Bombay High Court
Commissioner Of Income-Tax vs Agricultural Finance Corporation Ltd. on 26 March, 1991
JUDGMENT T.D. Sugla, J.
1. In this departmental reference relating to the assessee's assessment for the assessment year 1972-73, the Income-tax Appellate Tribunal has referred to this court the following question of law under section 256(1) of the Income-tax Act, 1961, for opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Appellate Assistant Commissioner was competent in entertaining an appeal regarding the grant of interest under section 214 of the Income-tax Act, 1961 ?"
2. For the assessment year 1972-73, the Income-tax Officer treated the assessee-company as one in which the public were not substantially interested. He had done so for the assessment years 1969-70 and 1971-72 also. In doing so, he had relied on various clauses of the articles of association which provided for restricting the right of shareholders to transfer the shares. The appellate Assistant Commissioner accepted the assessee's claim and the Tribunal confirmed the order of the Appellate Assistant Commissioner on the issue. However, the dispute is not involved in this reference.
3. On completion of regular assessment, the assessee's tax liability worked out to Rs. 8,33,666, as against which the assessee had paid advance tax of Rs. 14,86,250. The assessment, thus, resulted in a refund of Rs. 6,52,584. The interest thereon as required under section 214 of the Income-tax Act, 1961.
4. The assessee filed an appeal before the Appellate Assistant Commissioner. Besides other grounds, one of the grounds taken was that the Income-tax Officer ought to have paid interest to the assessee on the amount of refund under section 214 of the Income-tax Act, 1961. The Appellate Assistant Commissioner accepted the assessee's claim and directed the Income-tax Officer to allow interest as claimed.
5. In appeal before the Tribunal, the Department inter alia, contented that the appeal against non-payment of interest under section 214 of the Act was not competent. However, following the decision of our court in Mathuradas B. Mohta v. CIT [1965] 56 ITR 269, the Tribunal confirmed the order of the Appellate Assistant Commissioner.
6. Dr. Balasubramanian, learned counsel for the Revenue, states that, in view of the Full Bench judgment of our High Court in the case of CIT v. Daimler Benz A. G. [1977] 108 ITR 961, the appeal against charging of interest under section 215 is competent only if the assessee's case falls within the expression "denying his liability to be assessed under the Act". Referring then to the observations of the Full Bench in that case at page 986, Dr. Balasubramanian pointed out that the assessee in that case was denying his liability on the ground that he was not liable to pay advance tax at all. In the present case, there was no such ground. Therefore, the Tribunal was not justified in holding the appeal against non-payment of interest under section 214 before the Appellate Assistant Commissioner to be competent.
7. Shri Dastur, learned counsel for the assessee, fairly admitted that the Full Bench judgment concerned had interpreted the Expression "denying his liability to be assessed under the Act" in that case but it was so as the assessee had contended that he could appeal against the charging of interest under the expression. According to him, the Full Bench judgment could not be taken as authority for the proposition that appeal against charging of interest under sections not specifically appealable would not be competent unless they could fall under the expression "denying his liability to be assessed under the Act". Placing then reliance on two subsequent judgments of our court in the cases of Addl. CIT v. Mustakhusein Gulamhusein Ghia [1983] 143 ITR 951 and CIT v. B. V. Sabunani [1989] 177 ITR 56, Shri Dastur pointed out that our court, in B. V. Sabunani's case [1989] 177 ITR 56, after referring to the observations of the Full Bench at page 57, concluded at page 58 that it could not be denied that when the liability to be assessed including interest under section 139(1) was to some extent disputed, the appeal against the levy of interest under section 139(1) was competent.
8. Before proceeding to consider the rival contentions, we may like to observe that it is one of those cases where the Department was admittedly liable to pay interest under section 214 on the amount of refund and there is no discernible reason for the Department to contest the direction given by the Appellate Assistant Commissioner for payment of interest. In the case like the other before us, it would have been appropriate for the Department itself to pay interest by passing an order under section 154. The Tribunal, in the statement of the case, has clearly and categorically observed that the Income-tax Officer appeared to have inadvertently forgotten to allow interest on the excess payment of advance tax. The appellate authorities, i.e., the Appellate Assistant Commissioner and the Tribunal have done what the Income-tax Officer himself should have done. To take a technical stand and to deprive an assessee of his legitimate dues, to say the least, is not expected of the Department which is obliged under the statue to grant interest on advance tax paid in excess of the demand raised on regular assessment. The Department has no case whatsoever on merits.
9. Since a legal question has been raised, we are obliged to answer it. The admitted position in this regard is that the appeal was filed by the assessee before the Appellate Assistant Commissioner not against the non-payment of interest under section 214 only. There was other grounds and non-payment of interest formed one of the many grounds.
10. The assessee's case, it was stated, may also fall under another expression used in section 246(c), namely, "an appeal against the order of assessment where the assessee objects to the amount of tax to be determined". Section 214 provides for payment of simple interest on the amount of advance tax is paid in excess of the amount of tax determined on regular assessment. If interest is paid or calculated thereon, the amount of refund would have increased. Consequently, the amount of tax determined would have become much less. However, we need not pursue this aspect in this reference. The decision in Addl. CIT v. Mustakhusein Gulamhusein Ghia [1983] 143 ITR 951 (Bom), does not appear to us to really help the assessee. However, in CIT v. B. V. Sabunani [1989] 177 ITR 56, our court has referred to and applied the Full Bench judgment of our court in CIT v. Daimler Benz A. G. [1977] 108 ITR 961 and held that if the total income is reduced as a result of the appellate orders, it could not be denied that liability to be assessed to tax including interest under section 139(1) was to some extent disputed. The appeal against levy of interest under section 139(1) was held to be competent. This decision covers the issue in the present case.
11. In view of the decision in CIT v. B. V. Sabunani [1989] 177 ITR 56 (Bom), we are in agreement with the Tribunal that the appeal was competent. Accordingly, we answer the question referred to us by the Tribunal in the affirmative and in favour of the assessee.
12. No order as to costs.