S. Baburajendra Prasad V. The Assistant Commissioner of Income Tax, Central Circle, Mannaniyya Complex, Andamukkam, Kollam and The Sub Postmaster, Chathannoor Post Office, Chathannoor

WP(C)/28172/2004

AI Insights

The case involves S. Baburajendra Prasad, the petitioner, who contested the demand for interest on belated tax payments following a block assessment after a search by the Income Tax Department. During the search, 65 NSCs were seized, which the petitioner argued should have been encashed and the proceeds adjusted against tax demands. The department contended that without the petitioner's authorization, they could not encash the NSCs. The court had previously ordered the encashment of these NSCs, which were then adjusted against the tax demands. The main legal contention was whether the department was justified in demanding interest under Section 220(2) of the Income Tax Act despite these adjustments.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 670903 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 24-07-2008
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: P K R MENON; GEORGE K GEORGE; P NAIR
• Assessee Lawyers: S KUMAR
• Keywords: Block assessment; Interest demand; Tax adjustment; NSC encashment
• Section: 220(2); 220(2A)

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR THURSDAY, THE 24TH JULY 2008 / D SRAVANA 1930 WP(C).No. 28172 of 2004(D) -------------------------- PETITIONER: ------------ S.BABURAJENDRA PRASAD, ARUNODHAYAM, CHATHANNOOR, KOLLAM. BY ADV. SRI.S.SANTHOSH KUMAR RESPONDENTS: ------------- 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANNANIYYA COMPLEX, ANDAMUKKOM, KOLLAM. 2. THE SUB POSTMASTER, CHATHANNOOR POST OFFICE, CHATHANNOOR. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT FOR R1 SRI.GEORGE K. GEORGE, SC FOR IT FOR R1 SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR FOR R2 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 24/07/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 2 APPENDIX PETITIONER'S EXHIBITS: EXT.P1 TRUE COPY OF LETTER DATED 21.7.2004 OF THE FIRST RESPONDENT. EXT.P2 TRUE COPY OF NOTICE ISSUED BY GTHE 1ST RESPONDENT TO THE 2ND RESPONDENT. EXT.P3 TRUE COPY OF REPRESENTATION DATED2.8.2004 SUBMITTED BEFORE THE FIRST RESPONDENT. 2ND RESPONDENT'S EXHIBITS: EXT.R2(a) TRUE COPY OF THE INSTRUCTIONS NO. 61-19/2003-SB DATED 10.11.2003 ISSUED BY THE DIRECTOR GENERAL OF POSTS. TRUE COPY P.S. TO JUDGE. C.N. RAMACHANDRAN NAIR, J. -------------------------------------------- W.P.C. NO. 28172 OF 2004 -------------------------------------------- Dated this the 24th day of July, 2008 JUDGMENT Heard counsel for the petitioner and standing counsel appearing for the Income-tax Department and Asst. Solicitor General appearing for the second respondent. The question raised is whether the department was justified in demanding interest for belated payment of tax under section 220(2) of the I.T. Act, pursuant to block assessment made on petitioners after search conducted on 15.9.1995. Petitioner's case is that in the course of search department recovered 65 numbers of NSC of the face value of Rs. 1,23,000/- and with a maturity value of Rs. 2,46,000/-. The specific case of the petitioner is that after assessment the department was bound to encash the NSC on maturity and adjust the amount received from the post office against tax demands. Standing counsel for the Income-tax Department submitted that petitioner has not requested or authorised the department to encash NSCs on maturity and consequently department could not do it. However, when this Writ Petition was admitted, this Court issued 2 interim orders on 27.9.2004 directing encashment of NSCs by department and pursuant to interim direction, amounts have been recovered and adjusted against tax demands. It is not known whether NSCs could be encashed on presentation or whether authorisation is required from the person in whose name they were issued. If authorisation is required, then nothing stopped the petitioner from authorising encashment and adjustment towards tax demand if petitioner wanted to avoid interest. I do not think there is any need to consider the question whether department was justified in retaining NSCs without encashing it because the block assessment is taken up with the Settlement Commission which has the power to order reduction of interest. It is open to the petitioner to raise this question before the Settlement Commission in the Settlement Case before it. Alternatively, if settlement is not granted, it will be open to the petitioner to raise this question in an application filed for waiver of interest under Section 220(2A) of the Act. W.P. is closed with the above observation. (C.N. RAMACHANDRAN NAIR) Judge kk 3 "