2022 (6) TMI 899 - HC - Income Tax

Interest under Section 240 and 244-A - petitioners seek an order and direction against respondents to pay interest at the rate of 12% p.a. from 01.11.2017 to 01.12.2020 on cash amount and interest at the rate of 12% p.a. from 01.11.2017 till its final realization - revenue placed reliance on Section 132-B (4) (b) and would submit that, liability of payment of interest of the revenue is only upto the date of passing of assessment order under the said provision and not upto the date of payment - whether this Court can award interest or compensation having found delay on the part of the revenue in releasing the cash amount seized by the revenue from the petitioners while carrying out the assessment, though delay was attributed on the part of the respondents and not on the petitioners from the date of assessment order till payment or not? - HELD THAT - Though in this case the petitioners have prayed for interest at the rate of 12% p.a. from 01.11.2017 to 01.12.2020 on cash amount of Rs.9,35,000/- and compensatory interest at the same rate from 24.12.2019 till 01.12.2020 on the amount of cash released of Rs.14,36,000/-, the petitioners have restricted their prayer for compensatory interest at the rate of 6% p.a. on these two amounts and also on Rs.24,29,000/-. In our view, though Delhi High court in AJAY GUPTA 2007 (4) TMI 42 - HIGH COURT, NEW DELHI had awarded interest at the rate of 9% p.a. towards compensation/damages for the delayed period, since the petitioners in this case have restricted their claim for compensation/damages at the rate of 6% p.a. for the delayed period, we are inclined to allow the claim for the interest by way of compensation/damages at the rate of 6% p.a. for delayed period already quantified in the chart submitted by the petitioners. The respondents are directed to pay interest by way of compensation/damages for the period from 03.03.2018 to 23.12.2019 as prayed under Section 132-B(4) of the Act, 1961 at the rate of 6% p.a. totaling to Rs.5,99,780/- after giving credit of the interest already paid by the revenue for the period from 01.03.2018 to 13.12.2019 in the sum of Rs.2,06,360/- within a period of four weeks from the date of this order.

Issues Involved:
1. Release of the remaining cash amount of Rs. 24,29,000/-.
2. Payment of interest on the released cash amount.
3. Compensatory interest for delayed payment.
4. Legality of withholding cash beyond the statutory period.
5. Applicability of Section 132-B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Release of the Remaining Cash Amount of Rs. 24,29,000/-:
The petitioners sought an order directing respondent no.3 to release the remaining cash amount of Rs. 24,29,000/- which was seized during a search conducted on 31.10.2017. The respondents had retained this amount unlawfully despite the assessment order dated 23.12.2019 and 26.12.2019, which assessed the income at Rs. nil.

2. Payment of Interest on the Released Cash Amount:
The petitioners claimed interest at the rate of 6% p.a. from 03.03.2018 to 23.12.2019 and compensatory interest at the rate of 12% p.a. from 24.12.2019 till 01.12.2020 on the amount of Rs. 14,36,000/- released by the order dated 17.11.2020. The petitioners also sought interest at the rate of 12% p.a. from 01.11.2017 to 01.12.2020 on Rs. 9,35,000/- and from 01.11.2017 till final realization on Rs. 24,29,000/-.

3. Compensatory Interest for Delayed Payment:
The petitioners argued that there was no provision in the Income Tax Act for payment of interest after the passing of the assessment order, but the respondents could not deliberately delay the payment. They relied on various judgments, including the Delhi High Court's decision in Ajay Gupta Vs. Commissioner of Income Tax, which awarded interest for the delay in releasing seized cash.

4. Legality of Withholding Cash Beyond the Statutory Period:
The petitioners contended that the respondents could not retain the cash beyond the statutory period of 120 days from the date of the last authorization for search. The respondents' failure to release the cash within this period was unlawful. The petitioners cited Section 132-B(4)(a & b) of the Income Tax Act, which mandates the payment of interest if the cash is not released within the specified period.

5. Applicability of Section 132-B of the Income Tax Act, 1961:
The court examined the applicability of Section 132-B(4)(a & b) and concluded that the provision does not bar the awarding of interest or compensation for delays caused by the revenue. The court referred to the Supreme Court's judgment in Sandvik Asia Ltd. Vs. Commissioner of Income Tax-1, Pune, which held that the revenue must compensate the assessee for wrongful withholding of amounts.

Reasons and Conclusions:

Release of Cash:
The court noted that the search was conducted on 31.10.2017, and the petitioners applied for the release of assets on 29.11.2017. The respondents only released Rs. 23,71,000/- out of Rs. 48,00,000/- on 17.11.2021 without any statutory interest, despite the assessment orders assessing the income at Rs. nil.

Payment of Interest:
The court found that the respondents were responsible for the delay in releasing the cash and held that the petitioners were entitled to interest as per Section 132-B(4)(a & b). The court awarded interest at the rate of 6% p.a. for the period from 03.03.2018 to 23.12.2019, totaling Rs. 5,99,780/-, after giving credit for the interest already paid.

Compensatory Interest:
The court agreed with the petitioners' reliance on the Delhi High Court's judgment in Ajay Gupta and the Supreme Court's judgment in Sandvik Asia Ltd., which supported the claim for compensatory interest due to the revenue's delay.

Legality of Withholding Cash:
The court held that the respondents' withholding of cash beyond the statutory period was unlawful. The court emphasized that the revenue could not refuse to compensate the petitioners for wrongful withholding of the cash amount beyond the date of the assessment order.

Applicability of Section 132-B:
The court concluded that the principles laid down in Sandvik Asia Ltd. applied to this case. The respondents were responsible for the delay and could not refuse to pay compensation for the wrongful withholding of the cash amount.

Final Order:
The court directed the respondents to pay interest by way of compensation/damages at the rate of 6% p.a. for the period from 03.03.2018 to 23.12.2019, totaling Rs. 5,99,780/-, within four weeks. The writ petition was allowed, and no order as to costs was made.

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