Income Tax Appellate Tribunal - Ahmedabad
Income-Tax Officer vs Ajay Sanjay (Huf) on 29 May, 1989
Equivalent citations: [1990]32ITD415(AHD)
ORDER
R.M. Mehta, Accountant Member
1. These appeals pertaining to the same assessee for the same asst. year and involving common facts are disposed of by means of a consolidated order. The relevant facts pertaining to both these appeals may be stated as under:
(1) The assessee in this case filed a return on 29-6-1981 declaring total income of Rs. 1,01,357 in the status of HUE (2) The I.T.O. completed the assessment on 12-3-1984 on an income of Rs. 1,03,254 in the status of A.O.P. and on a protective basis.
(3) This assessment order was subsequently cancelled by the CIT (Appeals) vide order dated 25-9-84.
(4) The I.T.O. gave appeal effects to the order of the CIT(A) vide order dated 10-10-85 and allowed a refund of Rs. 60,124 comprising of Rs. 53,449 as tax and Rs. 6,675 as interest under Section 244.
(5) The assessee thereafter moved an application under Section 154 to the ITO on 7-11-85 requesting him to allow interest under Section 214.
(6) The I.T.O. vide letter dt. 11 -3-86 rejected the assessee's application for grant of interest under Section 214.
(7) The assessee filed an appeal before the CIT( A) against the rejection order of the ITO dt. 11-3-86. The CIT(A) vide order dt. 2-9-86 held that the appeal was maintainable. He further directed the ITO to re-consider the assessee's claim on account of interest in view of the decision of the Hon'ble Gujarat High Court in the case of Bardolia Textile Mills v. ITO [1985] 151 ITR 389.
(8) The ITO with a view to implement the order of the CIT(A) dt. 2-9-86 passed an order on 10-2-87 rejecting the assessee's claim for interest under Section 214.
(9) The C.I.T.(A) vide order dated 10-6-87 rejected the assessee's appeal filed against the order of the I.T.O. dated 10-2-87.
2. On the basis of the aforesaid facts we first take up for consideration the Revenue's appeal which is I.T.A. No. 2970/Ahd./l986. The following effective grounds are raised:
(1) The learned CIT(A) has erred in law and on facts in holding that appeal is maintainable against an intimation given to the assessee regarding not entitlement of interest under Section 214 of the Act.
(2) The learned CIT(A) has erred both in law and on facts in holding that interest under Section 214 is allowable up to date of order giving effect to appellate order.
3. The learned D.R. at the outset submitted that there was no formal order passed by the I.T.O. rejecting the assessee's claim for interest under Section 214 and the CIT(A) was not justified in entertaining the appeal filed by the assessee. According to the D.R. the letter dated 11-3-86 addressed by the ITO to the assessee was not an order but a mere intimation. It was further stated that the levy of interest under Section 214 was not an appealable matter and even if it was presumed that the letter dt. 11-3-86 did constitute a formal order the same was not appealable. On merits it was submitted that the CIT(A) erred in directing the ITO to allow interest to the assessee vis-a-vis the decision of the Hon'ble Gujarat High Court supra. According to the D.R. the aforesaid decision was not applicable to the facts of the assessee's case.
4. The learned counsel for the assessee on the other hand submitted that what was sought to be challenged before the CIT(A) was the rejection of the claim for interest under Section 214. According to him the letter dt. 11-3-86 addressed by the ITO to the assessee was in response to the application under Section 154 made on 7-11-85 and for all intents and purposes the aforesaid letter dt. 11-3-86 was an order under Section 154 and an appealable order. He further proceeded to contend that since the action of the ITO had the effect of seducing the amount of refund payable to the assessee an appeal lay to the CIT(A) against the aforesaid action of the ITO. In support of his arguments the learned counsel relied on the following authorities:
(1) Bakelite Hylam Ltd. v. CIT [1988] 171 ITR 344 (AP).
(2) CIT v. Perfect Pottery Co. Ltd. [1988] 173 ITR 545 (MP).
5. We have examined the rival submissions and have also perused the orders of the authorities below. The decisions cited at the bar have also been duly considered by us. We are of the view that no interference is called for in the order of the CIT(A) dt. 2-9-86 and which is the subject matter of the appeal filed by the Revenue. The litigation before the CIT( A) has arisen out of the assessee's application under Section 154 wherein it had claimed interest under Section 214. This claim was rejected by the I.T.O. vide his letter dt. 11 -3-86 and this letter for all intents and purposes is an order under Section 154 and an appealable order.
6. As regards the grievance of the Revenue to the effect that the CIT(A) has allowed interest under Section 214 up to the date of the order of the ITO giving effect to the order of the CIT(A), we find that no such decision has been taken by the CIT(A). All that he has done is to direct the ITO to "reconsider the appellant's claim of interest in view of the Gujarat High Court decision". According to us this is not a decision on merits and as the subsequent events would show the matter was left wide open.
7. In the final analysis we confirm the order of the CIT(A) dt. 2-9-86 and which is the subject matter of the Revenue's appeal.
8. We now take up for consideration the assessee's appeal which arises out of the order of the CIT(A) dated 10-6-87. As a result of the order of the CIT(A) dated 2-9-86 directing the ITO to consider the assessee's claim for interest under Section 214 vis-a-vis the decision of the Gujarat High Court supra, the ITO vide order dated 10-2-87 once again rejected the claim. According to her the facts of the assessee's case were different to those in the case of Bardolia Textile Mills (supra). According to her in the case before the Hon'ble Gujarat High Court the original assessment had been set aside by the A.A.C. and a subsequent assessment had been framed by the ITO. It was on these facts that the Hon'ble Gujarat High Court was of the view that the interest was to be paid to the assessee up to the date of the revised assessment. As against this in the case of the present assessee there was neither a fresh assessment nor a revised assessment since the regular assessment itself had been cancelled by the CIT(A). In this view of the matter the assessee's claim was rejected.
9. The CIT(A) confirmed the action of the ITO with the following observations:
After careful consideration of the Gujarat High Court case quoted above, lam unable to agree with the contention of the A.R. The Hon'ble Gujarat High Court decided in the facts and circumstances of that case that interest under Section 214 is payable up to the date of revised assessment order where fresh assessment order is made pursuant to rectification or revision. The term 'regular assessment' means assessment made under Section 143 or 144 as per definition of Section 2(40). In the present case, in my opinion, there was no regular assessment after the assessment was cancelled by the CIT(A). The order of the ITO dt. 10-10-85 only cancelled the original assessment and therefore, it is an order, not of assessment, but of non-assessment It is certainly not "regular assessment" as envisaged in Section 2(40).
It has been decided by the Madras High Court in the case of T.U.S.C. Ltd. v. CIT 126 ITR 125 that when as a result of the A.A.C's order of appeal, the assessment is reduced and the ITO passes an order giving effect to the decision of the A. A.C., the I.T.O.'s order has to be treated as one passed under Section 143 and, therefore, a regular assessment for the purpose of Section 214. In the present case, the assessment is not revised or reduced but it is annulled. Therefore, the assessment is honest in law. This material difference of facts stand in the way of equating the present case with the facts of the case of Madras High Court or the facts of the case of Kooka Sidhwa & Co. v. CIT [54 ITR 54]. The Hon'ble Gujarat High Court has placed reliance on the decision of the above two cases while interpreting the word "regular assessment". The position of annulled assessment or cancelled assessment has not come up for consideration before the Gujarat High Court in the case of Bardolia Textile Mills Ltd. In view of this material difference of facts, the principle of the Gujarat High Court in the case of Bardolia Textile Mills Ltd. cannot be applied in the facts and circumstances of the present case.
Further according to the Madras High Court in the case of T.U.S.C. Ltd. v. CIT 126 ITR 125, no appeal lies from the order of the ITO refusing interest due to the assessee under Section 214 and the appeal would lie only as part of appeal against assessment itself. The proper remedy of the assessee in such case is to file revision to Commissioner. Since the sum and substance of the present appeal is ITO's refusal to grant interest under Section 214 the appeal cannot be entertained in law since Section 246 of the IT. Act does not provide for an appeal from an order of the ITO determining the interest payable by the Government or by the assessee under Section 214 or Section 215 or Section 217. In view of the above reasons, the appeal is rejected.
10. The learned counsel for the assessee at the outset placed reliance on the two decisions in the cases of Bakelite Hylam Ltd. (supra) and Perfect Pottery Co. Ltd. (supra) for the proposition that the appeal was maintainable. It was further submitted that although the first assessment did not result in any refund to the assessee the same arose as a result of the subsequent order of the CIT( A) whereby the assessment itself was cancelled and the assessee became entitled to the refund of Rs. 53,449. According to the learned counsel the order of the ITO dt. 10-10-85 giving appeal effects to the order of the CIT(A) was an assessment order itself in view of the ratio laid down by the Full Bench of the Hon'ble Gujarat High Court in the case of Bardolia Textile Mills (supra). It was further submitted that the assessee would not press for the payment of interest under Section 214 up to the date 10-10-85 viz. the date on which appeal effect was given to the order of the CIT(A) but restrict it to the date of the order of the CIT(A) itself which was 25-9-84. He finally made an impassioned plea for the necessary relief to be allowed to the assessee in view of the decision of the Gujarat High Court supra.
11. The learned DR on the other hand strongly supported the orders of the authorities below. As in the revenue's appeal it was reiterated that the decision in the case of Bardolia Textile Mills (supra) did not help the assessee inasmuch as the facts were distinguishable. That according to him was a case where a revised assessment had been framed pursuant to the setting aside of the original assessment whereas in the present case the original assessment itself had been cancelled and there was no subsequent assessment. He thereafter reiterated the views expressed by the ITO and the CIT(A) in their respective orders. It was also submitted that the appeal was not maintainable against the order of the ITO refusing the grant of interest under Section 214.
12. We have examined the rival submissions and have also perused the orders of the authorities below. At the outset we may mention'that the appeal filed by the assessee before the CIT(A) was maintainable. In this we are supported by the two authorities on which reliance has been placed by the assessee's counsel.
13. As regards the main issue of interest under Section 214 weare of the view that the assessee should succeed in its claim. The assessee became entitled to a refund of Rs. 53,449 as a result of the order of the CIT(A) dated 25-9-84 although no such refund was due to it when the ITO framed the assessment on 12-3-1984. The ITO framed the assessment on a protective basis in the hands of the assessee although he was of the view that the income was assessable in the hands of the bigger HUF of Navnitlal Gordhandas. This was the view which the ITO had taken in the assessee's case in AY 1980-81 as well. Taking these facts into account in case the ITO had finalised the assessment in the hands of the assessee at Nil income and brought the income to tax in the main case, then a refund would have resulted at the time of the original assessment itself. In such a situation the ITO would have been obliged to grant interest under Section 214 to the assessee since it is not disputed before us that the amount of Rs. 53,44,9 is the advance tax paid by the assessee. All that has happened is that it is the subsequent order of the CIT(A) which has resulted in the same very refund of Rs. 53,449 to the assessee. According to us even the subsequent order passed by the ITO on 10-10-85 giving appeal effects to the order of the CIT(A)is a part of the process of "Regular Assessment". This would be so even in the present case where the original assessment order itself stands cancelled. The Hon'ble Gujarat High Court in the case of Bardolia Textile Mills (supra) discussed in detail what a "Regular Assessment" meant. According to their Lordships all orders subsequent to the first assessment which resulted in any modification to the income assessed were a part of the "Regular Assessment". We are also of the view that even on grounds of equity and justice the assessee would be entitled to interest under Section 214 since a substantial amount of money has remained with the Government and which has been utilised by it before refunding it to the assessee.
14. In the final analysis we direct the ITO to allow interest under Section 214 to the assessee up to the date on which the CIT(A) passed the order cancelling the assessment order viz. 25-9-84 since this is the amended claim made by the assessee's counsel during the course of the hearing.
15. In the result the Revenue's appeal is dismissed whereas the assessee's appeal is partly allowed.