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2015 (6) TMI 142 - ALLAHABAD HIGH COURT

2015 (6) TMI 142 - ALLAHABAD HIGH COURT - TMI - Interest on Refund - Unexplained inordinate delay in payment of interest within the statutory period by the department - Held that:- It is apparent that the assessee became entitled to payment of interest at least for the pre-assessment period from the date his appeal by CIT was allowed and the liability was reduced to 3,15,415/- only. This payment of interest has been denied to the assessee without any justifiable cause even after expiry of 9 year .....

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able to the assessee both under Section 132B (4) as well as under Section 243 / 244A for the period of nearly 9 and 8 years respectively. Thus the case of the assessee falls within the category of cases where there has been inordinate delay on the part of the department to pay the statutory interest, therefore, the assessee is entitled to be compensated for such wrongful retention of the money by the department. The assessee is entitled to be compensated at the same rates i.e. 9% as was provided .....

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el for the respondent. The facts giving rise to the present writ petition lie in a very narrow canvass. The same are stated as under. Search warrant dated 2.9.2002 was executed, at the residence and at the bank of the assessee on 4.9.2002. A total sum of ₹ 77 lacs were seized after such search. The assessee made an application disclosing the source of the aforesaid cash and requested for return of the assets, under section 132 (b) (i) of the Income Tax Act. This application of the assessee .....

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the demand was reduced to ₹ 3,15,430/- under Section 158BC/251/154 of the Income Tax Act. The balance amount of ₹ 37 lacs seized on 4.9.2002 was released in favour of the assessee petitioner under order of Commissioner of Income Tax (Appeal), Kanpur on 2.2.2007. The assessee made an application for payment of interest both in respect of the pre-assessment period as well as in respect of the subsequent period after the block assessment. The application of the petitioner for payment o .....

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re, joint application made by the petitioner under Section 132 (4) (b) read with Section 143 was not maintainable. Not being satisfied with the aforesaid two orders, the assessee has filed this writ petition. After the affidavits were exchanged, this Court on 15th April, 2015 passed an order requiring the counsel for the department to file an affidavit indicating as to whether the interest as admitted to be payable to the assessee under Section 243/244 Income Tax has actually been paid or not. A .....

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F Vs. Union of India and others (2014) volume 360 ITR 237 (SC) has explained that Section 132B (4) (b) deals with pre-assessment period in the matter of search and seizure and Section 244A deals with post assessment period. In the facts of the case it is submitted that on the sum of ₹ 37 lacs at least (out of the total seized amount of ₹ 77 lacs,) which being the aggregate exceeding the liability under Section 132 (b) (1) (i) of the Act the department is liable to pay interest at the .....

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ally unjustified. Reference is made to the judgment of the Division Bench judgment of this Court in the Case of Vijay Prakash Agrawal and others Vs. Commissioner of Income-Tax (Central) and another (2013) volume 355 ITR 114 (All) specifically paragraph Nos. 8,18 and 25 of the said judgment. He lastly contended that there has been an inordinate delay in the matter of payment of interest to the assessee on the aforesaid amount, for which the assessee must be compensated in view of the law laid dow .....

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ided for only if there has been inordinate delay in payment of the money to the assessee. Sri Govind Krishna, learned counsel for the department submits that no interest is payable on any amount for the pre assessment period and that the interest as paid as per the document dated 29th April, 2015 (Annexure SCA-2 to the supplementary affidavit) filed on 4.5.2015 at the flat rate of .5% per month under Section 243 and section 244A is strictly in accordance with the provisions applicable. He placed .....

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Ltd. V. CIT (ix) 173 ITR page 545 CIT V Perfect Pottery Co. Ltd. (x) 282 ITR Page 0198 Bhagwan Prasad Agarwal Vs. C.I.T. We have heard learned counsel for the parties and perused the records. It is not in dispute that the total amount of cash seized by the department under authorisation dated 2.9.2002, on 4.9.2002 was to the tune of ₹ 77 lacs. It is also not in dispute that after the assessment of the liabilities as were existing or were liable to be created under the block assessment, res .....

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ovision and section 240 or for that matter section 244 (A). The former deals with pre-assessment period in the matters of search and seizure and the latter deals with post-assessment period as per the order in appeal." We are of the considered opinion that these 37 lacs of rupees retained under Section 132 of the Act exceed the amount required to meet the liability under Section 132B (1) (i) of the Act and the Department is, therefore, to make payment of interest at the rate applicable from .....

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is not diluted in any manner because of the said amendment. We, therefore, hold that the assessee is entitled to interest at the rates applicable on the sum of ₹ 37 lacs for the pre-assessment period in accordance with Section 132B (4) (b) at the rates applicable from time to time after expiry of 120 days from the date of the seizure till the date of the assessment. So far as the prayer for interest under Section 243/244A of the Act is concerned, we find that two Division Benches of this C .....

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n view of the above the assessee is held entitled to interest at the rate's applicable from time to time under Section 243A on this sum of ₹ 37 lacs from the date the money became refundable till the date of actual refund. Let fresh quantification be done by the authorities concerned within four weeks. The amount of interest so calculated after deducting the amount, already paid towards interest, may be released in favour of the petitioner within four weeks of such quantification. This .....

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of Income Tax Vs. Gujarat Flouro Chemicals (2012) 348 ITR 319 (SC) in paragraph Nos. 5,6, 7 and 8 has held as follows: "5. Since there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this court had thought it fit that the assessee should be properly and adequately compensated and, therefore, in paragraph 51 of the judgment, the court while compensating the assessee had directed the Revenue to pay a compensation by way of interest for two period .....

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he statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period. 7. As we have already noticed, in Sandvik case ((supra)) this court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment .....

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n the statutory period by the department or not. From the facts which have been noticed hereinabove, it is apparent that the assessee became entitled to payment of interest at least for the pre-assessment period from the date his appeal by CIT was allowed and the liability was reduced to 3,15,415/- only. This payment of interest has been denied to the assessee without any justifiable cause even after expiry of 9 years from the date interest was payable. Similarly, we find that for the post-asses .....

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y not be a direction for payment of interest over interest and that Sandvik Asia Ltd (supra) has not laid down any such law. We only record that we are not directing payment of interest over interest, we have only provided that the assessee must be compensated for retention of money i.e. interest due under Section 132B (4) and Section 244B of the Income Tax Act by the department for long duration, namely, 9 and 8 years. Such payment of compensation has been recognized and accepted in the case of .....

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