unreasonably delayed before the Tribunal as such in case the Revenue is directed to pay interest on it then extra burden will be cast on the Revenue.

Similar controversy came for consideration before Division Bench of this Court in Bhagwan Prasad Agarwal, Advocate Vs. The Commissioner of Income Tax and The Income Tax Officer, . Division Bench held that ss. 132B and 244A of the Act operate in different fields. Sec. 132B deals with the liability to pay interest upto the date prior to the framing of the assessment or reassessment order and s. 244A deals with the liability for the subsequent stage which comes into existence after the completion of the assessment/reassessment order. Thus there is no overlapping between the two provisions.

Admittedly notice under s. 158BC was issued to the petitioner and assessment proceeding was drawn. The petitioner filed his return of the block period. The AO by order dt. 9th May, 2000 held the undisclosed income of the petitioner for the block period as Rs. 5,38,400 and assessed income tax of Rs. 3,23,040. Demand of Rs. 3,23,040 was raised from the petitioner and on the basis of the application of the petitioner, the amount of Rs. 3,23,040 was adjusted as income tax. As such argument of senior standing counsel that s. 244A is not applicable, is not liable to be accepted.

So far as the other arguments of senior standing counsel that the amount adjusted was lying in P.D. account of CIT(A), Jaipur, and no interest was payable on it or extra burden will be cast on the Revenue as the matter was unreasonably delayed before the Tribunal are concerned, in case there is statutory provisions then that cannot be ignored on the ground that it will cast an extra burden on the Government. There is nothing on record to suggest that the petitioner was responsible for unreasonable delay. On the other hand seizure of the money of the petitioner was held as illegal as such he was illegally harassed and his money was blocked for his no fault, as such statutory liability for payment of interest of the Revenue cannot be absolved on the so-called extra burden. In the result the writ petition succeeds and is allowed. The order dt. 14th Sept., 2010 passed by ITO, Agra (respondent-4) is set aside. The respondents are directed to pay the interest on the remaining amount under s. 244A of the IT Act, 1961 to the petitioner within a period of one month from the date of producing certified copy of this order before respondent-4.