Assessee Deprived Of Refund Due To Wrongful Withholding Of Amount By Income Tax Dept.: Bombay High Court Imposes 6% Interest

A search was conducted at the residence of the petitioner/assessee under Section 132 of the Income Tax Act, 1961 and an amount of Rs. 48,00,000 along with gold jewellery was seized by the department. The petitioners filed their explanation, explaining the source of the cash and jewellery. The petitioners applied for the release of the assets.

The department accepted the return of income filed by the petitioners for passing an assessment order under Section 143(3) of the Income Tax Act, 1961, in the case of the petitioner and assessed the income at nil.

The petitioners requested the department to release the seized cash of Rs. 48,00,000. The department partly released the cash of Rs. 23,71,000 without there being any payment of any statutory interest. However, the petitioner contended that the remaining amount of Rs. 24,29,000 was retained by the department unlawfully.

The petitioners contended that because 120 days had already passed, they were entitled to interest under Section 132(B)(4)(a & b) of the Income Tax Act of 1961. The department was liable to pay interest at the rate of 6% p.a., which shall run from the date immediately following the expiry of the period of 120 days from the date on which the last of the authorizations for search was executed to the date of completion of the assessment under Section 153-A or under Chapter XIV-B of the Income Tax Act, 1961.

The petitioner has urged that since the authorities have not passed an assessment order under Section 153-A or under Chapter XIV-B of the Income Tax Act, 1961, the department could not have retained the cash amount of the petitioners at all. There is no provision in the Income Tax Act regarding the payment of interest as well as compensatory interest after the passing of the assessment order. The department, however, cannot deliberately delay the payment of the amount due and payable with interest from the date of the assessment order on the ground that there is no provision for payment of interest after the passing of the assessment order.

The department contended that, as per the provisions of Section 132-B (1) (i), the cash can be retained till the completion of the assessment, penalty proceeding, and appellate proceedings and till the full discharge of the liability of the assessee. On the basis of the outcome of the assessment order, the Pr. CIT, Nagpur, vide order, released the seized cash of Rs. 23,71,000/-. However, in respect of M/s. Harshit S. Kabra (HUF) and M/s. Lashika Motors, the proceedings were initiated under Section 147 of the Act, 1961 for the reopening of the assessment. The proposal for payment of interest under Section 132-B (4) had been submitted to the Chief Commissioner of Income Tax, Pune, via letter and on receipt of the approval, the interest on the cash released would be paid to the petitioners.

The court observed that though the Delhi High Court had awarded interest at the rate of 9% p.a. towards compensation/damages for the delayed period, since the petitioners have restricted their claim for compensation/damages to the rate of 6% p.a. for the delayed period, we are inclined to allow the claim for the interest by way of compensation/damages at the rate of 6% p.a. for the delayed period already quantified in the chart submitted by the petitioners.

Case Title: Sanjeev Kumar Versus UOI

Case No: Writ Petition No.4402 Of 2021

Citation: 2022 LiveLaw (Bom) 170

Dated: 22.04.2022

Counsel For Petitioner: Advocate Raviraj R. Chandak

Counsel For Respondent: ASG D. B. Gaikwad

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