TMI Blog2008 (7) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... FDRs were encashed on 18-3-2002 and kept in P.D. Account. An amount of Rs. 3,97,800 was adjusted against the tax arrears and the balance amount of Rs. 96,02,200 was adjusted on 1-1-2004. The block assessment order was passed on 31-3-2003 raising tax demand of Rs. 2,96,84,325. Ld. CIT(A) vide his order dated 31-3-2004 deleted the addition. The Assessing Officer gave effect to CIT(A) order on 12-4-2004 and interest under section 244A was allowed from 1-1-2004 to 30-4-2004. Thus, he had given the interest from the date of adjustment and appropriation of the funds kept in the PD account up to the month in which he passed the order giving effect to the appellate order. The assessee filed petition under section 154 of the Act on 1-5-2004 and pointed out that interest under section 132B(4) for the period 18-7-2002 to 31-12-2003 was not given in the order dated 12-4-2004. The Assessing Officer examined the contention of the assessee and pointed out that a sum of Rs. 96,02,200 was appropriated on 1-1-2004 against a demand of Rs. 2,92,86,525 then outstanding. He further observed that as per order dated 31-3-2004 of the CIT(A), the demand against which the seized money was appropriated did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44A for the period 1-1-2004 to 30-4-2004 the interest for the period 18-7-2002 to 31-12-2003 remained to be granted as per the provisions of section 132B(4)( b ) of the Act. 7. Ld. Counsel referred to the decision of the Tribunal in the case of Dr. R.M. Saboo v. Asstt. CIT [2005] 92 TTJ (Hyd.) 1078 , and also referred to the submissions made before ld. CIT(A) vide para 3.5 page 8 and pointed out that here the Legislature has used the expression "assessment" in contradiction to the expression regular assessment used elsewhere which indicates that if more than one order is passed by the Assessing Officer, then interest is payable up to the date of last of such assessment. Ld. Counsel further submitted that the assessee has not paid the amount but the FDRs were seized by the department. Ld. Counsel referred to the decision of the Hon ble Allahabad High Court in the case of Smt. Mithilesh Kumari Jain v. CIT [1994] 209 ITR 337, wherein, it was held that when the explanation of the assessee was found to be proper, then the Commissioner had to pass appropriate order for release of the assets. Ld. Counsel further submitted that the liabilities determined on completion of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector General of Income-tax v. Diamondstar Exports Ltd. [2007] 293 ITR 438, wherein, it was held that since the direction for seizure of the various assets was quashed by the Hon ble High Court and it had directed to pay interest at the rate of 8 per cent, the department was directed to pay cost of Rs. 75,000 on account of loss suffered by the assessee during the proceedings before the High Court which was further aggravated by the delay of the department in complying with the High Court s decision. With reference to this decision, the ld. Counsel for the assessee submitted that since the assessee was having assets with due authority of law, therefore, interest had to be allowed to the assessee as per law. Ld. Counsel further referred to page 33 of the PB, wherein, the decision of the Hon ble Madhya Pradesh High Court in the case of Biaora Constructions (P.) Ltd. v. Director of Income-tax (Investigation) [2006] 281 ITR 247 is contained, wherein, it has been held that it is only when the assessee fails to explain the source, when called upon to do so or when the source to acquire the assets is found to be not legal or when it could not be explained satisfactorily the format ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le interest at the rate of 1 per cent of every month or part on the amount of which aggregate amount of money seized under section 132. The interest is to be calculated immediately following expiry of the period of 120 days from the date on which the last of the authorization for search under section 132 or requisition under section 132A was executed to the date of completion of the assessment. The assessee has claimed interest under section 132B. The first and foremost issue which has to be considered in this case is whether the provisions of section 132B, as substituted by the Finance Act, 2002 w.r.e.f. 1-6-2002, are applicable to the assessee s case because the block assessment order was passed on 31-10-2003 or the provisions of section prior to that date are applicable. In our opinion, the provisions as stood prior to the date of amendment would be applicable to the facts of the case and, therefore, the Assessing Officer was required to pass the order under section 132(5). In this case, no order under section 132(5) has been passed. However, before proceeding further, it will be useful to consider the provisions of section 132(5) as then stood. As per sub-section (5) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plea is to be considered with reference to the provisions of section 132B(1)( i ) which reads as under : "132B(1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely : ( i )The amount of the existing liability referred to in clause ( iii ) of the said sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in clause ( i ) of that sub-section relates (including any penalty levied or interest payable in connection with such assessment or reassessment) and in respect of which he is in default or is deemed to be in default may be recovered out of such assets." This section clarifies that while considering the interest under section 132B, the liability determined on assignment has to be taken into consideration which, no doubt, is subject to the 1st proviso to section 132B(1)( i ). 10. The facts are not disputed. The only point for consideration is whether the assessee was entitled to interest only on passing of the assessment order or the assessee was entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated the amount of interest and penalty imposable and any existing liability under the Act referred in clause ( iii ). We find that the assessee had furnished the source of FDRs of Rs. 1 crore with Canara Bank to the Addl. Director of Investigation on 17-10-2001 along with the copies of bank statements. Thus, the assessee had moved application explaining the source of FDRs. Therefore, even under the amended provisions, the Assessing Officer was required to take into consideration the explanation furnished by the assessee explaining the assets seized to determine the existing liabilities, effect of proviso which should have decided the issue and release the assets after the existing liability was satisfied. In the present case, we find that the Assessing Officer has not passed any order with reference to the assessee s application dated 17-10-2001 and adjusted the proceeds of the FDRs on passing of the block assessment order. The assessee s explanation regarding the source of FDRs had to be first duly examined by the Assessing Officer as the Legislature has consciously made this provision so that disclosed assets of the assessee are not subjected to illegal seizure. When the FD ..... X X X X Extracts X X X X X X X X Extracts X X X X
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