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REPORTABLE   

IN THE SUPREME COURT OF INDIA

  CIVIL APPELLATE JURISDICTION              

                 CIVIL APPEAL NO. 10601 OF 2013

[ARISING OUT OF S.L.P. (C) NO. 20381 OF 2012]             

   CHIRONJILAL SHARMA HUF ...   APPELLANT(s)                         Versus

UNION OF INDIA AND  OTHERS ...   RESPONDENT(s)

J U D G M E N T

R.M. LODHA,J.  

Leave granted.

2. The  brief  facts  necessary  for  consideration  

of the issue raised in the appeal are these: In the  

search  conducted  in  the  house  of  the  appellant  on  

31.1.1990,  a  cash  amount  of  Rs.  2,35,000/-  was  

recovered.   On  31.5.1990,  an  order  under  Section  

132(5) of the Income Tax Act, 1961 (for short “the  

Act”)  came  to  be  passed.   The  Assessing  Officer  

calculated the tax liability and the cash seized in  

the  search  from  the  appellant's  house  was  

appropriated.  However, the order of the  Assessing

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Officer  was  finally  set-aside  by  the  Income  Tax  

Appellate  Tribunal  (for  short  “the  Tribunal”)  on  

20.2.2004.   The  revenue  accepted  the  order  of  the  

Tribunal.   Consequently,  the  appellant  has  been  

refunded  the  amount  of  Rs.  2,35,000/-  along  with  

interest from 4.3.1994 (date of last of the regular  

assessments  by the Assessing Officer) until the date  

of refund.

3. The  appellant  (assessee)  claims  that  he  is  

entitled to interest under Section 132B(4)(b) of the  

Act which was holding the field  at the relevant time  

for the period from expiry of period of six month's  

from  the date of order under Section 132(5) to the  

date of  regular assessment order. In other words,  

the order under Section 132(5) of the Act having been  

passed on 31.5.1990, six months expired on 30.11.1990  

and the last of the regular assessments was done on  

4.3.1994, the assessee  claims interest under Section  

132B(4)(b) of the Act from 1.12.1990 to 4.3.1994.

4.  Section 132 of the Act deals with search and

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seizure.  Sub-section (5) thereof, which is relevant  

for  the  purposes  of  the  present  appeal,  reads  as  

under:

(5): Where any money, bullion, jewellery or  other valuable article or thing (hereafter  in this section and in sections 132A and  132B referred to as the assets) is seized  under sub-section (1) or sub-section (1A),  as  a  result  of  a  search  initiated  or  requisition  made  before  the  Ist  day  of  July, 1995, the Income-tax Officer, after  affording a reasonable opportunity to the  person  concerned  of  being  heard  and  making such enquiry as may be prescribed,  shall, within one hundred and twenty days  of  the  seizure,  make  an  order,  with  the  previous  approval  of  the  Joint  Commissioner)-

(i)   estimating  the  undisclosed  income  (including  the  income  from  the  undisclosed property) in a summary manner  to the best of his judgment on the basis  of such materials as are available with  him;

(ii) calculating the amount of tax on  the  income  so  estimated  in  accordance  with the provisions of the Income Income- Tax Act, 1922 (11 of 1922), or this Act;

(iia) determining the amount of interest  payable  and  the  amount  of  penalty  imposable  in  accordance  with  the  provisions of the Indian Income-Tax Act,  1922 (11 of 1922), or this Act, as if the  order  had  been  the  order  of  regular  assessment;

(iii) specifying the amount that will be  required  to  satisfy  any  existing  liability under this Act and any one or  more of the Acts specified in clause (a)  of  sub-section  (1)  of  section  230A  in  respect  of  which  such  person  is  in  default or is deemed to be in default,

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and  retain  in  his  custody  such  assets/or  part  thereof  as  are  in  his  opinion  sufficient to satisfy the aggregate of the  amounts referred to in clauses (ii), (iia)  and  (iii)  and  forthwith  release  the  remaining portion, if any, of the assets to  the  person  from  whose  custody  they  were  seized: Provided that if, after taking into account  the  materials  available  with  him,  the  Income Tax Officer is of the view that it  is  not  possible  to  ascertain  to  which  particular  previous  year  or  years  such  income or any part thereof relates, he may  calculate the tax on such income or part,  as the case may be, as if such income or  part  were  the  total  amount  chargeable  to  tax at the rates in force in the financial  year in which the assets were seized and  may also determine the interest or penalty,  if any, payable or imposable accordingly: Provided  further  that  where  a  person  has  paid or made satisfactory arrangements for  payment of all the amounts referred to in  clauses (ii), (iia) and (iii) or any part  thereof, the Income-Tax Officer may, with  the  previous  approval  of  the  Chief  Commissioner  or  Commissioner,  release  the  assets or such part thereof as he may deem  fit in the circumstances of the case.”     

5. Section  132B  deals  with  the  payment  of  

interest  on  delayed  assessment.   Omitting  the  

unnecessary part, the relevant provisions of  Section  

132B(4)(a) and(b) of the Act read as under:

132B:  Application of retained assets........

(4)(a)  The  Central  Government  shall  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  3  of  sub- section  (5)  of  that  section  exceeds  the  aggregate of the amounts required to meet the

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liability referred to in clause (i)  of sub-- section (1) of this section.

(b) Such  interest  shall  run  from  the  date immediately following the expiry of the  period of six months  from  the  date of  the  order under sub-section 5 of section 132  to  the  date  of  the  regular  assessment  or  reassessment  referred  to  in  clause  (i)  of  sub-section (1) or, as the case may be, to  the date of last of such assessments or re- assessments.   

5. A  close  look  at  the  above  provisions  and,  

particularly, clause (b) of  Section 132B(4) of the  

Act  clearly shows that where the aggregate of the  

amounts retained under Section 132 of the Act exceeds  

the  amounts  required  to  meet  the  liability  under  

Section 132B(1)(i), the department is liable to pay  

simple  interest  at  the  rate  of  fifteen  percent  on  

expiry of six months from the date of the order under  

Section 132(5) of the Act to the date of the regular  

assessment  or  re-assessment  or  the  last  of  such  

assessments or reassessments,  as the case may be.  It  

is true that in the regular assessment done by  the  

Assessing Officer, the tax liability for the relevant  

period was found to be higher and, accordingly, the

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seized  cash  under  Section  132  of  the  Act  was  

appropriated against the assessee's tax liability but  

the  fact  of  the  matter  is  that  the  order  of  the  

Assessing  Officer  was  over-turned  by  the  Tribunal  

finally  on  20.2.2004.   As  a  matter  of  fact,  the  

interest  for  the  post  assessment  period  i.e.  from  

4.3.1994 until refund on the excess amount has already  

been  paid  by  the  department  to  the  assessee.  The  

department  denied  the  payment  of  interest  to  the  

assessee under Section 132B(4)(b), according to Mr.  

Arijit Prasad,  learned counsel for the revenue on the  

ground that the refund  of excess amount is governed  

by  Section 240 of the Act and  Section 132B(4)(b) of  

the Act has no application.  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

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and the later deals with post assessment period as per  

the order in appeal.     

7. The view of the department is not right on the  

plain reading of  Section 132B(4)(b) of the Act as  

indicated above.

8. We,  accordingly,  allow  the  appeal  and  set-

aside the impugned order and hold that the appellant  

is entitled to the  simple  interest  at  the rate of  

fifteen percent per annum under Section 132B(4)(b) of  

the Act from 1.12.1990 to 4.3.1994.

9. The  revenue  shall  calculate  the  interest  

payable to the assessee as above and pay the same to  

the appellant (assessee) within two months from today.  

No costs.

                ............................J.                             (R.M. LODHA)

       ............................J.                    (MADAN B. LOKUR)

...........................J. (KURIAN JOSEPH)

  NEW DELHI;    NOVEMBER 26, 2013.