Chander Prakash Jain vs Commissioner Of Income Tax And ...
2015 Latest Caselaw 177 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Court No. - 10
 

 
Case :- WRIT TAX No. - 566 of 2011
 

 
Petitioner :- Chander Prakash Jain
 
Respondent :- Commissioner Of Income Tax And Another
 
Counsel for Petitioner :- R.B. Shukla,Dinesh Tiwari
 
Counsel for Respondent :- C.S.C., Income Tax,D.Awasthi.
 

 
Hon'ble Arun Tandon,J.

Hon'ble Dr. Satish Chandra,J.

Heard learned counsel for the petitioner-assessee and Sri Dhanajay Awashti, learned counsel for the respondent-department.

On 16th November, 1994, a search under Section 132 (1) of the Income Tax Act, 1961 (hereinafter referred to as the "Act, 1961") was conducted at the residential premises of the petitioner, where he along with his mother and brother resided. Again on 22nd November, 1994 a search was made at Bank of the petitioner. Rs. 2,59,900/- from the Saving Bank Account in the name of the son of the petitioner along with certificates of investments/deposits worth Rs. 3,45,997/- were seized under Section 132 (1) (iii) of the Act, 1961.

An order under Section 132 (5) of the Act, 1961 was passed by the Assessing Officer for retaining the aforesaid assets on 13th March, 1995.

An appeal under Section 132 (11) of the Act, 1961 was filed by the petitioner before the Commissioner of Income Tax on 3rd April, 1995, which remained pending.

The Assessing Officer made an order dated 28th September, 1995 adjusting the cash of Rs. 67, 038/- against the existing demands against the petitioner. He further adjusted Rs. 1,92, 862/- against the existing demands against late Pushpa Devi (mother of the petitioner). This exhausted the entire cash of Rs. 2,59,900/- seized from the Bank account of the son of the petitioner.

In response to the notice under Section 148 of the Act return of income for the assessment year 1992-1993 showing an income of Rs. 3,466/- was filed. Assessment order was made under Section 143/148 of the Act, 1961 for the assessment year 199201993, income was determined at Rs. 84,959/- under the head of other source and Rs. 16,50,000/- under the head of long term capital gains. No credit was given to the petitioner-assessee by the Assessing Officer for the money retained under Section 132 (5) of the Act, 1961.

Not being satisfied with the assessment order, assessee filed an appeal before the Commissioner of Income Tax (Appeals), which was allowed vide order dated 29th November, 1999 The demand was reduced to nill.

The department being not satisfied with the order of the appellate authority, filed an appeal before the Income-Tax Appellate Tribunal. The appeal was partly allowed by the Tribunal. Not being satisfied with the order of the Tribunal, assessee petitioner filed an appeal under Section 260A of the Act, 1961 before the High Court being Income Tax Appeal No. 92 of 2005, which remained pending.

In pursuance to the order of the Tribunal, fresh order was passed by the Assessing Officer on 19th April, 2005. Petitioner filed an appeal before the Commissioner of Income Tax (Appeals) on 31st August, 2005, which was partly allowed by the Commissioner of Income Tax vide order dated 17th January, 2006. On 18th January, 2007, an intimation was given by the assessing officer about the seized money. Petitioner also made an application before the Commissioner of Income Tax, Meerut for release of the seized assets, with a further prayer that the assessee be compensated for pecuniary loss due to non renewal of the deposits and interest under Section 132B (4) of Act, 1961.

Since the said application was not considered, petitioner filed Writ Petition No. 1306 of 2010. The High Court disposed of the writ petition with a direction upon Assessing Officer to decide the application of the petitioner within the time permitted by the High Court.

The Assessing Officer under order dated 8th February, 2011 has refused to release the seized assets and to make payment of the interest as claimed by the petitioner. Not being satisfied the petitioner has approached this Court by means of the present writ petition.

The High Court after hearing the learned counsel for the parties vide its order dated 23rd May, 2013 recorded that prima facie there is no justification for seized assets being not released.

Learned counsel for the department prayed for time for the matter being looked into.

The High Court on 29th May, 2013 recorded the statement of Senior Counsel for the department that the department is ready to release the seized assets and petitioner may collect the same.

It is not in dispute that the assets have been released in favour of the petitioner, which include the Kishan Viaksh Patras, Indira Vikash Patras, Bank Fixed Deposit Receipts, etc., these could not be encashed by the petitioner as the maturity date had expired and the value has been transferred to unclaimed account. However, there is no issue in that regard before this Court as the counsel for the department has assured the assessee-petitioner to do the needful so that certificates are encashed.

The dispute between the parties before us is confined to the payment of interest on the money seized on 22nd November, 1994 till the date the tax liability of capital gains of Rs. 3,71,653 for the assessment year 1992-1993 was adjusted and on the remaining assets till the date they were released. In the alternative, the assessee has prayed for a direction for renewal of seized investments in shape of Indira Vikash Patras and Kishan Vikash Patras and deposits with the banks with interest on the prevailing rates on the maturity value till the assets were appropriated/released.

It is the case of the petitioner that during all these period, the money would have augmented by nearly four times of its value in the year 1994. Learned counsel for the petitioner submitted that as per the order of retention under Section 132 (5) of Act, 1961, the seized assets comprise of cash, Indira Vikash Patras, Kishan Vikash Patras etc. of Rs. 3,45,997/-, they were retained against the liability of Rs. 5,81,133/- treating them as undisclosed income and Rs. 67,038/- against existing liability. This order of retention was a summary order subject to regular assessment under Section 143 (3) of Act, 1961, which was made on 29th March, 1996. The retention of seized assets beyond the date of regular assessment is without authority of law.

It is stated that in the regular assessment, for the year 1992-1993, no addition was made with reference to the seized assets, therefore, the liability as mentioned in the summary order dated 13th March, 1995 with reference to the seized assets ceased. Such assets were liable to be released under Section 132B (3) of Act, 1961. The Revenue has retained the assets for more than 19 years without authority of law, therefore, the assessee must be compensated for loss of interest.

In the alternative, it is submitted that the Revenue could have appropriated the seized amount in April, 1996 against the demand notice dated 29th March, 1996, no interest under Section 220 (2) of Act, 1961 could have been levied. The Revenue is liable to pay statutory interest under Sections 132B (4) and 244A of the Act, 1961. He explained that the Revenue cannot indirectly keep the money on the plea that there will be a demand and therefore, the money should be allowed to be kept with the Revenue. It is further explained that due to failure of the Revenue either to release the seized assets retained without authority of law/ failure to get the Indira Vikash Patras, Kishan Vikash Patras etc. renewed on the date of maturity in the year 1999, the petitioner suffered pecuniary loss.

Petitioner-assessee has also enclosed a Chart depicting the loss, which has been caused to him and it is claimed that the total loss is Rs. 17,50,000/0. It is also stated that interest on Rs. 1,49,183/- was wrongly charged under Section 220 (2) of the Act, 1961, which be deleted and the amount so recovered to be returned with interest under Section 244A (1) of the Act, 1961.

Learned counsel for the petitioner has relied upon the judgment of the Apex Court in the case of Chironjilal Sharma Huf vs. Union of India & Others reported in (2014) 360 ITR 237 (SC) for the proposition that liability as per the order of the Assessing Officer on being overturned by the Tribunal, the assessee becomes entitled to interest for pre-assessment period also under Section 132B (4) (b) of Act, 1961. It has also been explained that interest on post assessment period is to be dealt with in accordance with Section 240 or Section 244A of Act, 1961.

Reference has also been made to the judgment of the Apex Court in the case of Sandvik Asia Ltd. vs. Commissioner of Income Tax, Pune & Others reported in (2006) 2 SCC 508, wherein it has been held that if a person can be taxed in accordance with law and hence where excess amount is collected or any amounts are withheld wrongfully, the revenue must compensate the assessee. (Reference paragraph-30 of the judgment).

In paragraph nos. 31 and 41 of the said judgment, it has been explained that any amount becoming due to the assessee under Section 240 of the Act, 1961 would encompass interest also.

Sri Dhanajay Awashthi, learned counsel for the respondent-department disputes the correctness of the stand so taken on behalf of the assessee. It is submitted that no interest is payable to the assessee-petitioner in respect of the assets not sold or converted into money and that the cash which was seized from the petitioner assessee, has already been utilized, hence there is no cash, is lying unutilized in the P.D. Account. It is further stated that interest has been charged strictly as per the order of the Commissioner of Income Tax, therefore, the relief for refund of the same, as prayed, appears to be misconceived.

We have considered the submissions made by the learned counsel for the parties and have gone through the records of the present writ petition.

From the records of the present writ petition it is apparent that seizure was affected in the year 1994. The assessment was completed in the year 1996, the cash seized was adjusted against tax demands. Fixed Deposit Receipts, Kishan Vikash Patras and Indira Viaksh Patras, which were seized, were not encashed nor were renewed. It is for this reason only that the Assistant Commissioner of Income Tax, Meerut vide order dated 8th February, 2011 while disposing of the application of the petitioner dated 28th September, 2010 has refused payment of interest on the aforesaid assets. It has been recorded that no interest is payable in relation to assets other than the money, which are not sold by the income-tax officer. According to the Assistant Commissioner of Income Tax, interest is payable only in respect of seized assets, which are converted into money. No interest is payable in respect of assets, which remain unsold. In support of her conclusion, the officer has referred to sub-Section 4 of Section 132B of the Act, 1961.

It is not in dispute that seized Kishan Vikash Patras, Indira Vikash Patras etc. continued to be retained by the Income Tax Department even after conclusion of the assessment proceedings in the year 1996 unreasonably for long duration. There is absolutely no explanation from the side of the department as to why these Kishan Vikash Patras, Indira Vikash Patras, Fixed Deposit Receipts etc. were retained by the department even after the assessment proceedings had been completed in the year 1996 and as to why the same were not encashed/renewed.

In our opinion, the money invested in the shape of Kishan Vikash Patras, Indira Vikash Patras etc. continued to be the money available with the Union of India all along. This money was utilized by the Government for its own purposes, which fact can be inferred as the Vikash Patras etc. were never encashed.

The issue before us is as to whether the assessee is to suffer in respect of loss of interest on these Kishan Vikash Patras, Indira Vikash Patras etc. for the inaction on the part of the department especially when the money lay with the Union of India itself.

We are of the considered opinion that the facts of this case are more or less identical to those in the case of Chironjilal Sharma Huf and Sandvik Asia Ltd. (supras).

We may also refer to the recent judgment of the Apex Court in the case of Commissioner of Income-Tax vs. Gujarat Fluoro Chemical reported in (2013) 358 ITR 291 (SC), wherein while noticing the law laid down in the case of Sandvik Asia Ltd. (Supra), it has been noticed that in the case of Sandvik Asia Ltd. the Apex Court had come to the conclusion that where there had been inordinate delay on the part of the Revenue in returning the money, which will include statutory interest, Revenue must compensate and the same is not payment of interest on interest. (Reference paragraph 7 of the judgment).

In the case of South Eastern Coalfields Ltd. vs. State of M.P. & Others reported in (2003) 8 SCC 648, in paragraph 29 the Apex Court has laid down as follows:

"29. Once the doctrine of restitution is attracted, the interest is often a normal relief given in restitution. Such interest is not controlled by the provisions of the Interest Act of 1839 or 1978."

It is not in dispute that because of non return of Kishan Vikash Patras, Indira Vikash Patras, Fixed Deposit Receipts etc., and because of non-extension of the period of their validity by the Revenue for all the said period these investments lay in the controll of the Revenue, although illegally, in our opinion, after assessment proceedings had been finalized. The same should have been returned to the assessee after assessment. This act of the department has resulted in uncalled for loss of interest on the aforesaid investment, in the shape of Kishan Vikash Patras, Indira Vikash Patras, Fixed Deposit Receipts etc. The loss has been caused to the assessee for no fault of his.

The Kishan Vikash Patras, Indira Vikash Patras, Fixed Deposit Receipts etc. would have earned interest in normal course of things, if they had been revalidated/encashed as per the option available to the Revenue. If the Revenue has failed to do so and the money all along continued to remain deposited with the Union of India and the available for utilization by the Revenue itself, we see absolutely no reason in the facts of the case as to why the Revenue may not be asked to pay interest on the aforesaid Kishan Vikash Patras, Indira Vikash Patras, Fixed Deposit Receipts etc., at part with the interest, which money would have earned, on the face value of the aforesaid documents, under the provisions of the Income Tax Act had the investments revalidated/renewed been encashed by the department.

In the facts and circumstances of the case on record we are satisfied that the order of the Assistant Commissioner of Income Tax dated 8th February, 2011, insofar as it refuses to make payment of interest under Section 132B of the Act, 1961 on the ground that Kishan Vikash Patras, Indira Vikash Patras, Fixed Deposit Receipts etc. had not been encashed, cannot be legally sustained and is hereby quashed.

The Assistant Commissioner of Income Tax is directed to redetermine the interest as per the representation dated 28th September, 2010, in light of what has been recorded above and in light of the judgment of the Apex Court in the cases of Chironjilal Sharma Huf, Sandvik Asia Ltd. (Supras) strictly in accordance with the provisions of the Income Tax Act. Let necessary calculation of interest be done within four weeks from the date a certified copy of this order is filed before him. All consequential action shall be taken immediately thereafter.

So far as the refund of the interest paid under Section 220 of Act, 1961 is concerned, we find no reason to interfere with the order of the Commissioner of Income Tax dated 21st May, 2007.

The present writ petition is partly allowed subject to the observations made above.

(Dr. Satish Chandra, J.)                              (Arun Tandon, J.)
 
Order Date :- 28.04.2015
 
Sushil/
 

 

 
Case :- WRIT TAX No. - 566 of 2011
 

 
Petitioner :- Chander Prakash Jain
 
Respondent :- Commissioner Of Income Tax And Another
 
Counsel for Petitioner :- R.B. Shukla,Dinesh Tiwari
 
Counsel for Respondent :- C.S.C., Income Tax,D.Awasthi.
 

 
Hon'ble Arun Tandon,J.
 
Hon'ble Dr. Satish Chandra,J.
 
Allowed.
 
For order, see order of date passed on the separate sheets.
 
          
 
      
 
(Dr. Satish Chandra, J.)                              (Arun Tandon, J.)
 
Order Date :- 28.04.2015
 
Sushil/