2013 (7) TMI 547 - HC - Income Tax

Refund of seized money with interest - Tribunal ordered refund - IT authorities failed to comply with Tribunal s orders - Held that - CIT (Appeals) has held that the money belonged to petitioner and the amount seized did not belong to any other person - The department could not have adjusted the amount against the demand payable by respondent No. 5 in view of the findings recorded by the CIT (Appeals) in the order that the amount belonged to petitioner No.1 because it was not the money of respondent No. 5 - case of the respondent No.5 throughout has been that the money does not belong to him and the said finding has been accepted by the first appellate authority under the Act, i.e., the Income Tax Act, 1961 and the order has become final. Prima facie it appears that Section 132(3) is meant to deal with the cases where there is difference or dispute between two or more persons as to whom the money belongs. In the present case, no such issue or question arises - Decided in favour of petitioner.

Summary

Issues:
Refund claim under Section 240 of the Income Tax Act, 1961; Non-compliance with tribunal order by income tax authorities; Ownership of seized cash; Delay in refund processing; Interpretation of Section 132(3) regarding refund recipient.

Analysis:
1. Refund Claim under Section 240:
The petitioner filed a writ petition seeking a refund of Rs.5,42,000 with interest, based on a tribunal order dated 13th January, 2006. The tribunal had quashed the original assessment order adding Rs.5,42,000 to the petitioner's income, thus no addition was made in the petitioner's case.

2. Non-Compliance with Tribunal Order:
Despite the tribunal's decision, the income tax authorities did not refund the amount to the petitioner. The petitioner repeatedly requested the refund, but the Assessing Officer delayed the process by seeking justifications and not taking further action. The petitioner approached the Ombudsman, but no resolution was reached.

3. Ownership of Seized Cash:
The cash amount of Rs.5,25,000 seized during search operations was a point of contention. The CIT (Appeals) determined that the money belonged to the petitioner, not to the individual under investigation, and this finding was accepted by the Revenue without challenge.

4. Delay in Refund Processing:
The Assessing Officer's delay in responding to the refund request and subsequent inaction raised concerns. The tribunal's decision to delete the addition to the petitioner's income should have prompted an immediate refund. The department's failure to act promptly was criticized, especially since the ownership of the seized cash was established in favor of the petitioner.

5. Interpretation of Section 132(3):
The judgment clarified that Section 132(3) did not need to be invoked in this case, as there was no dispute over the ownership of the seized money. Both the petitioner and the individual under investigation agreed that the amount belonged to the petitioner, removing the need for further examination of Section 132(3).

In conclusion, the High Court allowed the petition, directing the income tax authorities to release the amount of Rs.5,25,000 with interest to the petitioner. The court also ordered the authorities to pay costs to the petitioner and clarified that any recovery from the individual under investigation would be conducted in accordance with the law.