9911796707
TMI Blog1990 (6) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, that, during the course of the search, it was represented to the officers that, out of the said amount, Rs. 1,00,000 (one lakh) belonged to the petitioner. It is also stated that the said sum of rupees one lakh was found in a small tin recovered from the kitchen. It was the petitioner's case that the said amount of rupees one lakh was received as advance consideration by tier from one Mohd. Ashraf Linder an agreement of sale dated September 25, 1986, in respect of tier flat bearing No. 305, Shajahan Apartments, Khairatabad, Hyderabad. It is stated that, on September 26, 1986, the receipt of the said sum was recorded in the memorandum cash book. The said sum was not released immediately. Thereafter, an enquiry was conducted by the Income-tax Officer, B-Ward, Circle-1, under section 132(5) of the Act. The petitioner made a claim and produced evidence for release of the said sum. The enquiry officer recorded statements from the petitioner, her husband and the purchaser, on oath in the enquiry conducted under section 132(5) of the Act. During the course of the enquiry, the petitioner applied on November 24, 1986, before the Income-tax Officer, B-Ward, Circle-1, for investment/depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, 1989. The amount of Rs. one lakh was refunded by an order dated November 7, 1989, by the Assistant Commissioner and the same was received on November 9, 1989 by the petitioner. The respondent, however, did not award any compensatory interest. The petitioner has, therefore, approached this court in the present writ petition seeking compensatory interest on the ground that her property was seized without the authority of law and that there was an infringement of article 300A of the Constitution of India. The petitioner also claims that she has been unlawfully deprived of the use and enjoyment of her own property and, therefore, entitled to be compensated in the same manner as interest is claimed by the Government from assessees under sections 234A and 234B of the Act. It is further alleged that, under section 132(5), the enquiry is to be completed within 120 days and the respondent ought to have refunded the sum of Rs. one lakh to the petitioner but the same was unlawfully withheld. The petitioner cannot be deprived of the property without payment of interest. A counter-affidavit has been filed by the Assistant Commissioner of Income-tax. It is contended that the sum of Rs. on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax, Sri M. Suryanarayana Murthy, that the Income-tax Act, 1961, is a complete code in itself and provides for payment of interest in various contingencies. Inasmuch as it does not provide for payment of interest to third parties when claims are allowed, it must be deemed that the Legislature did not contemplate any payment of interest particularly in the cases of bona fide seizure of goods or money of third parties. The right to refund is not automatic but arises only upon the conclusion of the enquiry by the Competent Authority or by the Commissioner. For the period during which the money is in the custody of the officer for conducting a lawful enquiry contemplated by the Legislature, no interest is intended to be given under the statute. Alternatively, he contended that interest cannot be paid as damages or as compensation under the law as it stands in our country and relied upon the decisions of the Privy Council and the Supreme Court for the proposition that, even under the Interest Act, 1839 (now replaced by the Interest Act, 1978), no compensatory interest or damages can be awarded under the common law or on grounds of equity. The points for consideration are : (1) W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the authorised officer can enter and search any building, etc., where he has reason to suspect that such money, etc., is kept. He can "seize" such money, etc. The authorised officer may, under section 132(4), examine on oath any person who is found to be in possession or control of any money, etc. Under section 132(4A), there is a statutory presumption, though rebuttable, that such money, etc., found in the possession and control of any person belongs to such person. Under section 132(5), the Income-tax Officer shall, after such seizure, afford a reasonable opportunity to the person concerned of being heard and after making such inquiry as may be prescribed, make an order within 120 days of the seizure, estimating the undisclosed income, calculating the tax, interest or the amount that will be required to satisfy any existing liability under the Act and retain custody of such assets or part thereof as are, in his opinion, sufficient to satisfy the aggregate of the amounts stated above and "forthwith" release the remaining portion, if any, of the assets to the person from whose custody they were seized. The assets retained under section 132(5) shall be dealt with in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simple interest calculated in the manner therein mentioned. Reading the said provisions along with section 237 which defines "refund", it is clear that section 244A also is not attracted to a case like the present one where a person other than the assessee is claiming interest. The Supreme Court has held that the Income-tax Act, being an Act to consolidate and amend the law relating to income-tax and super-tax, is complete Code by itself. (Ravulu Subba Rao v. CIT [1956] 30 ITR 163 (SC)). This principle was, in fact, applied by the Supreme Court in Panchanatham Chettiar v. CIT [1975] 99 ITR 579. There, the claim for interest was rejected by the Supreme Court on the ground that the facts did not come within section 243 of the Act, and that there was no other provisions under which, on facts, interest could be awarded. In that case, the assessment order was passed under the Indian Income-tax Act, 1922, and a refund was ordered consequent upon a decision of the Supreme Court rendered after April 1, 1962. The question arose under the new Act of 1961, in the context of the provisions in sections 243 and 297(2)(i), as to whether interest was payable. It was held that the new Act did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IR 1928 PC 287. In our view, the above decisions given under other statutes cannot be of any help for deciding whether interest is payable under the Income-tax Act. We are, therefore, unable to agree with the opinion of the Gauhati High Court. Inasmuch as the Income-tax Act, 1922 (or 1961), is complete code in itself as held by the Supreme Court in Ravulu Subba Rao's case [1956] 30 ITR 163, no interest can be awarded unless provision is made in the Act to cover the contingency. Learned counsel for the petitioner then relied upon the decision of the Delhi High Court in Sardar Parduman Singh v. Union of India [1987] 166 ITR 115. That was a case of search and seizure in which no documents or things were seized but the shop was sealed and the claimant was restrained from dealing with the shop. Damages of Rs. 10,000 were awarded to the claimant after holding that the action was mala fide. Apart from being distinguishable on the ground of the finding as to mala fides, we do not consider it as a precedent on the question of payment of interest under the Income-tax Act or even outside the said Act. For the aforesaid reasons, we hold on point No. 1 against the petitioner. Point No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a debt even under the proviso. While observing that it was an unsatisfactory position if interest could not be granted for retention of debt, the House of Lords felt obliged to follow what they called the settled position under the Common law of England that such interest could not be granted. The authority under the Common law was, according to their Lordships, contained in Page v. Newman [1829] 9 B C 378 ; 109 ER 140, which was heard by a court presided over by Lord Tenterden himself. In Page v. Newman [1829] 9 B C 378 ; 109 ER 140, it was held by the King's Bench that if the court should hold that interest was due wherever the debt had been wrongfully withheld after the plaintiff had endeavoured to obtain payment of it, it might frequently be made a question at nisi prius whether proper means had been used to obtain payment of the debt and such as the party ought to have used. That, it was held, would be productive of great inconvenience. Lord Tenterden further observed in that case that the King's Bench ought not to depart from the long-established rule that interest was not due on money secured by a written instrument unless it appeared on the face of the instrument t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood to the latter anything except the principal sum which he promised to pay, together with interest up to the date of payment. He was not liable to pay damages of a remote character. The illustration, they clarified, did not confer upon a creditor a right to recover interest upon debt which was due to him, when he was not entitled to such interest under any provision of law and that it did not have any effect of modifying the language of the section which alone formed the enactment. Referring to section 73 as declaratory of the common law, the Privy Council further observed as follows (at page 70 of AIR 1938 PC) : "As observed in Jamal v. Moolla Dawood Sons and Co., AIR 1915 PC 48, section 73 is merely declaratory of the common law as to damages, and it has been held by the House of Lords in London, Chatham and Dover Railway Co. v. South Eastern Railway Co. [1893] AC 429 that interest cannot be allowed at common law by way of damages for wrongful detention of debt .... The law has, however, been amended in England by section 3, Law Reform (Miscellaneous Provisions" Act, 1934, empowering Court of Record to award interest on the whole or any part of any debt or damages, at such ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he old Act of 1839 and section 4 of the new Act of 1978, it will be seen that, in substance, there is not much of a difference. It is obvious that section 4(1) saves the rights, if any, to claim interest if such rights are traceable to any other statute, common law or equity, or mercantile usage, etc. In fact, section 4(2) enumerates certain situations in which equity would allow interest. The decision of the Privy Council in Bengal Nagpur Railway Co.'s case, AIR 1938 PC 67, which has followed the decision of the House of Lords in London, Chatham and Dover Railway Co.'s case [1893] AC 429, read with the decision of the Supreme Court in Abnaduta Jena's case, AIR 1988 SC 1520, precludes, as stated earlier, any claim for interest as damages under the common law or under section 73 of the Indian Contract Act. In fact, in Bengal Nagpur Railway Co.'s case, AIR 1938 PC 67, the Privy Council specifically referred to section 73 of the Contract Act as being declaratory of the common law. In our opinion, whatever may be the position if the provisions of section 3 are satisfied, the position however under section 4(1) also is that no interest can be awarded as damages on the basis of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ER 145 and not the one in Page v. Newman [1829] 9 B C 378 ; 109 ER 140. Unfortunately, even though the House of Lords held in President of India v. La Pintada Cia Navegacion S. A. [1984] 2 All ER 773, as stated above, they did not feel inclined to bring English common law in conformity with the above said view but left it to the Legislature to alter the law. One of the reasons for this was that the British Parliament which introduced various amendatory statutes regarding interest after 1833, i.e., in 1934, 1981, 1982, did not think of altering the law by providing for payment of interest as part of special damages. The English law, therefore, as stated by certain writers, continues to remain in "shackles" reluctantly imposed on it by the House of Lords in London, Chatham and Dover Railway Co. [1893] AC 429 (See F. A. Mann's article, "On Interest, Compound Interest and Damages" [1985] 101 L.Q.R. 30). Recently, the High Court of Australia has rid the Australian law of similar "shackles" earlier imposed in Australia. In their judgment in Hungerford v. Walker [1989] 63 AU 210, the majority of the Australian High Court authoritatively laid down that a court, when awarding damages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as damages (articles 104 to 106) of the Code of Obligation) ; and that, in Scotland, interest is payable as damages as stated by Lord Kincairney in 1897 (Quoting from D. M. Walker, The Law of Damages in Scotland). Mann also points out that since the days of Roman law, interest was treated as a form of damages and that the same is reiterated by Prof. Kaser (a Roman lawyer) (See Das Romische Privatrecht, 1971, p. 516). He also states that the law was for granting interest in cases of tortious detention or damage to property, particularly in Admiralty cases. It is, therefore, clear that English law continues to remain in "shackles" while the law now awards interest as damages in Australia, Canada, the, United States of America, France, Germany and Switzerland. The law in India also continues to be in the same position as in, 1938 so far as the award of interest as damages for retention of debt is concerned. Lord Scarman and Lord Roskill have, in fact, said in President of India v. La Pintada Cia Navegacion SA [1984] 2 All ER 773 (HL) that the omission in the statutory law in England called for an immediate change as had been earlier recommended in the Report on Interest by the Br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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