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2011 (1) TMI 885 - HC - Income TaxBlock assessment - Search and seizure, under Section 132 of the Act - Block assessment order was passed on 23rd March, 2006 and there was no additional tax liability - in accordance with section 132B(4) the amount of Rs. 17 lacs along with interest became refundable - This amount should have been refunded immediately i.e. shortly after the date of determination, 23rd March, 2006 - A request was made by the petitioner on 11th December, 2006 to refund the amount with interest - There is no explanation or reason for this delay - Accordingly feel that the petitioner is entitled to interest with effect from 24th March, 2006 till the payment of Rs.17 lacs was made i.e., 15th April, 2008 - the cause of justice would be best subserved if the Revenue pays interest @ 7.5% from 24th March, 2006 till 15th April, 2008 i.e. the date of the refund.
Issues:
1. Delay in refunding the seized amount under Section 132 of the Income Tax Act, 1961. 2. Entitlement to interest on the refunded amount. 3. Applicability of Section 132B(4) for interest calculation. 4. Judicial precedents related to interest on delayed refunds. Issue 1: Delay in Refunding Seized Amount: The High Court addressed the delay in refunding the amount seized under Section 132 of the Income Tax Act, 1961. The block assessment for the relevant years was completed, and it was determined that there was no tax liability. Despite this, there was a significant delay in refunding the amount to the petitioner. The court noted that the petitioner should have been refunded immediately after the determination of no tax liability, which was on 23rd March, 2006. However, the refund was only made on 15th April, 2008, without any valid explanation for the delay. Consequently, the court held that the petitioner was entitled to interest for the period from 24th March, 2006, until the actual refund was made on 15th April, 2008. Issue 2: Entitlement to Interest on Refunded Amount: The court considered the petitioner's entitlement to interest on the refunded amount as per Section 132B(4) of the Income Tax Act, 1961. The petitioner had requested the refund of Rs. 17 lakhs on 11th December, 2006, and the amount was refunded on 15th April, 2008. Additionally, interest of Rs. 1,91,704 was paid on 16th May, 2008, covering the period from 7th May, 2004, to 23rd March, 2006. However, no interest was paid for the period from 23rd March, 2006, to 15th April, 2008. The court held that the petitioner was entitled to interest from 24th March, 2006, until the actual refund date, i.e., 15th April, 2008, at a rate of 7.5%. Issue 3: Applicability of Section 132B(4) for Interest Calculation: The court examined the provisions of Section 132B(4) of the Income Tax Act, 1961, which govern the payment of interest on seized or requisitioned assets. The section stipulates the calculation of interest rates and the period for which interest is payable. In this case, the court applied the relevant provisions of Section 132B(4) to determine the petitioner's entitlement to interest on the refunded amount seized under Section 132 of the Act. Issue 4: Judicial Precedents Related to Interest on Delayed Refunds: The court considered various judicial precedents cited by the petitioner's counsel, highlighting cases where interest on delayed refunds was granted. Reference was made to cases such as Sandvik Asia Ltd., where the court emphasized the importance of awarding interest on refunds as per statutory provisions and the specific circumstances of each case. The court also discussed the concept of compensation in the context of delayed payments and emphasized the need for fair compensation for financial losses incurred due to delayed refunds. Ultimately, the court ruled in favor of the petitioner, directing the Revenue to pay interest at a specified rate for the delayed refund period. Conclusion: The High Court allowed the writ petition, granting the petitioner interest on the refunded amount for the period of delay in the refund process. The court emphasized the importance of timely refunding seized amounts and the entitlement to interest as per statutory provisions and judicial precedents.
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