2010 (4) TMI 766 - HC - Income Tax

Refund Claim - Search - Interest on the excess amount seized in the search - A search conducted in the petitioner s residential/business premises - It was kept in the Commissioner s Personal Deposit Account for being adjusted towards the tax liability of the petitioner - The block assessment for the period 1989-90 to 1999-2000 was completed on 22.12.2000 - The tax liability was adjusted from and out of the monies seized from the petitioner - The balance was refunded to the petitioner - The petitioner prayed for interest vide his representation invoking the provision u/s 132B of the Income Tax Act. The petitioner is not entitled to any interest on the excess amount seized in the search conducted under section 132 of the Income Tax Act as the search was made well beyond the cut off date referred to under section 132(5) of the Act - The respondent has rightly rejected the plea for interest made by the petitioner -While passing the impugned order the respondent has rightly applied the relevant provisions of law and dismissed the plea for interest on the amount seized in the search conducted and refunded after assessment was made - Therefore the writ petition stands dismissed.

Summary

Issues:
1. Entitlement to interest under section 132B of the Income Tax Act for the amount seized and refunded after assessment.
2. Interpretation of provisions under section 158BH and 158BC(d) of the Income Tax Act.
3. Applicability of interest payment provisions under section 132B(4)(a) and (b) for searches conducted post 1st July 1995.
4. Comparison of legal precedents for interest payment on excess seized amounts.
5. Justification for denying interest on the excess amount seized post cut-off date.

Analysis:

Issue 1: Entitlement to interest under section 132B of the Income Tax Act
The petitioner sought interest on the amount seized and refunded after assessment, invoking section 132B of the Income Tax Act. The respondent rejected the claim, arguing that the search was conducted post the deadline set in the provision. The petitioner contended that the Department held the money for an extended period, justifying interest payment under general law.

Issue 2: Interpretation of provisions under section 158BH and 158BC(d)
The petitioner argued that the respondent failed to consider the provisions under section 158BH and 158BC(d) of the Income Tax Act, which mandate applying other provisions of the Act to assessments made under Chapter XIV-B. The respondent, however, emphasized that interest payment provisions under section 132B do not apply due to the search date post the specified deadline.

Issue 3: Applicability of interest payment provisions post 1st July 1995
The respondent contended that interest payment provisions under section 132B(4)(a) and (b) only apply to searches conducted before 1st July 1995. As the search in question occurred post this date, the petitioner was not entitled to interest as per the specific provisions of the Act.

Issue 4: Comparison of legal precedents
Legal precedents, including an unreported decision and a Supreme Court ruling, were cited by the petitioner to support the claim for interest payment on the excess seized amount. However, the court distinguished these cases based on the search date and the specific provisions of the Income Tax Act applicable in each scenario.

Issue 5: Justification for denying interest post cut-off date
The court analyzed the legislative intent behind the provisions related to interest payment and concluded that as the search was conducted after the specified cut-off date, the petitioner was not entitled to interest on the excess amount seized. The court upheld the respondent's decision to reject the claim for interest, stating that the relevant provisions of the law were correctly applied.

In conclusion, the court dismissed the writ petition, ruling that the petitioner was not entitled to interest on the excess amount seized post the specified cut-off date, as per the provisions of the Income Tax Act. The decision was based on a detailed analysis of the relevant legal provisions and precedents cited during the proceedings.