Gujarat High Court
Atmaram J. Hathiwala vs S. Sarup, Income Tax Officer on 30 June, 1994
Equivalent citations: [1994]209ITR456(GUJ)
Author: M.B. Shah
Bench: M.B. Shah, N.N. Mathur
JUDGMENT M.B. Shah, J.
1. This petition is filed against the order dt. 30th Dec., 1985 (Annexure `F') passed by the CIT, Surat under s. 264 of the IT Act ("the Act" for short) rejecting the petitioner's refund applications against the ITO's refusal in granting interest under s. 244(1A) of the Act on the amount of penalty, which is waived under s. 273A of the Act.
2. By the order dt. 25th Aug., 1982, the CIT waived the penalty imposed under ss. 271(1)(a), 273(a) and 273(c) of the Act for the asst. yrs. 1974-75 and 1975-76. In view of the aforesaid order, the petitioner filed an application before the ITO, Surat, praying that the amount as remitted by the CIT be refunded with interest under s. 244(1A) r/w r. 119(A). It was also prayed that the interest amount which the petitioner has paid on some delayed payments be also refunded with interest. The ITO refunded the amount without paying any interest as provided under s. 244(1A) of the Act. The petitioner therefore preferred revision applications under s. 264 of the Act. Those revision applications were rejected by the CIT solely on the ground that the relief under s. 273A is not the relief from the unjustified levy of tax or penalty and, therefore, the provisions of s. 244(1A) would not apply on the refund arising due to waiver under s. 273A of the Act.
3. Mr. Mehta, learned counsel for the petitioner, has not pressed his contention with regard to payment of interest over the interest amount refunded to the petitioner. His only contention is that the CIT ought to have allowed the application of the petitioner for grant of interest under s. 244(1A) on the penalty amount refunded to him in pursuance of the order passed under s. 273A of the Act. As against this, Mr. Thakore, learned counsel for the respondent, submits that the order passed by the CIT does not call for any interference.
4. For appreciating the rival contentions raised by the learned counsel for the parties, it would be necessary to refer to the relevant provisions under Chapter XIX pertaining to refunds of excess tax or penalty paid by the assessee under the IT Act. These provisions can broadly be dividend into two groups-(i) where the claim for refund is to be made, ss. 235, 239 and 243 provide procedure for it and (ii) other sections provide for the cases where no claim is required to be made and the concerned officer is required to refund the amount in pursuance of the order passed in appeal or in any other proceedings. The said sections are ss. 240, 241 and 244. Section 237 inter alia provides that, if any person satisfies the ITO that the amount of tax paid by him for any assessment year exceeds the amount with which he is properly chargeable for that year, he shall be entitled to a refund of the excess. Section 238 provides as to who would be entitled to file an application for refund. Section 239(1) inter alia provides that every claim for refund shall be made in the prescribed form and verified in the prescribed manner. Sub-s. (2) provides limitation within which an application for refund can be filed. Section 243 provides that in the cases where the ITO does not grant refund as provided therein, the Central Government shall pay the assessee the said amount with interest. In the present case, we are not required to deal with these sections. As against this, s. 240 provides that where, as a result of any order passed in appeal or other proceeding under the Act, refund of any amount becomes due to the assessee, the ITO shall refund the amount to the assessee without his having to make any claim in that behalf. However, s. 243 empowers the ITO to withhold the refund in a case where an order giving rise to a refund is the subject-matter of an appeal or further proceedings. Section 244 provides for payment of interest on such refund. Section 240 and relevant part of s. 244, with which we are concerned, are as under :
"240. 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 ITO shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf."
"244(1) Where a refund is due to the assessee in pursuance of an order referred to in s. 240 and the ITO does not grant the refund within a period of 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 12% 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.
(1A) Where the whole or any part of the refund referred to in sub-s. (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-s. (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 that x x x x"
5. Considering the aforesaid provisions, in our view, the scope and ambit of s. 240 is very wide. It provides that as a result of any order passed in appeal or other proceeding under the Act, any amount which becomes due to the assessee requires to be refunded to the assessee. In the context of s. 240, s. 244 provides for payment of interest on such refund. The phrase `other proceedings' used under s. 240 is of wide amplitude and would cover any order passed in the proceedings other than appeal under the IT Act. Therefore, the phrase `the orders passed in other proceedings under the IT Act' would include the orders passed under s. 154 (rectification proceedings), the order passed by the High Court or the Supreme Court under s. 260 (in reference) and the orders passed by the CIT in revision applications under s. 263 or 264 or on an application under s. 273A of the Act. In this view of the matter, in our view, there is no reason to restrict the meaning of the phrase `other proceedings' under the IT Act used in s. 240 to only some orders by which refund of excess tax or penalty is granted and not to cover the orders passed under s. 273A of the Act. Sub-s. (1A) of s. 244 also inter alia provides that in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in other proceedings under this Act to be in excess of the amount which such assessee is liable to pay as penalty, then the Government is required to pay to such assessee simple interest as specified therein. In this view of the matter, there is no reason to hold that in case where penalty is waived or reduced under s. 273A of the Act, the assessee is not entitled to have the said amount with interest as provided under s. 244(1A) of the Act.
6. The Allahabad High Court in the case of Raj Kishore Prasad vs. ITO (1991) 188 ITR 765 (All), observed that the words `other proceeding under the Act' used under s. 240, are wide enough to include the proceedings or orders passed under s. 263 of the Act giving rise to the claim of an assessee for refund. The Court negatived the contention of the Revenue for restricting the meaning and scope of the phrase `other proceedings' only to references made under the Act.
7. In view of the aforesaid discussion, in our view, the impugned order passed by the CIT is on the face of it illegal. Hence, the impugned order requires to be quashed and set aside.
8. In the result, this petition is allowed. The impugned order dt. 30th Dec., 1985 (Annexure `F') is quashed and set aside. The CIT is directed to decide the application of the petitioner on merits and to pass an appropriate order granting interest as provided under s. 244(1A) of the Act. Rule made absolute with no order as to costs.