2013 (3) TMI 333 - HC - Income Tax

Interest on delay in releasing the cash seized treating as unexplained cash - Tribunal held that the cash found from the possession of the assessee actually belonged to M/s. S. K. Industries Pvt. Ltd. & not unexplained thus resulted in a nil tax demand - Held that - As decided in G.L. Jain v. CIT & Ors. 2012 (9) TMI 93 - DELHI HIGH COURT relying on Sandvik Asia Ltd. v. CIT & Ors. (2006 (1) TMI 55 - SUPREME COURT) and the judgment of Ajay Gupta v. CIT (2007 (4) TMI 42 - HIGH COURT NEW DELHI) directed that it would be reasonable and equitable to order interest to be paid at the rate of 12% on the cash seized paid from the day next following the day on which the assessment was completed till the amount was actually released to the petitioner in respect of the period beyond the date on which the assessment was completed. Thus the petitioner is entitled to be paid interest @ 12% in respect of the amount of Rs.6, 33, 800/- for the period from 27.12.2006 to 24.05.2011 and a writ of mandamus directing the payment of the interest is accordingly issued.

Summary

Issues:
1. Release of seized cash and interest entitlement under section 132B(3) of the Income Tax Act, 1961.

Analysis:
The petitioner, assessed to income tax, had cash seized during a search under section 132(1) of the Act. The petitioner sought release of the seized cash, explaining its source to the income tax authorities. Assessments were completed under section 153A with no tax liability. Despite requests, the cash was not released due to uncertainty about its source until the assessment for the year 2005-06. The Tribunal later determined the cash belonged to another entity, resulting in nil tax demand for the petitioner.

Following subsequent appeals and court orders, the seized amount was eventually released to the petitioner. However, the petitioner sought interest under section 132B(3) for the delay in releasing the cash. The petitioner moved a writ petition seeking interest on the seized amount from the completion of the assessment in 2006 until its release in 2011, citing relevant provisions of the law.

The petitioner relied on a Division Bench order directing interest payment at 12% beyond the assessment completion date, following the Supreme Court's judgment in Sandvik Asia Ltd. v. CIT & Ors. The court analyzed section 132B, which mandates interest payment without demand to the assessee. The court determined the petitioner's entitlement to interest at 12% on the seized amount for the period in question, as per the precedent set in a similar case.

The revenue argued against the interest payment based on a subsequent Supreme Court case, but the court upheld the earlier judgment's validity. Consequently, the court granted the petitioner interest at 12% on the seized amount from 2006 to 2011, issuing a writ of mandamus for the payment within six weeks. The writ petition was allowed with no costs incurred.