Timely cheque tender and departmental acceptance bar interest recovery absent dishonour or notice of non-encashment.

Where a tax assessee tenders a cheque within time and the department accepts it, interest cannot be recovered for alleged non-realisation unless dishonour or non-encashment is communicated and the assessee is shown to be at fault. The departmental procedure under Rules 48 and 49 required proper handling of the cheque and notice of its result; on the record, no dishonour was shown and no intimation was given to the assessee. The same factual position applied to the subsequent assessment year, so the interest demand could not stand and the recovery certificate was set aside.

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Issues: Whether interest could be recovered on tax amounts tendered by cheque within time when the department accepted the cheque, there was no intimation that it was dishonoured, and the assessee was not at fault in the alleged non-encashment.

Analysis: The petitioner had tendered the cheque within time and the department accepted receipt of the cheque and Form IV. The record did not show dishonour of the cheque or any communication to the assessee that the cheque had not been encashed. In such circumstances, the assessee could not be faulted for non-payment, and the departmental procedure under Rules 48 and 49 required proper handling of the cheque and communication of its result. Since the same factual position existed for the subsequent assessment year, the same conclusion followed.

Conclusion: Interest was not recoverable from the assessee on the amounts covered by the timely tendered cheques.

Final Conclusion: The writ petition succeeded and the recovery of interest included in the impugned recovery certificate was set aside.

Ratio Decidendi: Where a tax assessee tenders a cheque within time and the department accepts it without showing dishonour or communicating non-encashment, interest cannot be fastened on the assessee for the alleged delay in realization.

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