2009 (11) TMI 83 - AT - Income Tax

Tribunal rules in favor of assessee on interest appeal under IT Act

The Tribunal allowed the appeal regarding interest under s. 132B(4)(a) of the IT Act, 1961, ruling in favor of the assessee. It held that interest should ... Search And Seizure Issues involved: Appeal against order of CIT(A) regarding interest under s. 132B(4)(a) and s. 244A(1)(b) of the IT Act, 1961.Issue 1: Interest under s. 132B(4)(a)The assessee's income was assessed under s. 158BC resulting in a demand, later reduced after appeal to CIT(A). The assessee claimed interest under s. 132B(4)(a) which was denied by AO and upheld by CIT(A). The dispute centered around the interpretation of the term 'existing liability' under s. 132B(1)(i) and whether it includes the liability after giving effect to the appellate order. The assessee argued for a broader interpretation based on legal precedents, while the Revenue insisted on a strict reading of the provision.Issue 2: Interpretation of s. 132B provisionsThe Tribunal analyzed the provisions of s. 132B, emphasizing the recovery of liabilities from seized assets and the payment of interest by the Central Government on excess seized money beyond the existing tax liability. The Tribunal highlighted the importance of correctly interpreting the phrase 'the amount of the liability determined on completion of assessment' in s. 132B(1)(i) and the conditions for granting interest under s. 132B(4)(a) and (b).Judgment:The Tribunal held that the Revenue's narrow interpretation of 'existing liability' was incorrect. It ruled in favor of the assessee, stating that interest under s. 132B(4)(a) should be granted as the seized cash exceeded the lawful tax liability. The Tribunal cited legal principles and precedents to support its decision, emphasizing the need to compensate the assessee for the excess cash retained without legal liability. The appeal on interest under s. 132B(4)(a) was allowed, and the AO was directed to compute the interest payable to the assessee. The appeal on interest under s. 244A(1)(b) was not pressed and dismissed accordingly.