Case Note & Summary
The dispute arose from a search conducted on 31.1.1990 at the appellant's residence, resulting in the seizure of Rs. 2,35,000. Following this, an order under Section 132(5) of the Income Tax Act, 1961 was issued on 31.5.1990, leading to the appropriation of the seized cash against the appellant's tax liability. However, the Income Tax Appellate Tribunal set aside the Assessing Officer's order on 20.2.2004, which was accepted by the revenue, resulting in the refund of the seized amount along with interest from 4.3.1994. The appellant contended that he was entitled to additional interest under Section 132B(4)(b) for the period from 1.12.1990 to 4.3.1994. The court examined the relevant provisions of the Income Tax Act, particularly Section 132B(4)(b), which stipulates that interest is payable for the period following the expiry of six months from the order under Section 132(5) until the regular assessment. The court found that the department's interpretation, which denied the applicability of Section 132B(4)(b) in favor of Section 240, was incorrect. The court ruled in favor of the appellant, allowing the appeal and ordering the revenue to calculate and pay the interest due within two months. No costs were awarded.
Headnote
A) Taxation - Interest on Delayed Assessment - Entitlement to Interest - Income Tax Act, 1961, Section 132B(4)(b) - The appellant claimed interest for the period from 1.12.1990 to 4.3.1994 under Section 132B(4)(b) after the order under Section 132(5) was passed. The court held that the appellant is entitled to simple interest at the rate of fifteen percent per annum for the specified period as per the provisions of the Act. (Paras 8-9).
Issue of Consideration
Whether the appellant is entitled to interest under Section 132B(4)(b) of the Income Tax Act for the period from the expiry of six months from the order under Section 132(5) to the date of regular assessment.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned order, and held that the appellant is entitled to simple interest at the rate of fifteen percent per annum under Section 132B(4)(b) from 1.12.1990 to 4.3.1994. The revenue was directed to calculate and pay the interest within two months.
Law Points
- Interest on delayed assessment
- Section 132B
- Income Tax Act
- 1961
- refund of excess amount
- pre-assessment period
- post-assessment period
