Income Tax Appellate Tribunal - Amritsar
Joint Commissioner Of Income Tax vs Leader Valves (P) Ltd. on 31 May, 2005
Equivalent citations: (2006)100TTJ(ASR)913
ORDER
Bhavnesh Saini, J.M.
1. Both the appeals by the Revenue are directed against the different orders of the CIT(A), Jalandhar, dt. 6th June, 2000 and 9th April, 1999 for the asst. yr. 1980-81.
2. Since common question of law is involved, therefore, both the appeals were heard together and we dispose of the same by this common order.
3. We have heard the learned representatives of both the parties and gone through the observations of the authorities below.
4. Briefly, the facts are that the assessee filed its return of income on 11th Nov., 1980 declaring total taxable income of Rs. 11,36,270. The assessee paid advance tax of Rs. 7,09,500 in one instalment on 21st Dec, 1979. Original assessment order was made on 23rd Sept., 1983 on taxable income of Rs. 19,76,556. The assessment order was challenged before the CIT(A) and the CIT(A) vide order dt. 21st Jan., 1984 allowed partial relief to the assessee and income was reduced to Rs. 11,46,670. The Tribunal vide its order dt. 9th July, 1985 annulled the assessment order by holding that the same was barred by limitation of time. The assessee claimed refund of the taxes paid as well as amount adjusted out of the refund due to the assessee for some other years. However, no refund was granted on the ground that the refund has been withheld with the prior approval of the CIT on the ground that the Department was in High Court against the order of the Tribunal. The assessee was not satisfied with the order withholding the refund and as such filed a writ petition before the Hon'ble Punjab and Haryana High Court, Chandigarh. The writ petition was allowed, reported as Leader Valves (P) Ltd. v. CIT (1987) 63 CTR (P&H) 322 : (1987) 167 ITR 542 (P&H). The Department thereafter issued a refund of Rs. 5,92,695. The assessee requested for payment of interest under Sections 214 and 244(1 A) but the application was rejected. The appeal against this rejection was not allowed by the CIT(A) and the assessee preferred appeal in Tribunal on the question of allowing interest as mentioned above. The Tribunal allowed the appeal of the assessee and while giving effect to the order of the Tribunal interest of Rs. 3,99,660 was allowed to the assessee under Section 244(1A) of the IT Act. The AO allowed further interest of Rs. 4,94,580 under Section 243 of the IT Act. The AO had earlier allowed interest of Rs. 3,834 under Section 244(1A) while granting refund of Rs. 5,92,695 and this amount was over and above the sum of Rs. 3,99,660 allowed in pursuance to the order of the Tribunal. The order of the Tribunal directing the AO to grant interest was passed in ITA No. 750/Asr/1989 vide order dt. 10th May, 1996 reported at Leader Valves (P) Ltd. v. Asstt. CIT (1996) 55 TTJ (Asr) 532-Ed. Subsequently, the Hon'ble Punjab and Haryana High Court reversed the order of the Tribunal on quantum in which the Tribunal had annulled the assessment. Consequently, the order was passed by the Tribunal. While giving effect to the consequential order of the Tribunal, the AO withdrew the interest under Section 244(1A) allowed earlier in pursuance to the order of the Tribunal. The assessee filed appeal against this order but the same was dismissed on the ground that no appeal lay against such order of the AO. The assessee took up the matter with the AO for rectification under Section 154 but the same was rejected vide order dt. 5th Nov., 1999 which is subject-matter of the present appeal. The assessee challenged the order of the AO before the CIT(A) and it was argued that interest under Section 244(1 A) had been allowed by the AO as per specific direction of the Tribunal, Amritsar Bench vide order dt. 10th May, 1996. It was pointed out that this order was accepted by the Department and no appeal is filed. It was pointed out that while giving effect to the order passed by the Tribunal consequent to the order of the Hon'ble Punjab and Haryana High Court, the AO had withdrawn the interest under Section 244(1A) vide order dt. 27th Jan., 1998 although the AO had no power to withdraw the interest allowed under Section 244(1A). Reliance was placed on the decision of the Hon'ble Gujarat High Court in the case of Cibatul Ltd. v. IAC , It was also pointed out that arguments of the AO in the impugned order were with reference to the provisions of Section 244A of the IT Act which was introduced w.e.f. 1st April, 1989 and subsequent assessment years. Therefore, this provision is not applicable to the present assessment year.
5. The CIT(A) considering the submissions of the assessee and the decision of the Hon'ble Gujarat High Court in the matter of Cibatul Ltd. (supra) and considering the order of the Tribunal dt. 10th May, 1996 was of the view that the decision of the Hon'ble Gujarat High Court is squarely applicable and, therefore, the AO cannot withdraw interest. The CIT(A) accordingly set aside the order of the AO withdrawing the interest amount and allowed the appeal of the assessee. In this matter the Revenue is in appeal in ITA No. 417/Asr/2000.
6. In ITA No. 392/Asr/1999, the Revenue is in appeal in which the AO has withdrawn the interest granted on interest in a sum of Rs. 4,94,580 under Section 243 of the Act. It was submitted before the AO that the interest on interest is permissible under Section 243. Reliance upon the decisions of the Hon'ble Gujarat High Court in the matters of D.J. Works v. Dy. CIT and Chimanlal S. Patel v. CIT was placed. It was also pleaded that, interest on interest cannot be withdrawn as there is no provision in the IT Act to empower the AO to do so. The CIT(A) considering the submissions of the assessee and the decision of the Hon'ble Gujarat High Court, referred to above, was of the view that there is provision for grant of interest on interest but there is no provision to withdraw the interest and, in fact, it is a debatable issue, therefore, the AO was not right in withdrawing the interest under Section 154 of the IT Act. The Revenue is in appeal in ITA No. 392/Asr/1999.
7. The learned Departmental Representative relied upon the orders of the AO and submitted that even if the assessment has been annulled the admitted tax cannot be withdrawn. The learned Departmental Representative submitted that AO (has) therefore rightly withdrawn the interest and interest on interest by passing the order of rectification under Section 154 of the IT Act. During the course of argument, the learned Departmental Representative, however, submitted that there is no provision for withdrawing interest prior to the insertion of Section 244A of the IT Act.
8. On the other hand, the learned Counsel for the assessee submitted that the interest was granted by specific order of the Tribunal in ITA No. 750/Asr/1989 order dt. 10th May, 1996, which has become final between the parties as the Department did not challenge this order. Therefore, the AO was not competent to withdraw interest. Similarly he has submitted that interest on interest is permissible under the IT Act which is also approved by the Hon'ble Gujarat High Court in the cases referred to above. He has further submitted that there is no provision in the IT Act to withdraw the interest once granted. The learned Counsel for the assessee relied on the decision of the Hon'ble Gujarat High Court, in the case of Cibatul Ltd. (supra) and decision of the Hon'ble Rajasthan High Court in the matter of CIT v. Udaipur Distillery Co. Ltd. and order of the Tribunal, Chandigarh Bench 'A' in the case of H.P. State Forest Corporation Ltd.'s case dt. 2nd Sept., 2003 in ITA No. 21/Chd/2001 in which similar view is taken.
9. We have considered the rival submissions and material available on record. It is not in dispute that the order granting interest was passed by the Tribunal, Delhi Bench 'C in the case of the assessee in ITA No. 750/Asr/1989 vide order dt. 10th May, 1996 and the same became final as the Department did not challenge this order before the High Court. Interest on interest is also permissible under the IT Act, We find from the order of the Tribunal, Delhi Bench dt. 10th May, 1996 that the refund of taxes was allowed to the assessee in the writ petition filed by the assessee in the Punjab and Haryana High Court, which was allowed vide judgment dt. 13th April, 1987. The Tribunal, Delhi Bench in pursuance to that order was of the view that since the tax has been refunded as per directions of the Hon'ble Punjab and. Haryana High Court, therefore, the interest is to be allowed under Section 244(1 A) of the IT Act to the assessee. The Revenue Department refunded the tax as per directions of the Hon'ble Punjab and Haryana High Court and interest was allowed as per order of the Tribunal, Delhi Bench vide order dt. 10th May, 1996. Interest on interest was also allowed. The Hon'ble Gujarat High Court in the matter of Cibatul Ltd. (supra) held that "A bare reading of Section 244(1A) of the IT Act, 1961, would make it clear that it provides for grant of interest to the assessee on the excess amount of tax paid by him. It does not provide for withdrawal of interest already granted." The Hon'ble Gujarat High Court has also considered that the legislature has inserted Section 244A of the Act w.e.f. 1st April, 1989. For the assessment year commencing from 1st April, 1989, and subsequent assessment years, the said provision is now applicable. It was, therefore, observed that it is indicative of the fact that the legislature, realising the necessity of such a provision in the absence of which interest paid under Section 244(1A) could not be recovered, has now made an appropriate provision. The similar view is taken by the Hon'ble Rajasthan High Court in the matter of CIT v. Udaipur Distillery Co. Ltd. (supra) by following the decision of the Hon'ble Gujarat High Court in the case of Cihalul Ltd. (supra). Similar view is taken by the Tribunal, Chandigarh Bench, in the matter of H.P. State Forest Corporation Ltd. (supra).
10. We find that Section 244A was introduced later on in the IT Act by which it was provided that interest could be withdrawn and this provision shall be applicable in respect of the assessments for the assessment year commencing on 1st April, 1989 and subsequent assessment years. However, the present appeals pertain to the asst. yr. 1980-81, therefore, the provisions of Section 244A would not be applicable to this case. It stands clear, therefore, that earlier there was no provision for withdrawing interest once granted to the assessee. Therefore, the CIT(A) rightly relied upon the decision of the Hon'ble Gujarat High Court referred to above while allowing the appeals of the assessee. In view of the matter, we do not find any infirmity in the orders of the CIT(A). We uphold the same and dismiss both the appeals of the Revenue.
11. As a result, both the appeals of the Revenue are dismissed.