AJAY GUPTA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question which calls for consideration in this Petition concerns the date from which the Income Tax Department is liable to pay interest on the amount of money/assets seized from the Petitioner in the course of a Search conducted on 2.7.2002 under Section 132 of the Income Tax Act, 1961 (IT Act). In the course of this Search, cash amounting to Rs.35,15,000/ - was discovered at the premises of the Petitioner/assessed, out of which there was a Seizure of Rs.33,00,000/ -. It is the case of the Department that during the Block Assessment proceedings the assessed could sufficiently explain only a part of the cash seized during the Search. The Block Assessment proceedings were completed vide Assessment Order dated 30.7.2004 According to the Department, the assessed's undisclosed income aggregated Rs.12,43,232/ -, attracting a tax demand of Rs.7,83,236/ - together with a penalty of Rs.7,83,236/ - under Section 158BFA(2) of the IT Act, thus raising a total demand of Rs.15,66,471. Pursuant to this Order, the balance amount of Rs.17,33,529 was 'released' on 27.9.2004 as stated in the Affidavit of the Assistant Commissioner of Income Tax (Central Circle 5, New Delhi). Upon appeal against the Assessment Order, the CIT(A) vide its Order dated 15.12.2004 deleted Rs.12,43,232 as undisclosed income assessable to tax along with the penalty imposed. The Assessing Officer (AO) gave effect to the Order -in -appeal and framed 'nil income' assessment on 24.12.2004, releasing the remaining amount of Rs.15,66,471/ -. Thus, the entire Seizure of Rs.33 lakhs was ordered to be released (in contradistinction to 'refunded') to the Petitioner.

(2.) WITH respect to the payment of interest, it has been stated in the Affidavit by the Assistant Commissioner that as per the provisions of Section 132B(4) of the IT Act, interest was paid on the sum of Rs.17,33,529/ - as follows: (a) 01 -11 -02 to 31.08.03 (10 months) at the rate of 0.66 per cent per month = Rs.1,14,411/ -; (b) 01 -09 -03 to 30 -07 -04 (11 months) at the rate of 0.5 per cent per month = Rs.95,342/ -; thus aggregating the sum of Rs.2,09,753/ -. This interest is stated to have been determined in consonance with ITNS 150 dated 7.3.2005, and was paid to the assessed vide Refund Voucher No.830974 dated 7.3.2005. This computation as well as the rate of interest has not been challenged before us, although the period for which it has been granted is assailed by the Petitioner. The entire seized amount having been returned, the only remaining controversy concerns the element of interest payable by the Department to the Petitioner.

(3.) THE claim of the Petitioner on account of interest is adumbrated in the following table: Amounts Released on Period material to Interest paid (Rs.) and Period of interest computation after 120 period of payment unpaid/remaining days from the date of Search i.e. 1.07.02 to the date of Release in terms of Section 132B(4)(b) 17,33,529 27.9.04 1.11.02 to 27.9.04 2,09,753/ - for period: 1.8.04 to 27.9.04 1.11.02 to 30.7.04 (2 months) 15,66,471 24.12.04 1.11.02 to 24.12.04 31,328/ - for period: 1.11.02 to 31.8.04 1.09.04 to 31.12.04 (22 months) - - - - - - - - - - - - - - - - - - 33,00,000/ - 24 months - - - - - - - - - - - - - - - - - -