In a setback for the Income Tax (IT) department, the Bombay High Court has directed it to return seized jewellery from a Pune-based businessman in 2002 and refund Rs7 lakh paid as tax, along with interest over its action despite an order of the Income Tax Appellate Tribunal (ITAT) in 2018.
A division bench of Justices Dhiraj Singh Thakur and Kamal Khata has directed the IT to do the needful within two weeks.
The HC was hearing a plea filed by Sunil Agarwal, son of late Lakhpatrai, seeking refund and the return of jewellery as the department had failed to complete the fresh assessment.
In August 2002, the IT conducted a search at Lakhpatrai Agarwal’s house in Pune. Agarwal admitted undisclosed income of Rs 28,04,308 for the block period April 1, 1996 to August 13, 2002, following which the jewellery was seized.
The Commissioner of Income Tax (CIT), on December 29, 2004, passed an order assessing the undeclared income of Rs 52,82,278 as against the declared return of income of Rs 28,04,308. The same was upheld by the Commissioner of Income Tax (Appeals) (CIT-A).
Agarwal then approached the ITAT contending that the CIT passed the order without giving him a hearing.
The ITAT had asked the IT officer concerned to reassess the matter.
On March 6, 2018, Agarwal’s son, Sunil, wrote a letter to the IT seeking refund and the return of jewellery as the department had failed to complete the fresh assessment.
He received a notice from the IT department in July 2022, stating that a fresh assessment will be conducted in August.
Sunil Agarwal then approached the HC challenging the belated action on the part of the tax department. His advocates Sham Walve and Abhishek Khandelwal. Argued that as per section 153(3) of the IT Act, fresh assessment has to be completed within nine months from the end of the financial year in which the order is received by the commissioner.
IT advocates, Ajeet Manwani and Samiksha Kanani, said that the department did not receive the 2010 ITAT order and the compliance period does not begin till the order “is received” as mentioned in the I-T Act.
Dismissing the IT argument, the HC said that the period for receiving the order has to be “reasonable’’. “We are unable to accede to the contention of the (I-T office) to construe the words ‘is received’ in section 153(3) to mean ‘till it is received’ and thereby extend the limitation in perpetuity. It has to be a reasonable period of time, especially when the respondents (Union ministry of finance and income-tax commissioners) are a party to the proceeding,” said the bench.
The court further observed that accepting the department’s stand “would have led to extending the time for compliance…for almost 12 years at least, in this case”.
“Having failed to take steps to comply with the order dated 18th February 2010 and even within 9 months after receipt of the letter addressed by the Petitioner on 6th March 2018, we direct the respondents to issue a refund of 7,39,083/- ₹ plus additional interest till date of payment to the Petitioner and to release the jewellery seized within two weeks from the date of this order,” said HC.
