Income-tax Officers not liable for damages; banks to pay interest on withheld deposits post-maturity.

The court held that Income-tax Officers were not liable for damages as they acted within their statutory powers to investigate the source of deposits, ruling their actions as legally justifiable. However, the banks were directed to pay interest on the fixed deposit amounts withheld post-maturity due to the officers' prohibitory orders, in accordance with the contract rate until actual payment, as per fluctuations directed by the Reserve Bank. The appeal was partially allowed, setting aside the appellate court's judgment and instructing the banks to pay the accrued interest to the appellant, along with costs.

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Issues:
1. Claim of damages against Income-tax Officers.
2. Claim of interest from banks from the date of maturity till payment.

Analysis:
1. Claim of damages against Income-tax Officers:
The appellant filed a suit seeking damages of Rs. 50,000 from defendants, including Income-tax Officers, for withholding his fixed deposit amounts and causing inconvenience. The Income-tax Officers had issued prohibitory orders to banks, restraining payment to the plaintiff, suspecting the deposits as escaped income. The appellant alleged malicious and arbitrary actions by the Income-tax Officers, causing harassment and loss. However, the court held that the officers acted within their jurisdiction under the Income-tax Act to investigate the source of deposits. The delay in proceedings and actions taken were deemed legally justifiable. The court ruled that the officers cannot be held liable for damages as they were acting in a quasi-judicial capacity and within their statutory powers.

2. Claim of interest from banks from the date of maturity till payment:
The appellant also claimed interest on the fixed deposit amounts withheld by the banks due to the prohibitory orders issued by the Income-tax Officers. The court noted that the banks had withheld the amounts beyond the maturity date and were obligated to pay interest at the contract rate until actual payment. It was observed that the banks had paid interest from the date of deposit until maturity but failed to pay interest post-maturity due to the prohibitory orders. The court directed Canara Bank, Tamil Nadu Transport Development Financial Corporation Ltd., and Karnataka Bank to pay interest on the fixed deposit amounts from the date of maturity till actual payment, in accordance with the contract rate and subject to fluctuations directed by the Reserve Bank. The court partially allowed the appeal, setting aside the appellate court's judgment and instructing the banks to pay the accrued interest to the appellant, along with costs.

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