SHRI MAHESH CHOUDHURY V. CIT , BIHAR-II, RANCHI

Tax/11/2001

AI Insights

The case involves Shri Mahesh Choudhary, the petitioner, who contested the imposition of interest on delayed tax payments for the assessment years 1988-89 and 1989-90. The Income Tax Appellate Tribunal had earlier reversed the decision of the C.I.T.(Appeals), which had favored the assessee by stating that the interest should not be charged from the date of seizure of money, as the Revenue had retained the money against the tax liability. The High Court examined whether the Tribunal was justified in its decision to impose interest despite the Revenue's retention of the seized amount against the assessee's tax liabilities, which were assessed later.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 766970 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 02-11-2012
• Assessment Year: misc
• Other Referred Cases: Sandvik Asia Ltd. Vs. Commissioner of Income-Tax, Commissioner of Income Tax Vs. Pandurang Dayaram Talmale, Commissioner of Income Tax Vs. K.K. Marketing, Satpal D. Agarwal HUF Vs. ACIT, Vipul D. Doshi Vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: DEEPAK ROSHAN; RUPA KUMARI
• Assessee Lawyers: BINOD PODDAR; DARSHANA PODDAR; PIYUSH PODDAR; AMRITA SINHA
• Keywords: High Court; Income tax appellate tribunal; Interest liability; Seizure of money; Seizure of money; Tax assessment
• Section: 234B; 234A; 132B; 132(5); 139(8); 217

Judgement Text

" - 1- IN THE HIGH COURT OF JHARKHAND AT RANCHI Tax Case No. 11 of 2001 Shri Mahesh Choudhary ...... Petitioner Vs. Commissioner of Income Tax, Bihar II, Ranchi ... Respondent ------ CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MRS. JUSTICE JAYA ROY ---- For the Petitioner: Mr. Binod Poddar, Sr. Advocate, M/s M. K. Choudhary, Darshana Poddar, Piyush Poddar & Amrita Sinha, Advocates For the Respondents: M/s Deepak Roshan, Rupa Kumari. Reportable ------ Dated 2nd November, 2012 Heard learned counsel for the parties. 2. Following question has been referred to this Court by the Income Tax Appellate Tribunal, Patna Bench, Patna vide order dated 29th February, 2000: “Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the assessee was liable for interest u/s 139(8)/217 for the assessment year 1988-89 and interest u/s 234A & 234B for the assessment year 1989-90 upto 26.3.91 the due date when the return was filed without giving credit of the amount retained by the department u/s 132(5) for meeting future tax liability which was seized on 7.7.1989?” 3. The brief facts of the case are that in the course of search under Section 132 B of the Income Tax Act, 1961 on 6th July, 1989 a sum of Rs. 11,95,660 was seized from - 2- the petitioner. Out of this amount as per Sub-clause (i) (ii) (iia) and (iii) of sub-section (5) of Section 132 (as was in enforce) the Assessing Officer provisionally determined the liability of tax and retained Rs. 6.44,881 and released rest of the amount. Final assessment was made by the Assessing Officer creating liability against the assessee and imposed interest under Section 139(8) and 217 for the assessment year 1988-89 and under Section 234A and 234B for the assessment year 1989-90. In the appeal preferred by the assessee, the C.I.T.(Appeals) held in order dated 27.7.1992 that the department since had money with it from 6.7.1989, therefore, that money is required to be adjusted against the assessed liability from the date the money was seized and, therefore, from that date (7.7.1989) the assessee was not required to pay the interest. The finding of this appellate order dated 27.7.1992 was reversed by the Income Tax Appellate Tribunal in its order dated 18.6.1997 on appeal preferred by the Revenue. Therefore, an application was submitted by the assessee for referring the question of interest liability to the High Court, upon which, the Tribunal has referred the above question for consideration of this Court. 4. Learned senior counsel, Sri Binod Poddar, for the assessee submitted that the money was seized in search operation under Section 132 of the Act of 1961 and was retained by the Revenue obviously for tax liability of the assessee and not for any other purpose, therefore, on - 3- the day on which the amount was seized by the revenue it was against the tax liability of the assessee though such liability may have been created subsequent to the seizure because of the reason that assessment could have been made after reasonable time only and not forthwith. It is submitted that by no stretch of imagination, it can be said that said amount was kept by the Revenue for other reason than the assessment against the liability of the petitioner for the tax claimed by the revenue. It is also submitted that if the department keeps the money of anybody, which is not in accordance with law, in that situation also the department is liable to pay the interest. Learned counsel for the petitioner relied upon judgment of the Hon'ble Supreme Court delivered in the case of Sandvik Asia Ltd. Vs. Commissioner of Income-Tax reported in {2006} 280 ITR (SC); Commissioner of Income Tax Vs. Pandurang Dayaram Talmale reported in (2004) 135 Taxman 193(Bom.) and Commissioner of Income Tax Vs. K.K. Marketing (2005) 278 ITR 596 (Delhi); Satpal D. Agarwal HUF Vs. ACIT reported in (1998) 62 TTJ (Mumbai) 98 and Vipul D. Doshi Vs. ACIT reported in (2001) 118 Taxman 30 (Mum). 5. Learned counsel for the Revenue, Sri Deepak Roshan, submitted that the amount could have been adjusted only after passing of the assessment order and before that amount could not have been given any adjustment. - 4- 6. We considered the submissions of learned counsel for the parties and perused the facts of the case as well as relevant provisions of law. It appears from Section 132(5) that where any money is seized under sub-section(1) or sub-section(1A) of Section 132, the Income Tax Officer is required to give reasonable opportunity of hearing to the persons concerned and as per sub-clause(i) for estimating the undisclosed income in a summary manner to the best of his judgment on the basis of such materials as are available with him and is required to calculate tax on such income, as provided in sub-clause (ii) of sub-section(5) of Section 132 of Act and then determine the amount of interest payable as provided by sub-clause (iia) as well as penalty imposable under the Income Tax Act, as if the order had been the order of regular assessment and specifying the amount that will be required to satisfy any existing liability under the Income Tax Act. As per Section 132B (as was applicable at relevant time) the assets retained under sub- section(5) of Section 132 is required to be dealt with as Clauses (i) to (iii) and is required to be adjusted as per sub- section 4 of Section 132B. The assets/money retained under sub-section(5) of Section 132, as per-clause (ii) are required to be adjusted in discharge of the liabilities referred to in clause(i) of Section 132B and assessee shall be discharged of such liability to the extent of the money so applied. As per clause (iii) of sub-section (1) of Section 132B, even other assets other than the money retained by - 5- the Assessing Officer can be sold out and proceed can be discharged against the liabilities of the assessee. As per sub-section 4(a) of Section 132B, the Central Government is liable to pay simple interest at the rate of fifteen per cent per annum on the amount by which the aggregate of money retained under section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (iii) of sub-section (5) of that section exceeds the aggregate of the amounts required to meet the liabilities referred to in clause (i)of sub-section (1) of Section 132B. Therefore, the scheme of the Act clearly suggests that the money seized during the course of the search is retained by the Revenue for the liability of the assessee which may be determined finally by the assessment or re-assessment or by final order of assessment or re-assessment, the existing liability of a previous time is only quantified and not a creation of liability on the date of passing of the assessment order. Therefore, the retained amount also required to be given adjustment against the then liability of the assessee, which has been quantified subsequently by the order of assessment and re-assessment. This fact finds support of sub-section (4) of Section 132B, which for excess amount retained by the revenue, the Central Government shall pay the interest. 7. Consequently, the reference is answered and it is held that Tribunal was not justified in holding that the - 6- assessee was liable for interest u/s 139(8)/217 for the assessment year 1988-1989 and interest u/s 234A & 234B for the assessment year 1989-1990 up-to 26.3.91. The reference is answered accordingly. (Prakash Tatia, C J) (Jaya Roy , J) Alankar/- - 7- IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 6079 of 2012 Mongia Steel Ltd. ...... Petitioner Vs. Union of India & Ors. ... Respondents ------ CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MRS. JUSTICE JAYA ROY ---- For the Petitioner: Mr Sumeet Gadodia For the Respondents: M/s Deepak Roshan, Rupa Kumari. ------ Dated 2nd November, 2012 Learned counsel for the Petitioner wants to withdraw this writ petition in view of the reason that petitioner want to file fresh writ petition raising some more points. Permission is granted. The writ petition is dismissed with above liberty. (Prakash Tatia, C J) (Jaya Roy , J) Alankar/- - 8- - 9- "