Income Tax Appellate Tribunal - Amritsar
Vipan Kumar Sudesh Kumar (Huf) vs Income Tax Officer on 1 August, 2003
Equivalent citations: (2004)82TTJ(ASR)552
ORDER
Issue relating to interest under section 244 Catch Note:
Since the interest claimed by the assessee was payable under sections 243 and 244 which was component of the refund to be made under section 237 and an order under section 237 is appealable under section 246(1)(k). Therefore, the Deputy Commissioner (Appeals) was not justified in observing that no appeal under section 246 had been provided in respect of matters relating to section 244.
Ratio:
Since the interest claimed by the assessee was payable under sections 243 and 244 which was component of the refund to be made under section 237 and an order under section 237 is appealable under section 246(1)(k). Therefore, the Deputy Commissioner (Appeals) was not justified in observing that no appeal under section 246 had been provided in respect of matters relating to section 244.
Case Law Analysis:
N. Chakravorti & Co. & Anr. v. Union of India & Ors. (2002) 29 DTC 839 (Cal-HC) : (2002) 257 ITR 10 (Cal) relied on Application:
Also to current assessment year.
Decision:
In favour of assessee.
Income Tax Act 1961 s.246(1)(k) Refund--INTEREST UNDER SECTION 244(1A)Withdrawn while giving effect to appellate order Catch Note:
The assessing officer was justified in withdrawing interest under section 244(1A) while giving effect of appellate order because after 1-4-1985 the interest under the said provision is payable after taking into consideration the result of any appellate order.
Ratio:
The assessing officer was justified in withdrawing interest under section 244(1A) while giving effect of appellate order because after 1-4-1985 the interest under the said provision is payable after taking into consideration the result of any appellate order.
Held:
Interest under section 244(1A) would be payable by taking into consideration the result of any appellate order. Therefore, in the instant case, the assessing officer rightly withdrew the interest which was not payable after giving the appeal effect. Therefore, the assessing officer was justified in withdrawing interest and to recover the same from the assessee.
The Deputy Commissioner (Appeals) had rightly confirmed the action of the assessing officer in withdrawing the interest while giving effect to the appellate order.
Case Law Analysis:
Modi Industries Ltd. & Anr. v. CIT & Anr. (1995) 216 ITR 759 (SC), ANZ Grindlays Bank Plc. v. CIT (2000) 13 DTC 574 (Cal-HC) : (2000) 241 ITR 260 (Cal) and CIT v. Hansa Agencies (P) Ltd. (1998) 5 DTC 95 (P&H-HC) : (1998) 234 ITR 271 (P&H) relied on; CIT v. Ahmedabad New Cotton Mills Co. Ltd. (2002) 253 ITR 762 (Guj) not followed H.P. State Forest Corpn. Ltd. v. Asstt. CIT (order dated 10-3-2003 in ITA Nos. 19 & 20/Chd/1998) distinguished.
Application:
Also to current assessment year.
Decision:
In favour of assessee.
Income Tax Act 1961 s.244(1A) Appeal (Dy. CIT(Appeals)--APPEALABLE ORDERIssue relating to interest under section 244 Catch Note:
Since the interest claimed by the assessee was payable under sections 243 and 244 which was component of the refund to be made under section 237 and an order under section 237 is appealable under section 246(1)(k). Therefore, the Deputy Commissioner (Appeals) was not justified in observing that no appeal under section 246 had been provided in respect of matters relating to section 244.
Ratio:
Since the interest claimed by the assessee was payable under sections 243 and 244 which was component of the refund to be made under section 237 and an order under section 237 is appealable under section 246(1)(k). Therefore, the Deputy Commissioner (Appeals) was not justified in observing that no appeal under section 246 had been provided in respect of matters relating to section 244.
Case Law Analysis:
N. Chakravorti & Co. & Anr. v. Union of India & Ors. (2002) 29 DTC 839 (Cal-HC) : (2002) 257 ITR 10 (Cal) relied on Application:
Also to current assessment year.
Decision:
In favour of assessee.
Income Tax Act 1961 s.246(1)(k) ORDER N.K. Saini, A.M.
1. This is an appeal by the assessee and is directed against the order of the Dy. CIT(A), Jalandhar, dt. 31st March, 1997, relating to asst. yr. 1985-86.
2. The assessee has raised following grounds in this appeal:
"1. That the Dy. CIT(A) was not justified in holding that no appeal can be filed in respect of matter relating to Section 244. He has failed to appreciate that appeal was filed before him against the order giving effect to the appellate order which is appealable order being part of order under Section 143(3).
2. That the Dy. CIT(A) has travelled beyond his jurisdiction by making his observations about refund due to the assessee.
3. That the Dy. CIT(A) was not justified in not holding that interest under Section 244(1A) could not be withdrawn while giving appeal effect as held by Gujarat High Court in the case of Cibatul Ltd v. IAC (1993) 201 ITR 507 (Guj). He was not competent to either find fault with drafting of Act or dissent from the decision of High Court.
4. That the order of the Dy. CIT(A) and AO is against law and facts of the case."
3. Ground Nos. 1 & 2 relate to the observation of the Dy. CIT(A) that no appeal under Section 246 had been provided in respect of matters relating to Section 244 of the IT Act.
3.1. We have heard both the parties on this issue. The learned Dy. CIT(A) while passing the impugned order observed at para 3 in the following manner :
"3. In the first place, no appeal under Section 246 has been provided in respect of matters relating to Section 244. Therefore, the matter under consideration cannot be agitated in this appeal. On this ground alone, it deserves to be dismissed in limine."
However, the learned Dy. CIT(A) had not dismissed the appeal of the assessee in limine. On the contrary, the issue has been decided on merits. Therefore, raising of this issue has made it academic in nature because the learned Dy. CIT(A) although observed that no appeal is maintainable yet he had not dismissed the appeal in limine, on the contrary, decided the appeal of the assessee on merits.
3.2. Before parting, we may add here that a similar issue has been decided recently by the Hon'ble Calcutta High Court in the case of N. Chakravorti and Co. and Anr. v. Union of India and Ors. (2002) 257 ITR 10 (Cal), wherein it has been held that:
"Held, dismissing the petition, (i) that in the earlier writ petition the Court did not entertain the writ petition on the question of the merits of the claim for refund or otherwise. Only on limited ground the writ petition was entertained and certain orders were passed. Therefore, the said order could not be brought within the purview of writ jurisdiction. Moreover, the IT Act itself provides for adequate remedy and provisions for dealing with the same, and so the Court could not assume jurisdiction even if the order appeared ex facie bad or had been passed on surmises and conjectures. It was not that no writ petition could be maintained for the purpose of claiming refund. Only if it was shown that the assessee was entitled to get the refund of the specific amount could the writ jurisdiction be invoked that too at the discretion of the Court.
(ii) That the interest claimed by the petitioner was payable under Sections 243 and 244 of the Act which was a component of the refund to be made under Section 237. The order of refund was made under Section 237. Therefore, the contention of the petitioner to the extent that the order was not an order under Section 237, since interest was also claimed, could not be sustained and the order was appealable under Section 246(l)(k)."
From the above ratio laid down by the Hon'ble Calcutta High Court, it would be clear that the learned Dy. CIT(A) has the jurisdiction to dispose pf the appeal, since the interest claimed by the assessee was payable under Sections 243 and 244 of the IT Act which was component of the refund to be made under Section 237 of the IT Act and an order under Section 237 is appealable under Section 246(1)(k) of the IT Act. Therefore, the learned Dy. CIT(A) was not justified in observing that no appeal under Section 246 had been provided in respect of matters relating to Section 244 of the IT Act. These two grounds are disposed of in the manner indicated hereinabove.
4. Vide ground No. 3 the grievance of the assessee is that while the interest under section has been paid to the assessee, that cannot be withdrawn in this case.
4.1. The facts in brief as appearing from the orders of the authorities below are that in this case return was filed by the assessee on 26th Aug., 1985, declaring an income of Rs. 47,200. That return was revised to an income of Rs. 49,620 on 28th Oct., 1986. Protective assessment was made on 19th Feb., 1988, at an income of Rs. 1,67,534 resulting in a demand of Rs. 1,13,163. The learned CIT(A) dismissed the appeal of the assessee vide order dt. 26th Sept., 1988. However, the Tribunal vide its order dt. 7th June, 1991 set aside the order of the learned CIT(A) and restored the issue back to his file. The learned Dy. CIT(A) vide his order dt. 24th Nov., 1995, upheld the protective nature of assessment but allowed a relief on quantum by reducing income by Rs. 1,93,780. The AO gave the appeal effect vide order dt. 28th March, 1994, which resulted in refund of Rs. 24,420. On 14th Dec., 1994, the Tribunal directed assessment to be framed in substantive capacity. The AO on 31st March, 1995, gave further appeal effect to the order dt. 28th March, 1994, resulting in refund of Rs. 53,800 which included interest of Rs. 29,380 under Section 244(1A) along with refund of Rs. 24,420 allowed earlier. Further, appeal effect was given by the AO vide order dt. 18th Nov., 1996, resulting in a demand of Rs. 22,570 and, therefore, interest of Rs. 29,380 which was allowed earlier was withdrawn.
4.2. Against the withdrawal of the interest, the assessee preferred an appeal to the Dy, CIT(A). The learned Dy. CIT(A) dismissed the appeal of the assessee and confirmed the view taken by the AO for the reasons stated at paras 5 to 7 of the impugned order.
4.3. Now the assessee is in appeal. The learned counsel for the assessee, Sh, Y.K. Sud, CA, vehemently argued and stated that the provision under which the AO had withdrawn interest allowed to the assessee under Sections 214 and 244 at the time of giving appeal effect was untenable in the eyes of law and was liable to be set aside. It was further stated that no withdrawal of interest paid under Section 244(1A) on refund granted on giving effect to the appellate order was possible in view of the ratio laid down by the Hon'ble Gujarat High Court in the case of CIT v. Ahmedabad New Cotton Mills Co, Ltd. (2002) 253 ITR 762 (Guj). The reliance was also placed on the decision of the Tribunal, Chandigarh 'A' Bench, in the case of H.P. State Forest Corpn. Ltd., Shimla v. Jt CIT, Special Range, Shimla, order dt. 10th March, 2003, in ITA Nos. 19 & 20/Chandi/1998, for the asst. yrs. 1983-84 and 1984-85.
4.4. In his rival submissions, the learned Senior Departmental Representative strongly supported the order of the learned Dy. CIT(A) and submitted that the interest has rightly been withdrawn by the AO in view of the amended provisions of Section 214 of the IT Act, w.e.f. 1st April, 1985. It was further stated that while giving effect to the appellate order, the AO simply has to compute the taxable income and at the same time has no discretion to ignore the appellate order while calculating the interest under Sections 214 and 244(1A). The reliance was placed on the decision of the Hon'ble Supreme Court in the case of Modi Industries Ltd. and Anr. v. CIT and Anr. (1995) 216 ITR 759 (SC).
4.5. We have heard the learned representatives of both the parties at length and also carefully gone through the material available on the record. Provisions of Section 244(1A) of the IT Act, read as under:
"244(1A). Where the whole or any part of the refund referred to in Sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st 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-section (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 where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted :
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding.
Provided also that where any interest is payable to an assessee under this subsection, no interest under Sub-section (1) shall be payable to him in respect of the amount so found to be in excess.
(2) Where a refund is withheld under the provisions of Section 241, the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of three months from the end of the month in which the order referred to in Section 241 is passed to the date the refund is granted.
(3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st April, 1989, or any subsequent assessment years."
5. The Hon'ble Supreme Court in the case of Modi Industries Ltd. and Ors. v. CIT and Anr. (supra) had extensively dealt with the points relating to the payment of interest under Sections 214 and 244(1A) of the IT Act, after narrating the legislative history and discussing the various judgments rendered by the various High Courts of the country. Their Lordships laid down following three propositions at p. 808 which read as under :
(i) Up to 31st March, 1975, interest under Section 214 is payable from the first day of April of the relevant assessment year to the date of the first assessment order. The amount on which the interest is to be paid is the amount of advance tax paid in excess of the tax payable by the assessee as calculated in the regular assessment (the first assessment order). The amount on which interest was payable did not vary due to the reduction or enhancement of tax as a result of any subsequent proceeding. But with effect from 1st April, 1985, while the period for which interest was payable remained constant, the amount on which the interest was payable, varied with the variation in the quantum of refund as a result of any subsequent orders.
(ii) If any tax paid pursuant to an assessment order after 31st March, 1975 (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by the ITO as payment of tax in discharge of the assessee's tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount under Section 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source must be treated as payment of income pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, in other words, the date of the assessment order.
(iii) With effect from 1st April, 1985, interest payable under Section 214 will increase or decrease in 'accordance with the variation in the quantum of the excess payment of tax brought about by orders passed subsequent to the regular assessment as mentioned in Sub-section (1A)."
Here, we are concerned with the third conclusion was arrived at by their Lordships. As per this conclusion w.e.f. 1st April, 1985, interest payable under Section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by orders passed subsequent to the regular assessment as mentioned in Sub-section (1A). In the aforesaid case of Modi Industries Ltd. v. CIT their Lordship has observed at p. 807 as under:
"Interest under Sub-section (1A) of Section 244 is payable when the tax or penalty paid by an assessee pursuant to an order of assessment has been reduced in appeal or any other proceeding. In such a case, an excess amount of tax or penalty paid by the assessee will have to be refunded and the Central Government has to pay interest on the excess amount from the date on which such amount was paid to the date on which the refund was granted. Of course, there can be no question of paying interest both under Section 214(1A) and Section 244(1A) simultaneously. The rate of interest being the same under both the provisions, there would be no difference in the actual amount of interest payable, whichever provisions is applied."
5.1. From the above, it would be clear that the interest under Section 244(1A) would be payable by taking into consideration the result of any appellate order. Therefore, in the instant case, the AO rightly withdrew the interest which was not payable after giving the appeal effect. On a similar issue, the Hon'ble Calcutta High Court in the case of ANZ Grindlays Bank Plc. v. CIT held that:
"With regard to the question that whether the interest paid under Section 214 to the assessee can be withdrawn or can be recovered or can be adjusted, Sub-section (1A) of Section 214 provides that where on completion of the regular assessment the amount on which the interest so paid under Sub-section (1) has been reduced, the interest shall be reduced accordingly, and the excess, if any paid, shall be deemed to be tax payable by assessee and the provisions of this Act shall apply. Admittedly, the net result after regular assessment as well as after giving effect to the orders of the Tribunal for the asst. yr. 1978-79 is that the assessee has not paid the tax deducted at source or advance tax more than the tax assessed. Therefore, in any case, if the interest has been paid, which is not payable under Section 214, that can be recovered.
It has been further held that the interest under Sections 214 and 244(1A) which was not due at all, or payable by the Revenue to the assessee, has rightly been adjusted."
From the above, it would be clear that where the tax deducted at source and advance tax paid by the assessee did not exceed the tax assessed either on regular assessment or after giving effect to the orders or the Tribunal, interest under Sections 214 and 244(1A) granted to the assessee was not due at all and had to be recovered from the assessee.
In the instant case also, there was no interest due after the final appeal effect given by the AO. Therefore, the AO was justified in withdrawing interest and to recover the same from the assessee.
A similar issue has also been decided by the Hon'ble jurisdictional High Court in the case of CIT v. Hansa Agencies (P) Ltd. (1998) 234 ITR 271 (P&H), by following the judgment of the Hon'ble Supreme Court in the case of Mod) Industries Ltd. v. CIT (supra). The Hon'ble High Court of Punjab & Haryana held that the assessee was entitled to interest on the entire amount or pre-assessment tax paid and found in excess of regular demand after giving effect to appellate order for the asst. yr. 1976-77 under Section 244(1A) of the IT Act. From the above, it would also be clear that the interest, if any, is required to be paid to the assesses after giving effect to the appellate order.
5.2. As regards to the decision of the Chandigarh Bench of the Tribunal, as relied upon by the learned counsel for the assessee is concerned, the assessment years involved in that case were 1983-84 and 1984-85 i.e., before the amendment which came into effect from 1st April, 1985. It is pertinent to mention here that the Hon'ble Gujarat High Court in the case of CIT v. Ahmedabad New Cotton Mills Co. Ltd. (supra) held that "the interest cannot be withdrawn under Section 244(1A) of the IT Act, even when the order as a result of which refund became payable, is subsequently reversed. "However, the Hon'ble Supreme Court has granted special leave to the Department to appeal against the aforesaid judgment of the Hon'ble Gujarat High Court vide order dt. 23rd July, 1993, in SLP No. 10954 of 1993. Before us. neither of the representatives of both the parties could throw any light as regards to the outcome of the judgment of the Hon'ble Supreme Court in the regular appeal. Therefore, we are unable to follow the judgment of the Hon'ble Gujarat High Court.
In view of the aforesaid discussions and keeping in view the ratio laid down by the Hon'ble Supreme Court in the case of Modi Industries Ltd. and Anr. v. CIT and Anr. (supra), by the Hon'ble Calcutta High Court in the case of ANZ Grindlays Bank Plc. v. CIT (supra) and by the jurisdictional High Court in the case of CIT v. Hansa Agencies (P) Ltd. (supra), we are of the opinion that the learned Dy. CIT(A) had rightly confirmed the action of the AO in withdrawing the interest while giving effect to the appellate order. In that view of the matter, we do not see any valid ground to interfere with the findings of the learned Dy. CIT(A) on this issue.
6. Ground No. 4 is general in nature, so does not require any comments on our part.
7. In the result, the appeal of the assessee is dismissed.