Search and Seizure – Section 132B(4)(b) as it stood dealt with pre-assessment period and there is no conflict between this provisions and section 240 or 244A which deals with post-assessment period after the appeal – Assessee is entitled to interest for the period from expiry of period of six months from the date of the order u/s. 132(5) to the date of the regular assessment order in respect of amounts seized and appropriated towards tax but which became refundable as a result of appellate orde<

In the search conducted in the house of the appellant on 31st January, 1990, a cash amount of Rs. 2,35,000 was recovered. On 31st May, 1990, an order u/s. 132(5) came to be passed. The Assessing Officer calculated the tax liability and cash seized from appellant’s house was appropriated. However, the order of the Assessing officer was finally set aside by the Tribunal on 20th February, 2004. The Revenue accepted the order of the Tribunal. Consequently, the appellant was refunded the amount of Rs. 2,35,000 along with interest from 4th March, 1994 (date of last of the regular assessments by the Assessing Officer) until the date of refund.

The Appellant (assessee) claimed that he was entitled to interest u/s. 132B(4)(b) of the Act which was holding the field at the relevant time for the period from expiry of period of six months from the date of order u/s. 132(5) to the date of regular assessment order. In other words, the order u/s. 132(5) of the Act having been passed on 31st May, 1990, six months expired on 30th November, 1990, and the last of the regular assessment was done on 4th March, 1994, the assessee claimed interest u/s. 132B(4)(b) of the Act from 1st December, 1990 to 4th March, 1994.

The Supreme Court observed that close look at the provisions of section 132(5) and 132B, and, particularly, clause (b) of u/s. 132B(4) of the Act showed that where the aggregate of the amounts retained u/s. 132 of the Act exceeded the amounts required to meet the liability u/s. 132B(1)(i), the Department is liable to pay simple interest at the rate of 15% on expiry of six months from the date of the order u/s. 132(5) of the Act to the date of the regular assessment or reassessment or the last of such assessments or reassessments, as the case may be. The Supreme Court noted that though in the regular assessment done by the Assessing Officer, the tax liability for the relevant period was found to be higher and, accordingly, the seized cash u/s. 132 of the Act was appropriated against the assessee’s tax liability but the order of the Assessing Officer was overturned by Tribunal finally on 20th February, 2004 and in fact, the interest for the post-assessment period, i.e., from 4th March, 1994, until refund on the excess amount was paid by the Department to the assessee. The Department denied the payment of interest to the assessee u/s. 132B(4)(b) on the ground that the refund of excess amount was governed by section 240 of the Act and section 132B(4)(b) had no application. According to the Supreme Court, however, section 132B(4)(b) dealt with pre-assessment period and there was no conflict between this provision and section 240 or for the matter section 244A. The former dealt with pre-assessment period in the matters of search and seizure and the latter deals with post-assessment period as per the order in appeal.

The Supreme Court held that the view of the Department was not right on the plain reading of section 132B(4)(b) of the Act as indicated above.

The Supreme Court, accordingly, allowed the appeal and set-aside the impugned order holding that the appellant was entitled to the simple interest at the rate of 15% p.a. u/s. 132B(4)(b) of the Act from 1st December, 1990 to 4th March, 1994.