9911796707
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Issues involved: Whether the petitioner-firm is entitled to interest on income-tax paid when orders of assessment were set aside by the AAC and the ITO did not refund the amounts paid within three months.
Summary: The petitioner-firm paid tax based on original orders of assessment for three years. The AAC accepted the firm's contention of improper inquiry by the ITO and remanded the matter for fresh consideration. Fresh assessment orders were passed with reduced tax, and excess tax paid was refunded. The question is whether the firm is entitled to interest on the total amount paid as per the notices of demand. The petitioner's counsel argued that the original orders of assessment merged in the appellate orders, making the notices of demand ineffective and any amount paid immediately refundable. Citing a Supreme Court case, counsel contended that annulment of assessment results in refundable amounts. The Validation Act of 1964 dispensed with the need for a fresh notice of demand upon tax reduction in appeal. The court held that the notice of demand remains valid and enforceable to the extent of the tax finally determined due. Annulling the original assessment does not require refund but a correct determination of liability. The object of remand is to recalculate and refund any excess. Therefore, interest under section 244 does not arise until a fresh computation of tax is made. The court dismissed the challenge against the orders refusing interest to the firm.
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