RADHEY SHYAM GUPTA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) A draft of Rs. 46,300 was seized and recovered subsequent to the completion of the original assessment of the petitioner for the year 1981-82. The draft was dated January 10,1983, in the name of the late Shri Thakur Das Gupta. The petitioner is a son of Shri Thakur Das Gupta. The draft was recovered by the Income-tax Officer against a demand made by the Income-tax Officer of an amount of Rs. 1,23,162 dated January 20, 1983. This demand was ultimately cancelled by the Commissioner of Income-tax vide order dated November 26, 1989. For the reason that no demand was pending, the draft amount recovered was to be refunded and, therefore, a demand was made for refund of the amount along with interest vide annexure 1. Repeated reminders were also sent. The petitioner was asked to attend the Income-tax Office a number of times. For the reasons that the matter stood already decided in favour of the father of the petitioner, a departmental appeal had also been filed by the Department against the order of the Commissioner of Income-tax before the Tribunal. The Income-tax Officer, B-Ward, Alwar, vide its order dated February 14, 1986, informed the petitioner that he should furnish a security for the reason that there was likelihood of the appeal being decided in favour of the Department if the request for refund of the amount involved is to be accepted. Further reminders were sent by the petitioner claiming refund and interest on such demand. However, ultimately, a refund was made of an amount of Rs. 35,720 on May 18, 1988, vide annexure 8, when the Income-tax Officer had got the draft encashed. The petitioner claimed an interest on the amount from the date of seizure till the date of refund of the, amount on the ground that the draft amount which was to be utilised by the petitioner had been kept by the Income-tax Department with it. The interest claimed was 15 per cent. The request was rejected, vide annexure 10, on September 12, 1988, primarily on the ground that the Department had got the draft encashed only on May 5, 1988, and for the reason that the Department had not utilised the draft, the petitioner was not entitled to any interest on such refund. An appeal against such an order was dismissed vide annexure 13 on September 14, 1989, on the ground that the appeal was not maintainable. An application under Section 154 of the Income-tax Act was also rejected. Grievance was also made before the Commissioner of Income-tax, vide annexure-15, which was dismissed, vide annexure 18, dated November 24, 1993. After issuing notices, ultimately, the petitioner filed the present writ petition with the prayer for quashing the orders whereby the interest accruable to the petitioner on the refund had been declined with a further prayer to grant interest to the petitioner on the delayed refund of amount of Rs. 35,720 in view of the provisions contained in Section 244(a)(?) and 244(1A) of the Income-tax Act.

(2.) THE petition has been opposed. It is stated that against the demand made, the Income-tax Officer has recovered the demand draft along with other demand drafts, i.e., three demand drafts were recovered, of an amount of Rs. 46,300, Rs. 1 lakh, and Rs. 76,500. It is stated that one of the drafts of Rs. 46,300 could not be encashed as payment was prohibited under Section 281B of the Income-tax Act, 1961, and was impounded under Section 131. It is stated that the assessee had filed the return of the income for the year 1981-82 declaring a loss, however, he was assessed to Rs. 1,69,390. THE appeal filed by the assessee was allowed. THE second appeal filed by the Department determining the total amount of the assessee and the total demand created came to the tune of Rs. 9,750. It is admitted that the amount of Rs. 35,720 itself out of the demand draft seized, was refunded ultimately on May 18, 1988. It is further stated that no interest is accruable.

(3.) THE writ petition is allowed. THE impugned orders are quashed with the direction that the respondents shall pay to the petitioner the interest due as per the provisions of Section 244 of the Income-tax Act from the date of recovery till the date of payment at the rate of 15 per cent, per annum. THE order shall be complied with within a period of three months from the date of receipt of the certified copy and in case the order is not complied with, the petitioner shall be liable to recover the interest further on such arrears of interest at the same rate of interest till the date of actual payment.