1998 (12) TMI 68 - HC - Income Tax

Issues Involved:
1. Calculation of interest on the amount seized under section 132 of the Income-tax Act, 1961.
2. Applicability of sections 243 and 244 of the Income-tax Act, 1961, for interest on delayed refunds.
3. Interpretation of section 132B(3) and its relation to regular assessments and refunds.
4. The impact of section 243(3) on the applicability of interest provisions post-April 1, 1989.

Issue-wise Detailed Analysis:

1. Calculation of interest on the amount seized under section 132 of the Income-tax Act, 1961:
The petitioners had Rs. 1,45,680 seized on October 7, 1986, under section 132. An order under section 132(5) estimated undisclosed income and retained Rs. 1,41,800. The regular assessment on June 19, 1989, resulted in the entire amount becoming refundable. The sum of Rs. 1,41,800 was refunded on November 17, 1995, with interest calculated only up to the date of regular assessment. The petitioner sought interest until the actual date of payment.

2. Applicability of sections 243 and 244 of the Income-tax Act, 1961, for interest on delayed refunds:
The petitioner argued for interest under section 243, which mandates interest if refunds are delayed beyond three months from the end of the month in which the refund claim is made. The Commissioner rejected this, citing section 243(3), which excludes its applicability for assessments from April 1, 1989. However, the court clarified that section 243(3) does not apply to assessments prior to April 1, 1989, and thus does not affect interest on refunds due for earlier periods.

3. Interpretation of section 132B(3) and its relation to regular assessments and refunds:
Section 132B(3) mandates that any assets or proceeds remaining after discharging liabilities should be returned to the person from whom they were seized. The court emphasized that the retention of assets under section 132(5) is directly related to tax liabilities estimated up to that date. Once regular assessments are completed, any excess amount must be refunded, and interest should be calculated for delays beyond the regular assessment date.

4. The impact of section 243(3) on the applicability of interest provisions post-April 1, 1989:
The court found the Commissioner's interpretation of section 243(3) erroneous. The provision does not negate the applicability of interest for refunds due from assessments prior to April 1, 1989. The court reaffirmed that interest on delayed refunds should be paid under sections 243 and 244, even if the refund claim was made after April 1, 1989.

Conclusion:
The court held that the petitioner is entitled to interest on the delayed payment of the refund amount from the date of regular assessment until the actual payment date. The impugned order of the Commissioner was quashed, and the respondents were directed to compute and pay the interest within two months. The court emphasized that no delay was attributable to the petitioner, and thus no deductions on that ground should be made. The rule was made absolute with no order as to costs.

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