J.C.Verma, J. - (1.) A draft of Rs. 46,300 was seized and recovered subsequent to the completion of the original assessment of the petitioner for the year 1981-82. The draft was dated January 10,1983, in the name of the late Shri Thakur Das Gupta. The petitioner is a son of Shri Thakur Das Gupta. The draft was recovered by the Income-tax Officer against a demand made by the Income-tax Officer of an amount of Rs. 1,23,162 dated January 20, 1983. This demand was ultimately cancelled by the Commissioner of Income-tax vide order dated November 26, 1989. For the reason that no demand was pending, the draft amount recovered was to be refunded and, therefore, a demand was made for refund of the amount along with interest vide annexure 1. Repeated reminders were also sent. The petitioner was asked to attend the Income-tax Office a number of times. For the reasons that the matter stood already decided in favour of the father of the petitioner, a departmental appeal had also been filed by the Department against the order of the Commissioner of Income-tax before the Tribunal. The Income-tax Officer, B-Ward, Alwar, vide its order dated February 14, 1986, informed the petitioner that he should furnish a security for the reason that there was likelihood of the appeal being decided in favour of the Department if the request for refund of the amount involved is to be accepted. Further reminders were sent by the petitioner claiming refund and interest on such demand. However, ultimately, a refund was made of an amount of Rs. 35,720 on May 18, 1988, vide annexure 8, when the Income-tax Officer had got the draft encashed. The petitioner claimed an interest on the amount from the date of seizure till the date of refund of the, amount on the ground that the draft amount which was to be utilised by the petitioner had been kept by the Income-tax Department with it. The interest claimed was 15 per cent. The request was rejected, vide annexure 10, on September 12, 1988, primarily on the ground that the Department had got the draft encashed only on May 5, 1988, and for the reason that the Department had not utilised the draft, the petitioner was not entitled to any interest on such refund. An appeal against such an order was dismissed vide annexure 13 on September 14, 1989, on the ground that the appeal was not maintainable. An application under Section 154 of the Income-tax Act was also rejected. Grievance was also made before the Commissioner of Income-tax, vide annexure-15, which was dismissed, vide annexure 18, dated November 24, 1993. After issuing notices, ultimately, the petitioner filed the present writ petition with the prayer for quashing the orders whereby the interest accruable to the petitioner on the refund had been declined with a further prayer to grant interest to the petitioner on the delayed refund of amount of Rs. 35,720 in view of the provisions contained in Section 244(a)(?) and 244(1A) of the Income-tax Act.
(2.) THE petition has been opposed. It is stated that against the demand made, the Income-tax Officer has recovered the demand draft along with other demand drafts, i.e., three demand drafts were recovered, of an amount of Rs. 46,300, Rs. 1 lakh, and Rs. 76,500. It is stated that one of the drafts of Rs. 46,300 could not be encashed as payment was prohibited under Section 281B of the Income-tax Act, 1961, and was impounded under Section 131. It is stated that the assessee had filed the return of the income for the year 1981-82 declaring a loss, however, he was assessed to Rs. 1,69,390. THE appeal filed by the assessee was allowed. THE second appeal filed by the Department determining the total amount of the assessee and the total demand created came to the tune of Rs. 9,750. It is admitted that the amount of Rs. 35,720 itself out of the demand draft seized, was refunded ultimately on May 18, 1988. It is further stated that no interest is accruable. On the above said facts and the pleadings, it is clear that out of three drafts recovered, two were encashed. The third somehow remained with the Income-tax Officer. Had the demand drafts in question been encashed by the Income-tax Officer, the Department would have been benefited, but, none the less if the draft was not encashed by the Income-tax Officer immediately on recovery or seizure, but was ultimately encashed in the month of May, 1988, the petitioner did suffer the benefit of such draft. Only because of the reason that the demand draft was not encashed or it was omitted to be encashed by the Income-tax Department, the Income-tax Department cannot escape the liability of negligence on its part. It is also true that the appeal against the demand made was accepted in favour of the petitioner and as such in view of the admitted facts, there was no demand pending against the petitioner and in such case the petitioner was entitled to the refund immediately. The Income-tax Officer had definitely erred in law in refusing to release the amount immediately. Section 237, Chapter XIX, of the Act deals with the refunds. Section 240 prescribes that as a result of any order passed in appeal, if any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided under the Act, refund the amount to the assessee without his having to make any claim in that behalf. Section 244 provides that in case where Section 240 is applicable and the Assessing Officer does not grant the refund within three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at 15 per cent, per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted and further provides that where the whole or any part of the refund is due to the assessee and in pursuance of any order of assessment or penalty and such amount having been found in appeal or other proceedings under this Act to be in excess of the amount which such assessee is liable to pay as tax, etc., the Central Government shall pay to such assessee simple interest at the rate of 15 per cent, per annum on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted. The relevant Sections of the Income-tax Act are reproduced as under : "237. Refunds.-If any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess. 240. Refund on appeal, etc.--Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf: Provided that where, by the order aforesaid,-- (a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment ; (b) the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee. 244(1A); Where the whole or any part of the refund referred to in Sub-section (1) is due to the assessee as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in Sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted : Provided ..." The relevant provisions as aforesaid are very clear that in case any order is set aside in appeal by the Income-tax Appellate Tribunal and the refund becomes due, the refund is to be made with simple rate of interest at 15 per cent, per annum. In the present case it makes no difference if the amount was recovered from the petitioner against the demand notice in cash or in draft for the reason that the bank demand draft is as good as cash and if any such cash or demand draft is kept in the Income-tax Department or is not encashed, the Department cannot be excused by saying that for the reason that the demand draft was encashed at a much later stage, therefore, the Department is not liable to pay any interest. Admittedly, in the present case, the recovery was made in January, 1983, and was refunded on May 18, 1988. The petitioner is surely entitled to the interest from January, 1983, to May 18, 1988, as per the law as enumerated above.
(3.) THE writ petition is allowed. THE impugned orders are quashed with the direction that the respondents shall pay to the petitioner the interest due as per the provisions of Section 244 of the Income-tax Act from the date of recovery till the date of payment at the rate of 15 per cent, per annum. THE order shall be complied with within a period of three months from the date of receipt of the certified copy and in case the order is not complied with, the petitioner shall be liable to recover the interest further on such arrears of interest at the same rate of interest till the date of actual payment.;