Interest on refunded seized cash under Section 132B may include compensatory interest where assessment is not undertaken.

Section 132B of the Income-tax Act provides for simple interest on refunded seized cash after expiry of 120 days from the last authorisation, and the interest runs until completion of assessment, reassessment, or recomputation. Where no assessment is undertaken, the objection that no interest is payable is not sustained. Pendency of a vigilance reference does not, by itself, justify withholding interest on the refunded amount. The text also notes that, where refund is delayed in the absence of assessment, extraordinary jurisdiction under Article 226 may be invoked to grant compensatory interest, including further interest for non-payment within the time granted.

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Issues: Whether interest was payable on the refunded seized cash under Section 132B of the Income-tax Act, 1961, and whether the Court could award compensatory interest under Article 226 of the Constitution of India despite the absence of assessment proceedings and the pendency of vigilance reference proceedings.

Analysis: The seized cash of Rs. 9,00,000 was returned to the petitioner, but no interest was paid. Section 132B(4)(a) provides for simple interest at the rate of one-half per cent for every month or part of a month, and Section 132B(4)(b) stipulates that such interest runs from the expiry of 120 days from the execution of the last authorisation under Section 132 or requisition under Section 132A until completion of assessment, reassessment, or recomputation. As no assessment was undertaken, the statutory objection that no interest was payable was rejected. The pendency of a reference to vigilance authorities was held not to justify further withholding of interest. The Court also held that, where refund is delayed because no assessment is made, its extraordinary jurisdiction under Article 226 can be invoked to award compensatory interest.

Conclusion: Interest at the rate of one-half per cent per month, equivalent to 6% per annum, was held payable on the refunded amount from the expiry of 120 days from 01.05.2019 until 05.06.2026, with further interest at 12% per annum in case of non-payment within the time granted.

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