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Judgment
P. Jyothimani, J.—The writ petition is directed against the order of the first respondent.Settlement Commission of IT & WT, dt. 25th Oct., 2002 insofar as itrelates to the portion of the order rejecting the claim of the petitioner forpayment of interest on the shares retained beyond the period of sixmonths from the date of order under s. 132(5) of the IT Act and fordirection against the first respondent to allow the claim of the petitionerfor such interest. The petitioner is a member of the Madras Stock Exchange, carrying onthe business as a share broker in the trade name, "Viswanath Anil Kedia"in his individual capacity. As a stock broker, he buys and sells shares in the stock exchange on behalf of his clients apart from selling andpurchasing in his own name. While carrying on the purchase and sale ofshares in his name, he is known as "jobber" who buys shares for lowerprice and sells at higher price and makes his profit. The shares held byhim accordingly form part of the working capital of his business withoutretaining liquid cash. According to him, in the nature of business of astock broker, such shares are equivalent to cash since the amounts arerealized within 10 days of sale.
(a) There was a search and seizure conducted by the IT Department inthe office and residential premises of the petitioner on 15th July, 1992,and during the course of the said operation, cash, shares and jewellerywere seized from the petitioner and his family members and also sharesand debentures in the form of documents kept on behalf of the clientswere also seized. The market value of the shares seized from theresidential premises of the petitioner on the date of seizure amounts toRs. 107 lakhs and the Value of shares seized from the office amounts toRs. 36 lakhs and in addition to that, certain jewellery and cash were alsoseized from the residential house.
(b) As per the provisions of s. 132 of the IT Act, when the Departmententers into residential and office premises of the assessee and seizes thebooks of account, money, jewellery, etc., the ITO, within 120 days, aftergiving opportunity has to make an order estimating the undisclosedincome in a summary procedure and calculate the tax liability. He willalso determine the interest and penalty, if imposable and thereafterretain the custody of the assets. The assets thus retained are dealt withunder the provisions of s. 132B which provides that such retained assetsshall be used for existing tax liability of the assessee and also the liabilityarising out of such search or seizure and the remaining assets afteradjustment of the above said liability are to be returned forthwith to theperson from whom they were seized. Under s. 132B(4)(a) of the IT Act, it is the duty of the Central Government to pay simple interest at the rateof 15 per cent per annum on the amount by which the aggregate ofmoney retained under s. 132, etc.
(c) After the seizure was effected, it is stated that the petitioner and hisfamily members made applications on 15th July, 2002, seeking release ofthe seized assets which were accounted in the books of account of thepetitioner as well as his family members. The order under s. 132(5) of theIT Act retaining the custody was passed on 12th Nov., 1995, estimatingthe income tax and penalty payable by the petitioner at Rs. 1.93 croresand, therefore, the assets and shares having market value of Rs. 1.46crores were retained under the said provision. The open documentsseized from the office premises of the petitioner were released afterrepresentation on 30th Sept., 1992, on the petitioner''s father and motherproviding their house property as security for a period of six months.
(d) On 23rd Nov., 1992, the petitioner, on his behalf and on behalf of hisfamily members, filed application under s. 132(11) of the IT Act before theCIT raising objections to the orders passed under s. 132(5) of the IT Actdt. 12th Nov., 1992. The objections were that the seized shares were dulyaccounted in the books of account and being a stock broker, the sharesare the working capital, of the business and the market value of theshares fluctuates and, therefore, the shares seized caused lot ofdifficulties since the petitioner was unable to carry on his business. Afurther representation was filed on 2nd Feb., 1993, before the CIT forrelease of the seized shares.
(e) According to the petitioner, the shares are equivalent to money for thepurpose of business. However, the FT Department did not release theshares, while disposing of the application under s. 132(5) of the IT Act. Itwas after prolonged representations, the Department having realized thatthe retention of the said assets were needed for adjusting any possibletax liability, released the shares on various dates, viz., 16th March, 1993,3rd June, 1993, 4th Feb., 1994, 10th Feb., 1995, 27th Nov., 1996, and24th Jan., 1997. The market values of the shares of the petitioner andhis family members represented Rs. 49,50,732, Rs. 24,16,174, Rs.5,53,455, Rs. 1,22,200, Rs. 2,15,000 and Rs. 25,08,439 totalling a sumof Rs. 1,07,66,000.
(f) On 5th Sept., 1994, the petitioner and his brothers filed an applicationbefore the Settlement Commission for settlement of cases relating to theasst. yrs. 1991-92, 1992-93 and 1993-94. The Settlement Commissionpassed an order on 23rd Jan., 1995, under s. 245D(1) of the IT Act,thereby getting exclusive jurisdiction on the cases pending before it withpowers to be exercised on all matters pending with the IT authorities. Thepetitioner, on receipt of the order passed under s. 245D(1) of the IT Act,made application on 13th March, 1995, seeking release of the seizedshares.
(g) The contention of the petitioner before the Commission was that theterm, "money" contemplated under s. 132B(4) of the IT Act also includes"shares" seized on the facts and circumstances of the case and, therefore,the expression cannot be restricted to cash alone, since the intention ofthe legislators could be gathered to the effect that it does not contemplatecash alone which would be a narrow and restricted meaning. Ignoringthe said contention, the first respondent passed the impugned order byconstruing the term, "money" only to the restricted meaning of cash andconsequently, refused to grant interest to the petitioner under s. 132B(4)in respect of the shares seized.
(h) It is against the said order, the writ petition is filed on variousgrounds including that the term, "money" under s. 132B of the IT Act hasto be construed broadly to mean not only cash but also all other securities including shares which are capable of being valued in terms ofmoney, especially when the term "money" has not been defined under the Act, that as per s. 132B(4), the term, "money" includes not only cash, butalso shares by referring to various definitions of the term "money" definedin the Corpus Juris Secundum, that in view of the undisputed facts andsettled legal position that the seized shares represented working capitalof the business of the petitioner which would be converted into cashwithin a week''s time, the seized shares which were duly accounted for inthe accounts, would not represent undisclosed income; that the seizedshares were released without adjusting any tax liability of the petitionerand that the specific request of the petitioner was to release the shares inorder to use the sale proceeds for payment of tax.
The respondents have not filed any counter-affidavit.
It is the contention of the learned counsel for the petitioner thatinasmuch as the shares seized formed part of the working capital of thebusiness of the petitioner as a jobber, and ultimately, the IT authoritiesreturned the shares after coming to a conclusion that the retention ofshares is not needed for adjustment against the possible tax liability and,therefore, it should be treated as "money" and under s. 132B(4) of the ITAct the Central Government is bound to pay interest at 15 per cent perannum. In the absence of the definition of the word "money" under the ITAct by referring to the term under the Corpus Juris Secundum, it is hissubmission that the true meaning of "money" should be construed takinginto account the context and, therefore, the word has got more than onemeaning to be interpreted and in the context of the present case,according to the learned counsel, the term, "money" cannot be restrictedto the word "cash".
On the other hand, Mr. T. Narayanasamy, learned counsel for therespondents would submit that under the taxation law, one has toconstrue the terms of the provisions of the Act strictly as per the termsand there is no scope for going beyond the words of the statute.According to the learned counsel, when s. 132B(4) of the IT Act makes itabundantly clear that the amount of interest payable by the CentralGovernment is only in respect of the amount of money retained under s. 132 of the IT Act, there is no scope for extending the meaning of the term"money" to the shares seized and retained by the IT Department whenthe search was made.
I have heard the learned counsel for the petitioner and the learnedcounsel for the respondents and given my anxious thoughts to the issueinvolved in this case.
The simple point to be considered on the facts and circumstances ofthe present case is, as to whether the Central Government is liable to payinterest on the shares which were seized by the IT Department and retained under s. 132 of the IT Act which, of course, were subsequentlyreleased after a few years, without adjusting any possible tax liability.The fact that on application made by the petitioner on 5th Sept., 1994,the Settlement Commission passed orders on 23rd Jan., 1995, is not indispute. That order was passed on the application made by the petitionerunder s. 245C(1) which is as follows :
245C. (1) An assessee may, at any stage of a case relating to him, makean application in such form and in such manner as may be prescribed,and containing a full and true disclosure of his income which has notbeen disclosed before the AO, the manner in which such income hasbeen derived, the additional amount of income tax payable on suchincome and such other particulars as may be prescribed, to theSettlement Commission to have the case settled and any such applicationshall be disposed of in the manner hereinafter provided :
Provided that no such application shall be made unless-
(i) the additional amount of income tax payable on the income disclosedin the application exceeds three lakh rupees; and
(ii) such tax and the interest thereon, which would have been paid underthe provisions of this Act had the income disclosed in the applicationbeen declared in the return of income before the AO on the date ofapplication, has been paid on or before the date of making theapplication and the proof of such payment is attached with theapplication.
for the asst. yrs. 1991-92 to 1993-94. As per the requirements of s. 245D(1) of the Act, the Settlement Commission proceeded to enquire andin fact, the CIT reported that the application was suitable for settlement.Accordingly, the order was passed by the first respondent on 23rd Jan.,1995, with necessary direction to the CIT.
By that time, the search and seizure effected by the IT Departmentunder s. 132 of the Act was pending. Since the shares were seized fromthe petitioner on 15th July, 1992, and 16th July, 1992, to the value ofRs. 107 lakhs and odd, stated to be the shares dealt with by thepetitioner as a jobber, viz., share broker, who purchased shares for alesser price and sold the same for higher price, thereby earning profit.The said shares which were seized in July, 1992, were released onvarious dates as given by the petitioner in the form of the followingparticulars in the affidavit filed by him.
SI.
No
Date of release
Market value of shares of the petitioner
Market value of shares of family members of the petitioner
Total
1
16,3,1993
5,69,151
43,81,581
49,50,732
2
3-6-1993
2,34,695
21,81,479
24,16,174
3
4-2-1994
0
5,53,455
5,53,455
4
10-2-1995
0
1,22,200
1,22,200
5
27-11-1996
0
2,15,000
2,15,000
6
24-1-1997
1,62,062
23,46,377
25,08,439
Total
9,65,908
98,00,092
1,07,66,000
Admittedly, the release of shares were ultimately made by theDepartment without adjusting any possible tax liability and. therefore,the petitioner claims interest on the shares seized and subsequentlyreleased under s. 132B(4) of the IT Act. Since in the meantime, the firstrespondent was seized of the matter under s. 245C of the Act on theapplication made to the first respondent, which resulted in passing theimpugned order rejecting the claim of the petitioner for payment ofinterest on the ground that what was seized was only shares and itcan not be deemed to be an aggregate amount of money retained.
The provisions relating to search and seizure are referred to in s. 132 of the IT Act. Under s. 132(5) which was In existence at the time whenthe shares were seized since the said s. 132(5) along with s. 132(6) wasomitted by the Finance Act, 2002, w.e.f. 1st June, 2002 only, itcontemplated that when money, jewellery or other valuable articles wereseized as per s. 132(1) or (1A) of the Act based on the search effectedbefore 1st July, 1997, by the ITO, after giving reasonable opportunity tothe person concerned and within 120 days of the seizure, he must makean order with the approval of the Jt. CIT estimating the undisclosedincome in a summary manner, calculating the amount of tax on theincome estimated, apart from interest payable on the amount, andpenalty and also specifying the amount that is required to satisfy theexisting liability under the Act. The said s. 132(5), which stood as on thesaid date, is as follows :
(5) Where any money, bullion, jewellery or other valuable article orthing (hereafter in this section and in ss. 132A and 132B referred to asthe assets) is seized under sub-s. (1) or sub-s. (1A), as a result of asearch initiated or requisition made before the 1st July, 1995, the ITO,after affording a reasonable opportunity to the person concerned of beingheard and making such enquiry as may be prescribed, shall, within onehundred and twenty days of the seizure, make an order, with theprevious approval of the Jt. CIT,-
(i) estimating the undisclosed income (including the income from theundisclosed property) in a summary manner to the best of his judgmenton the basis of such materials as are available with him;
(ii) calculating the amount of tax on the Income so estimated inaccordance with the provisions of the Indian IT Act, 1922 (11 of 1922), orthis Act;
(11a) determining the amount of interest payable and the amount ofpenalty imposable in accordance with the provisions of the Indian IT Act,1922 (11 of 1922), or this Act, as if the order had been the order ofregular assessment;
(iii) specifying the amount that will be required to satisfy any existingliability under the Act and any one or more of the Acts specified in cl. (a)of sub-s. (1) of s. 230A in respect of which such person is in default or isdeemed to be in default, and retain in his custody such assets/or part thereof as are in hisopinion sufficient to satisfy the aggregate of the amounts referred to incls. (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 withhim, the ITO is of the view that it is not possible to ascertain to whichparticular 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, asif such income or part were the total income chargeable to tax at therates in force in the financial year In which the assets were seized andmay also determine the interest or penalty, if any, payable or imposableaccordingly :
Provided further that where a person has paid or made satisfactoryarrangements for payment of all the amounts referred to in cls. (ii), (iia)and (iii) or any part thereof, the ITO may, with the previous approval ofthe Chief CIT or CIT, release the assets or such part thereof as he maydeem fit in the circumstances of the case.
Sec. 132(6) of the Act, which stood as on that date, which is asfollows :
132.(6) The assets retained under sub-s. (5) may be dealt with inaccordance with the provisions of s. 132B.
enables to deal with the assets as per s. 132B of the Act. Under s. 132B(1)of the Act, the assets thus retained under s. 132(5) are to be applied for theamount of existing liability under the IT Act or the WT Act, theExpenditure-tax Act, the GT Act and the Interest-tax Act. Sec. 132B(3) contemplates that after dealing with the said seized assets for adjusting thetax stated under s. 132B(1) and after discharging such liability, any furtherassets remain, the same shall be forthwith returned to the person fromwhose custody the assets were seized. Sec. 132B(3) is as follows :
132B.(3) Any assets or proceeds thereof which remain after the liabilitiesreferred to in cl. (I) of sub-s. (1) are discharged shall be forthwith madeover or paid to the persons from whose custody the assets were seized.
The crucial section that is relevant for the purpose of this case is s. 132B(4) of the Act which is as follows :
132B. (4) (a) The Central Government shall pay simple interest at therate of six per cent pet annum on the amount by which the aggregateamount of money seized under s. 132 or requisitioned under s. 132A, asreduced by the amount of money, if any, released under the first provisoto cl. (i) of sub-s. (1), and of the proceeds, if any. of the assets soldtowards the discharge of the existing liability referred to in cl. (i) of sub-s.(1), exceeds the aggregate of the amount required to meet the liabilitiesreferred to in cl. (i) of sub-s. (1) of this section.
(b) Such interest shall run from the date immediately following the expiryof the period of one hundred and twenty days from the date on which thelast of the authorisations for search under s. 132 or requisition under s. 132A was executed to the date of completion of the assessment under s. 153A or under Chapter XIV-B.
The said provision imposes an obligation on the part of the CentralGovernment to pay simple interest in respect of retention of aggregateamount of money seized under s. 132 or as requisitioned under s. 132A,as reduced by the amount of money. Therefore, in respect of theobligation of the Government to pay simple interest in respect of delayedrelease under s. 132B(4)(a) of the Act, a bare reading of the said provisionmakes it clear that it relates to only money seized under s. 132 of the Actor requisitioned under s. 132A which is reduced into amount of money,which means that it relates to any assets which are reduced in terms ofmoney. Sec. 132(1)(c) which is as follows :
132.(1)(c) any person is in possession of any money, bullion, jewellery orother valuable article or thing and such money, bullion, jewellery or othervaluable article or thing represents either wholly or partly income orproperty (which has not been, or would not be, disclosed) for thepurposes of the Indian IT Act, 1922 (11 of 1922), or this Act (hereinafterin this section referred to as the undisclosed income or property),
only uses the word, money, bullion, jewellery or other valuable articles orthings. The authority contemplated can ultimately seize under s. 132(1)(c)(iii), any such books of account, other documents, money,bullion, jewellery or other valuable articles or things as a result of suchsearch. Likewise, s. 132A(1)(c) which is as follows :
132A.(1)(c) any assets represent either wholly or partly income orproperty which has not been, or would not have been, disclosed for thepurposes of the Indian IT Act, 1922 (11 of 1922), or this Act by anyperson from whose possession or control such assets have been takeninto custody by any officer or authority under any other law for the timebeing in force.
relates to the assets to fee handed over to the requisitioning officer havingpowers under s. 132A(3) which is as follows :
132A.(3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-ss. (4A)to (14) (both inclusive) of s. 132 and s. 132B shall, so far as may be,apply as if such books of account, other documents or assets had beenseized under sub-s, (1) of s. 132 by the requisitioning officer from thecustody of the person referred to in cl. (a) or cl. (b) or cl. (c), as the casemay be, of sub-s. (1) of this section and as if for the words ''theauthorised officer'' occurring in any of the aforesaid sub-ss. (4A) to (14),the words the requisitioning officer'' were substituted.
Therefore, while the powers given to the authorities under ss. 132(1) and 132A are wider relating to the seizure of money and other assets, s. 132B(4) (a) imposes an obligation on the Government to pay interest onlyin respect of those seized matters which are either money or beingreduced into the amount of money. The term "money" is not defined inthe IT Act. In respect of payment of advance tax under s. 234B of the Act,the assessee is liable to pay interest on the amount of tax. The word,"amount" used under the said provision has to be necessarily construedto mean "cash". Such cash seized under s. 132(1) of the Act, if notutilized even for payment of advance tax, which falls due after seizure ofcash, also would come within the term "money" for the purpose ofenabling the assessee to claim interest under s. 132B(4)(a) of the Act.Therefore, in the absence of the words like, assets or shares which arecapable of being reduced into the value of money, specificallyincorporated in the said provision, it is not possible to accept thecontention of the learned counsel for the petitioner that the shares seizedshould also be treated as money. Therefore, the construction for thepurpose of payment of interest under the said provision, viz., s. 132B(4)(a) shall be only in respect of money which has been seized in theform of cash or any other assets like, bullion which are capable of beingassessed in terms of cash, which can alone be covered for the purpose ofpayment of interest. The shares held by the petitioner which were seizedmay form part of capital assets of the business in his day-to-daybusiness, but that will become money only if the amount contemplatedunder the shares is encashed and that encashment from the sharesrequires the process of sale to ascertain their value and, in myconsidered view, it cannot be stated to be either "money" or "assets"which can be reduced into money.
The term, "money" which is defined in the Corpus Juris Secundumrelied upon by the learned counsel for the petitioner has to be construedon the facts and circumstances of the case. On the facts andcircumstances of the present case, merely because the shares seized didform part of the capital assets of the petitioner and the petitioner asjobber was in the process of buying and selling shares which is hisavocation, it does not mean that the shares should be construed asmoney, for the purpose of claiming interest. This aspect has in fact been considered by the first respondent in the impugned order. Theconstruction of the term, "money" in the form of cash by the firstrespondent, the Settlement Commission, in my considered view, in thepresent context, cannot be said to be either alien to the present scenarioor illegal by looking into any angle. In such view of the matter, I am of the considered view that there isno illegality in the order of the first respondent. Accordingly, the writpetition fails and the same is dismissed. Consequently, the order of theSettlement Commission, the first respondent herein stands confirmed. Nocosts. Connected miscellaneous petition is closed.