1. This appeal by the assessee is against the order of the AAC relating to the assessment year 1977-78. The ITO found that the assessee had not paid the demand raised as a result of the assessment made for the assessment year 1977-78. The demand which had been raised in the assessment was of Rs. 32,054. The ITO passed an order under Section 220(2) of the Income-tax Act, 1961 ('the Act'), which provided that if the amount specified in a demand notice is not paid within this time specified, the assessee shall be liable to simple interest at 12 per cent per annum from the day commencing after the end of the period as mentioned in Sub-section (1). There is also a provision of consequential reduction of interest if the main demand is also reduced.
The assessee moved an application under Section 154 of the Act on 16-7-1980 objecting to the charging of interest under Section 220(2).
According to the assessee, interest could not be charged as there had been a search and the jewellery belonging to the assessee's wife had been retained under the provisions of Section 132(5) of the Act. The assessee had further claimed that the ITO should have allowed interest to the assessee as the value of the jewellery retained was more than the demand raised as per the assessment order.
2. The ITO rejected the assessee's application under Section 154 as he held that the provision of Section 154 was not applicable as there was no mistake apparent from the record. He referred to the provisions of Section 132(5) and pointed out that the retainment of the assets was only in those conditions where the assessee does not make any arrangement for the payment of the anticipated demand. This section provides for application of retained assets. It provides that if the assets consist solely of money or partly of money and partly of other assets, the ITO may apply such money in the discharge of the liabilities and the assessee shall be discharged of such liability to the extent of the money so applied. The section also authorises the ITO to apply other assets towards the demand raised by selling them.
However, the recovery of the amount of liability by other methods is not barred. Sub-section (4) of Section 132B of the Act provides as under; (4)(a) The Central Government shall pay simple interest at the rate of twelve per cent per annum on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (iii) of Sub-section (5) of that section exceeds the aggregate of the amounts required to meet the liabilities referred to in Clause (i) of Sub-section (1) of this section.
(b) Such interest shall run from the date immediately following the expiry of the period of six months from the date of the order under Sub-section (5) of Section 132 to the date of the regular assessment or reassessment referred to in Clause (i) of Sub-section (1) or, as the case may be, to the date of last of such assessments or reassessments.
The ITO held that the interest had to be paid only in respect of money retained or the assets sold for satisfying the demand. He, therefore, considered the application to be misconceived. The claim of the assessee was, therefore, rejected.
3. Before the AAC the assessee relied on the brochure issued by the Directorate of Inspection (RSP), namely, 'Tax Payers Information Series' interest payment under the Act. In this brochure, it has been stated that interest has to be paid to the assessee on the excess value of the assets over the liabilities due. It was on the basis of this sentence in the brochure that the assessee claimed that the interest was payable on the value of the jewellery retained. The AAC referred to the provisions of Section 132B(4) and pointed out that interest has to be allowed only on money retained or the sale proceeds of the assets retained. The order of the ITO was, therefore, upheld.4. It has been submitted before us that the interest charged by the ITO should have been cancelled and the AAC should have further allowed interest under Section 132B(4) on the excess value of assets over liabilities. As far as the correctness or otherwise of the interest charged under Section 220(2) is concerned, we find that the point does not arise out of the order of the AAC and it was pointed out by the departmental representative that the assessee had not taken any ground on that question before the AAC. The only question raised before the AAC was that the ITO should have allowed interest under Section 232B(4). We have already reproduced the provisions of Section 132B(4) above. The provisions of the section are every clear and simple interest has to be paid by the Central Government on the amount by which the aggregate of money retained under Section 132 and the proceeds of the assets sold exceeds the aggregate of the amount required to meet the liabilities on the assessee. In the present case, no money was retained and none of the assets were sold. On the face of the section, therefore, no interest is due to the assessee. It may also be mentioned that as far as the question of allowance of interest under Section 132B(4) is concerned, it cannot arise in a rectification proceedings against the order passed under Section 220(2). The right of the assessee to receive interest under Section 132B(4) is a separate right and the assessee can proceed to claim that right independently.
However, for this reason, the order under Section 220(2) cannot be considered to be suffering from any mistake. The contention of the assessee that the assets retained should be treated as money would start a controversy and the matter cannot be resorted under the provisions of Section 154. We, therefore, agree with the lower authorities that the provisions of Section 154 were not attracted for the purpose of the assessee's claim for interest under Section 132B(4).
On this ground, therefore, the order of the lower authorities is upheld.5. In connection with the interpretation of Section 132B(4), our attention has been drawn to the commentary by Chaturvedi and Pithisaria on Income-tax Law, third edn., Vol. 3, which reads as under: Sub-section (4) of Section 132B provides for interest to be paid by the Central Government as compensation for retention of money seized and proceeds of assets sold in excess of the total tax, etc., liabilities against which they are applied. Where the aggregate of the amount retained under Section 132 and of the proceeds, if any, of the assets sold for the purpose of recovery of the existing liabilities referred to in that section exceed the aggregate of the existing liabilities in default and the liability determined on regular assessment, etc., the Central Government shall pay simple interest at six per cent up to 30th September, 1967, at nine per cent for the period between 1st October, 1967, and 31st March, 1972, and thereafter at twelve per cent per annum on the amount of such excess. The interest is to run from the date immediately following the end of six months from the date of the order under Section 132(5) to the date of regular assessment or reassessment relating to the undisclosed income, or, as the case may be, to the date of the last of such assessments or reassessments. No interest is payable in relation to assets, other than money, which are not sold by the Income-tax Officer. The liabilities covered under this section are not only for tax, but also for any penalty and interest payable.
Thus, it is clear that the matter could not be resolved under the provisions of Section 154 by way of rectification of order under Section 220(2).
6. Before we part with the case, we would like to make a reference to the brochure issued by the Directorate of Inspection. The language in the brochure does give an impression that interest was allowable on excess value of the assets over the liabilities due. It is not clear whether this was by way of concession or an interpretation of Section 132B(4). If the intention of the department is to pay interest on the value of the assets retained, they should be fair to the taxpayers and if the assessee approaches the ITO for allowance of interest, such interest should be allowed according to the intention of the department. A brochure is issued in taxpayers information series but it is marked for official use only. It is meant for educating the taxpayers and if it gives an impression about the provision which should be the duty of the Government to see that the concession should be issued in the form of instructions to the departmental officers. The assessee will be free to move the ITO afresh for the allowance of interest under Section 132B. We have decided the question in accordance with the provisions of law. The appeal is dismissed.