Cash seized in a search was appropriated against a tax liability that the Tribunal later knocked out. The Department has paid me interest from the date of the assessment to the date of refund. Am I entitled to anything for the years before the assessment?
Yes. The Supreme Court held that section 132B(4) governs the pre-assessment period in search and seizure matters while sections 240 and 244A govern the post-assessment period as per the order in appeal, and that there is no conflict between them — so interest for the pre-assessment period under section 132B(4) is payable in addition to, and not in substitution for, the interest already paid on the refund. On the provision as it then stood the assessee was held entitled to simple interest at 15 per cent per annum from the day after six months from the section 132(5) order to the date of the last regular assessment.
Decided by the Supreme Court (R.M. Lodha J, Madan B. Lokur J and Kurian Joseph J) on 2013-11-26, reported as Civil Appeal No. 10601 of 2013, arising out of S.L.P. (C) No. 20381 of 2012 (Supreme Court of India). It bears on section 132B, section 132B(4), section 132(5), section 240, section 244A of the Income Tax Act 1961, in Refunds, Interest & Condonation, Search, Survey & Block Assessment and How Tax Law Is Read matters.
The value of this decision is the principle that the two interest regimes occupy different periods and do not exclude each other, and that principle survives the rewriting of section 132B. It is the answer to the standard departmental line that refund of seized money is governed by section 240 and that section 132B has no application. The reader must, however, be careful about the machinery, because the provision the Supreme Court construed no longer exists in that form. The case arose from a search of 31 January 1990 and turned on section 132(5), which required a summary order within 120 days of seizure, and on section 132B(4)(b) as it then read, which ran interest at 15 per cent from the expiry of six months from that order. Section 132(5) applies only to searches initiated or requisitions made before 1 July 1995 and the section 132B in force today was substituted by Act 20 of 2002. Under the present section 132B(4), interest runs at one-half per cent for every month or part of a month from the day after the expiry of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or requisition under section 132A was executed, to the date of completion of the assessment under section 153A or under Chapter XIV-B. So the structure the Court described is intact — a pre-assessment interest that is distinct from refund interest — but the trigger date and the rate must be taken from the current text, and a claim computed on 15 per cent from six months after a section 132(5) order will be wrong for any modern search.
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A search was conducted at the appellant's house on 31 January 1990 and cash of Rs 2,35,000 was recovered. An order under section 132(5) was passed on 31 May 1990. The Assessing Officer calculated the tax liability and the seized cash was appropriated against it. The order of the Assessing Officer was finally set aside by the Income Tax Appellate Tribunal on 20 February 2004 and the Revenue accepted that order. The appellant was consequently refunded Rs 2,35,000 with interest from 4 March 1994, the date of the last of the regular assessments, until the date of refund. The appellant claimed a further entitlement to interest under section 132B(4)(b) as it then stood, for the period from the expiry of six months from the section 132(5) order to the date of the regular assessment, that is from 1 December 1990 to 4 March 1994. The Department denied it, counsel for the Revenue contending that refund of the excess amount is governed by section 240 and that section 132B(4)(b) has no application.
The appeal was allowed and the impugned order set aside. The appellant was held entitled to simple interest at 15 per cent per annum under section 132B(4)(b) from 1 December 1990 to 4 March 1994, and the Revenue was directed to calculate and pay it within two months. No costs.
The Court set out section 132(5) and section 132B(4)(a) and (b) as they then stood and read clause (b) plainly: where the aggregate of the amounts retained under section 132 exceeds the amounts required to meet the liability under section 132B(1)(i), the Department is liable to pay simple interest at 15 per cent from the expiry of six months from the date of the section 132(5) order to the date of the regular assessment or reassessment, or the last of them. It accepted that in the regular assessment the tax liability had been found to be higher and the seized cash appropriated accordingly, but held that the fact of the matter was that the Assessing Officer's order was overturned by the Tribunal on 20 February 2004, so the retention had in truth exceeded the liability. As to the Revenue's argument that section 240 covered the field, the Court held that section 132B(4)(b) deals with the pre-assessment period and that there is no conflict between it and section 240 or section 244A, the former dealing with the pre-assessment period in matters of search and seizure and the latter with the post-assessment period as per the order in appeal. The Department's view was therefore not right on the plain reading of the provision.
But, in our view, Section 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and Section 240 or for that matter 244(A). The former deals with pre-assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal.
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Handle my notice → Ask a CA on WhatsAppYes. The Supreme Court held that section 132B(4) governs the pre-assessment period in search and seizure matters while sections 240 and 244A govern the post-assessment period as per the order in appeal, and that there is no conflict between them — so interest for the pre-assessment period under section 132B(4) is payable in addition to, and not in substitution for, the interest already paid on the refund. On the provision as it then stood the assessee was held entitled to simple interest at 15 per cent per annum from the day after six months from the section 132(5) order to the date of the last regular assessment. This was decided by the Supreme Court (R.M. Lodha J, Madan B. Lokur J and Kurian Joseph J) and bears on section 132B, section 132B(4), section 132(5), section 240, section 244A of the Income Tax Act 1961. It is reported as Civil Appeal No. 10601 of 2013, arising out of S.L.P. (C) No. 20381 of 2012 (Supreme Court of India). The value of this decision is the principle that the two interest regimes occupy different periods and do not exclude each other, and that principle survives the rewriting of section 132B. It is the answer to the standard departmental line that refund of seized money is governed by section 240 and that section 132B has no application. The reader must, however, be careful about the machinery, because the provision the Supreme Court construed no longer exists in that form. The case arose from a search of 31 January 1990 and turned on section 132(5), which required a summary order within 120 days of seizure, and on section 132B(4)(b) as it then read, which ran interest at 15 per cent from the expiry of six months from that order. Section 132(5) applies only to searches initiated or requisitions made before 1 July 1995 and the section 132B in force today was substituted by Act 20 of 2002. Under the present section 132B(4), interest runs at one-half per cent for every month or part of a month from the day after the expiry of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or requisition under section 132A was executed, to the date of completion of the assessment under section 153A or under Chapter XIV-B. So the structure the Court described is intact — a pre-assessment interest that is distinct from refund interest — but the trigger date and the rate must be taken from the current text, and a claim computed on 15 per cent from six months after a section 132(5) order will be wrong for any modern search. If it applies to you, the first step is this: Separate the two periods before you compute anything: the pre-assessment period governed by section 132B(4) and the post-assessment period governed by sections 240 and 244A. The Department's payment of interest for the second does not answer a claim for the first.
A search was conducted at the appellant's house on 31 January 1990 and cash of Rs 2,35,000 was recovered. An order under section 132(5) was passed on 31 May 1990. The Assessing Officer calculated the tax liability and the seized cash was appropriated against it. The order of the Assessing Officer was finally set aside by the Income Tax Appellate Tribunal on 20 February 2004 and the Revenue accepted that order. The appellant was consequently refunded Rs 2,35,000 with interest from 4 March 1994, the date of the last of the regular assessments, until the date of refund. The appellant claimed a further entitlement to interest under section 132B(4)(b) as it then stood, for the period from the expiry of six months from the section 132(5) order to the date of the regular assessment, that is from 1 December 1990 to 4 March 1994. The Department denied it, counsel for the Revenue contending that refund of the excess amount is governed by section 240 and that section 132B(4)(b) has no application. The matter was decided on 2013-11-26 by the Supreme Court (R.M. Lodha J, Madan B. Lokur J and Kurian Joseph J). On those facts the Supreme Court held as follows. The appeal was allowed and the impugned order set aside. The appellant was held entitled to simple interest at 15 per cent per annum under section 132B(4)(b) from 1 December 1990 to 4 March 1994, and the Revenue was directed to calculate and pay it within two months. No costs.
The Court set out section 132(5) and section 132B(4)(a) and (b) as they then stood and read clause (b) plainly: where the aggregate of the amounts retained under section 132 exceeds the amounts required to meet the liability under section 132B(1)(i), the Department is liable to pay simple interest at 15 per cent from the expiry of six months from the date of the section 132(5) order to the date of the regular assessment or reassessment, or the last of them. It accepted that in the regular assessment the tax liability had been found to be higher and the seized cash appropriated accordingly, but held that the fact of the matter was that the Assessing Officer's order was overturned by the Tribunal on 20 February 2004, so the retention had in truth exceeded the liability. As to the Revenue's argument that section 240 covered the field, the Court held that section 132B(4)(b) deals with the pre-assessment period and that there is no conflict between it and section 240 or section 244A, the former dealing with the pre-assessment period in matters of search and seizure and the latter with the post-assessment period as per the order in appeal. The Department's view was therefore not right on the plain reading of the provision. In the words reproduced by the source cited on this page: "But, in our view, Section 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and Section 240 or for that matter 244(A). The former deals with pre-assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal."
It was decided by the Supreme Court on 2013-11-26 and is reported as Civil Appeal No. 10601 of 2013, arising out of S.L.P. (C) No. 20381 of 2012 (Supreme Court of India). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 132B, section 132B(4), section 132(5), section 240, section 244A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the impugned order set aside. The appellant was held entitled to simple interest at 15 per cent per annum under section 132B(4)(b) from 1 December 1990 to 4 March 1994, and the Revenue was directed to calculate and pay it within two months. No costs. It arises in Refunds, Interest & Condonation, Search, Survey & Block Assessment and How Tax Law Is Read matters, on section 132B, section 132B(4), section 132(5), section 240, section 244A of the Income Tax Act 1961, and was decided by R.M. Lodha J, Madan B. Lokur J and Kurian Joseph J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For a search or requisition of the present era, take the start date as the day after 120 days from the date the last authorisation under section 132 or section 132A was executed, and the end date as the date of completion of the assessment under section 153A or Chapter XIV-B, and apply one-half per cent per month or part of a month — not the 15 per cent and not the six-month rule the reported case applies. Compute the excess to which the interest attaches: it is the amount by which the aggregate money seized or requisitioned, reduced by any money released under the first proviso to section 132B(1)(i), together with the proceeds of assets sold towards existing liability, exceeds the liabilities referred to in section 132B(1)(i). Where the appropriation of seized cash was later set aside in appeal, say so expressly — the Court treated the Tribunal's reversal as decisive of the fact that the retained sum exceeded the liability, notwithstanding that the Assessing Officer had at the time computed a higher liability. Meet the section 240 argument head on with the Court's own formulation that the former deals with the pre-assessment period in matters of search and seizure and the latter with the post-assessment period as per the order in appeal.
Superseded by amendment. The principle — that section 132B(4) interest for the pre-assessment period is distinct from and additional to interest on refund under sections 240 and 244A — was not doubted and no later decision doubting it was searched for; a later-treatment check was not carried out. The label is used for the machinery, which has changed. Section 132(5), on which the six-month starting point in this case depended, applies only where the search was initiated or the requisition made before 1 July 1995, and section 132B was substituted by Act 20 of 2002. Under the section as it now stands, sub-section (4)(a) fixes simple interest at one-half per cent for every month or part of a month, and sub-section (4)(b) runs it from the day after the expiry of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or requisition under section 132A was executed to the date of completion of the assessment under section 153A or Chapter XIV-B. Do not apply the rate or the starting point stated in this judgment to a current search. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The report as published carries two paragraphs numbered 5; the numbering runs 2, 3, 4, 5, 5, 6, 7, 8, 9. The duplication is at 5 — the second of them extracts section 132B(4)(a) and (b) — and the Court's analysis of the provision, from which the quotation is taken, is paragraph 6. The extract of section 132B(4)(a) reproduced in the judgment refers to 'the existing liability referred to in clause 3 of sub-section (5) of that section' and to 'the Income Income-Tax Act, 1922', both of which appear to be errors of transcription in the report rather than the statute. The present text of section 132B, including the two provisos to clause (i) of sub-section (1) and the whole of sub-section (4), was read separately from the indiankanoon section page in order to state the amendment position; the case itself was decided on the pre-2002 text. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the impugned order set aside. The appellant was held entitled to simple interest at 15 per cent per annum under section 132B(4)(b) from 1 December 1990 to 4 March 1994, and the Revenue was directed to calculate and pay it within two months. No costs.
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