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TMI Blog2005 (10) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 3,00,000 towards tax due out of Rs. 12,00,000 seized during the course of search, the balance amount of Rs. 9,00,000 was refunded to the assessee. On the refund of Rs. 9,00,000, the CIT(A) directed the Assessing Officer to grant interest for the period from 1-8-1997 to 17-3-1998. The learned D.R. further submitted that under section 132B(4)(b), interest need not be paid if the block assessment was completed within ten months from the date of search. According to the learned D.R., the time limit for passing the order under section 132(5) is 120 days, i.e., 4 months and interest shall run after six months from the date of order under section 132(5). Therefore, the assessee is entitled to interest in respect of excess amount retained by the Department, provided the block assessment order was not passed within ten months from the date of search. The learned D.R. further submitted that in this case no order under section 132(5) of the Income-tax Act was passed and the block assessment was made on 17-3-1998. Therefore, according to the learned D.R., the assessee is not entitled to any interest on the sum of Rs. 9,00,000 refunded by the Assessing Officer. 3. On the contrary, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 132 and retained up to the date of the block assessment. The learned counsel for the assessee further submitted that the assessee is entitled to interest from the date of seizure of the asset under section 132 till the date of block assessment since the provisions of section 132(5) is not applicable. The learned counsel for the assessee submitted that the First Appellate Authority has rightly directed the Assessing Officer to grant interest. 5. We have considered the rival submissions on either side, and also perused the material available on record. We have also carefully gone through the provisions of section 158BC, section 132 and section 132B. Admittedly, there was a search in the business and residential premises of the assessee on 31-7-1997 and an amount of Rs. 12,00,000 was seized besides other assets. Section 158BC(d) as it was in existence at the relevant point of time reads as follows:- "The assets seized under section 132 or requisitioned under section 132A shall be retained to the extent necessary and the provisions of section 132B shall apply subject to such modifications as may be necessary and the reference to 'regular assessment' or 'reassessment' in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct; (iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in clause (a) of sub-section (1) of section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets/or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized:" 7. A bare reading of section 132(5) clearly says that this section is applicable only in respect of search initiated before 1-7-1995. Therefore, as rightly submitted by the learned counsel for the assessee, section 132(5) is not applicable to the facts of the case since the search was initiated only on 31-7-1997. Therefore, in our considered opinion, no order is required to be passed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has to estimate the undisclosed income and the amount of tax thereon. Now, we have to find out at what point of time the Assessing Officer shall estimate the extent of asset required for meeting the liability, in the absence of section 132(5). In the case of block assessment, the Assessing Officer gets the jurisdiction to assess undisclosed income on the initiation of search as held by the Special Bench in the case of Smt. Mahesh Kumari Batra. However, after completion of search, the Assessing Officer has to examine the seized material and if any material relating to any person other than the person with respect to whom search was made, then the same shall be handed over to the Assessing Officer having jurisdiction. Therefore, in the process of examination of seized material, the Assessing Officer could estimate the undisclosed income approximately and the tax liability of the assessee. In our opinion, while issuing notice under section 158BC, the Assessing Officer could estimate the extent of asset which is required or necessary to meet the tax liability of the assessee. Even though section 132(5) is not applicable, in our opinion, the Assessing Officer has to estimate the undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest shall run from the expiry of six month period from the date of which the Assessing Officer applies his mind and estimate the undisclosed income and the tax liability of the assessee. Even though section 132(5) is not applicable, the Assessing Officer has to estimate the undisclosed income approximately in view of section 158BC(d). This estimation of undisclosed income could be possible only when the notice under section 158BC was issued. This interpretation would give effect to provisions of section 158BC(d). If any other interpretation is made, in our opinion, the provisions of section 158BC(d) would be ineffective and redundant and that may not be the intention of the Legislature. In our opinion, the intention of the Legislature is to grant interest only from the date immediately following the expiry of period of six months from the date on which the Assessing Officer would determine the extent of liability and the extent of assets required to be retained. In the case of block assessment, though the proceeding was commenced on the date of initiation of search, the Assessing Officer can come to a preliminary conclusion after examining the material seized on the date of issu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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