2020 (4) TMI 724 - HC - Income Tax

Interest u/s 244A OR 132B(4) - not refunding the seized amount - demand against the petitioner justifying retention of the seized amount, yet no interest was paid - HELD THAT - Clause (b) of Section 244A of the Act talks of all other cases than mentioned in clause (a) and (aa) for giving interest from the date of payment to the date on which the refund is granted. The refund of amount became due to the petitioner under the Act after finalisation of the assessment i.e. 21.1.2014 and the same was refunded on 4.7.2017, in such circumstances, the case is covered under clause (b) of Section 244A of the Act. Sections 132B and 244A of the Act are independent provisions and are not over-lapping. Rather, Section 132B(4) of the Act deals with interest for the period from seizing of the amount till finalisation of the assessment and Section 244A of the Act operates for the period after the refund has become due under the Act. Madhya Pradesh High Court in Manohar Lal's case 2001 (2) TMI 99 - MADHYA PRADESH HIGH COURT took a view that Section 132B of the Act is a self contained code, the assets seized have to be dealt with under Section 132(6) of the Act and payment of interest is to be made under Section 132B(4) of the Act and Section 244 of the Act had no application. With utmost respect, we are not in agreement with the view taken by Madhya Pradesh High Court for the reasons mentioned above. WP allowed. The petitioner shall be entitled to interest under Section 244A of the Act for the period from 22.1.2014 till the date of payment.

Summary

Issues:
- Quashing of order restricting interest on seized amount
- Direction for interest payment on seized amount for specific period

Quashing of Order Restricting Interest:
The petitioner filed a writ petition seeking to quash an order restricting interest on a seized amount until the date of assessment. The cash was seized by the Income Tax Department, and despite various legal proceedings and appeals, the amount was refunded to the petitioner after almost five years. The petitioner argued that interest should be paid for the period the amount was withheld. The respondents contended that interest had been paid as per Section 132B(4) of the Income Tax Act, citing a previous decision by the Madhya Pradesh High Court.

Interest Payment for Specific Period:
The main issue revolved around the lack of justification for withholding the seized amount without any pending demand against the petitioner. The respondents did not dispute this fact but argued that no provision existed for additional interest payment. The Court examined Sections 132B(4) and 244A of the Act along with Article 300A of the Constitution of India. It noted that while Section 132B(4) deals with interest until the completion of assessment, Section 244A covers interest on delayed refunds. The Court emphasized that these provisions are independent and not overlapping. Disagreeing with the Madhya Pradesh High Court's view, the Court held that the petitioner was entitled to interest under Section 244A of the Act for the relevant period.

In conclusion, the High Court allowed the writ petition, granting the petitioner interest under Section 244A of the Act from a specified date until the date of payment. The judgment clarified the distinct applicability of Sections 132B(4) and 244A of the Act and emphasized the entitlement to interest on delayed refunds under the relevant legal provisions.