Orissa High Court
Grantha Mandir And Anr. vs Commissioner Of Income-Tax And Anr. on 18 November, 1987
Equivalent citations: [1988]172ITR287(ORISSA)
Author: D.P. Mohapatra
Bench: D.P. Mohapatra
JUDGMENT H.L. Agrawal C.J. 1. Both the writ applications are disposed of by this judgment as the petitioners as well as the facts and law are all common in both of them. They arise out of an income-tax matter and the question being the right of the petitioner to get interest on the amount of refund that became payable to him. Two separate applications have been filed as the impugned orders relate to two separate years, 1963-64 and 1964-65. 2. The Income-tax Officer (O.P. No. 2) had refused to grant registration to the petitioner for the assessment years in question on certain grounds which need not be discussed. The petitioner's appeal before the Appellate Assistant Commissioner also failed. Thereafter he took the matter before the Appellate Tribunal. The Tribunal, by its order dated December 20, 1972 (annexure-1), set aside both the orders mentioned above and directed 0. P. No. 2 to reconsider the claim for registration in the light of the finding recorded by the Tribunal and after giving due opportunity to the assessee. 3. After the remand, the Income-tax Officer, by his order dated September 29, 1976, allowed the claim for registration and assessed tax at Rs. 1,672 for each of the assessment years 1963-64 and 1964-65 and directed refund of Rs. 10,345*14 and Rs. 7,857 for the respective years. But while ordering refund, he did not grant any interest. The petitioner again took the matter in appeal before the Appellate Assistant Commissioner claiming interest on the amounts of refund. The appellate authority dismissed the appeals on the ground of maintainability. The petitioner then filed revisions under Section 264(1) of the Income-tax Act before the Commissioner of Income-tax, who by his order dated January 22, 1979 (annexure-2), also rejected the claim on the ground that interest under Section 244 could be granted only if the refund was due in pursuance of any appellate order, and inasmuch as the Tribunal had merely set aside the order of the Income-tax Officer and remanded the matter for fresh consideration with option to the Income-tax Officer to take an independent decision in favour of the assessee, no interest is payable to the petitioner. 4. Mr. Dipak Misra, learned advocate appearing for the petitioner, submitted that interest was payable to the petitioner by virtue of the provisions contained in Section 244(1) read with Section 240 of the Income-tax Act. Sections 240 and 244(1), as they stood at the material time, read as follows : " 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 Income-tax 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. 244, Interest on refund where no claim is needed.--(1) Where a refund is due to the assessee in pursuance of an order referred to in Section 240 and the Income-tax Officer does not grant the refund within a period of six months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at four per cent. per annum on the amount of refund due from the date immediately following the expiry of the period of six months aforesaid to the date on which the refund is granted." 5. On the basis of the above provisions, it was contended by Mr. Misra that the petitioner was entitled to the payment of interest on the amount of tax realised from him which became due and refundable to him on the order of assessment being set aside by the Tribunal. 6. Learned standing counsel, on the other hand, contended that since the order of remand did not wipe out the liability of the petitioner completely but left the matter in the hands of the Income-tax Officer to pass a fresh assessment order and thus leaving the liability of the petitioner and the amount already paid by him answerable for the said liability, no interest was payable. 7. It is difficult to accept the submission of learned standing counsel. Section 240 of the Income-tax Act provides for refund of any amount that becomes due to an assessee as a result of any proceeding under the Act so much so that the assessee need not even make a demand or an application. To meet the situation where the whole amount paid may not become refundable where ultimately on completion of the assessment proceedings a liability may still be determined, provision has already been made in Section 241 empowering the Income-tax Officers to withhold refund in certain cases. It was fairly conceded by learned standing counsel that the provisions of Section 241 were not attracted to the facts of the present case, much less had the procedure indicated therein for with-holding the refund followed by the Income-tax Officer. No other provision which could entitle the assessing authority to withhold the refund pending a fresh assessment proceeding was pointed out to us. Under the Income-tax Act, although a liability accrues on an assessee to pay the tax for each year, rather in advance, that is only a mode for the convenience of collection. The tax as such becomes due and payable only when an assessment order is passed and a liability is created followed by a demand notice under Section 156 of the Act. Obviously, in the absence of any assessment order, there is no liability for payment of any income-tax. 8. In that view of the matter, on the setting aside of the assessment orders by the Tribunal, the tax already paid by the petitioner became refundable under the provisions of Section 240 of the Act. The liability of the petitioner arose after the passing of the fresh order of assessment which was payable only on service of a demand notice. The existence of an apparent liability of an assessee for payment of income-tax does riot, under the scheme of the Act, ipso facto, entitle an Income-tax Officer like a creditor to refuse to refund unless recourse to Section 241 of the Act is taken and a sufficient safeguard is provided by the makers of the law in the interest of the Revenue in the following terms: "241. Power to withhold refund in certain cases.--Where an order giving rise to a refund is the subject-matter of an appeal or further proceeding or where any other proceeding under this Act is pending, and the Income-tax Officer is of the opinion that the grant of the refund is likely to adversely affect the revenue, the Income-tax Officer may, with the previous approval of the Commissioner, withhold the refund till such time as the Commissioner may determine." 9. In situations mentioned in Section 241, the Income-tax Officer with the prior approval of the Commissioner can withhold the refund till the remand proceedings are completed. Under Sub-section (2) of Section 244 where there is provision to withhold the refund, the Government is liable to pay interest at the prescribed rate on the amount of refund. 10. In my concluded opinion, therefore, as soon as the assessment orders were set aside, the amount of tax paid by the petitioner as income-tax under the assessment orders in question became refundable to him and that having not been paid within the prescribed period (at the relevant time--six months), the petitioner is entitled to the payment of interest as well on the amounts refundable to him. I find full support for the above view from a Bench decision of the Allahabad High Court in the case of Purshottam Dayal Varshney v. CIT [1974] 94 ITR 187. 11. I would, therefore, direct payment of interest to the petitioner on the amounts refundable to him for the period between the expiry of six months from the date of the order of the Tribunal setting aside the assessment order to the date of refund of the same to the petitioner. 12. In the circumstances, I leave the parties to bear their own costs. D.P. Mohapatra, J.
13. I agree.