1996 (5) TMI 108 - AT - Income Tax

Advance Tax Assessment Year High Court Interest Payable By Government Mistake Apparent From Record Regular Assessment Supreme Court Total Income Tribunal s Order Writ Petition

Summary

Issues Involved:
1. Entitlement to interest under section 214(2).
2. Interpretation of section 214(2) and its applicability.
3. Entitlement to interest under section 244(1A).
4. Validity of the orders passed by the Assistant Commissioner and CIT(A).

Detailed Analysis:

1. Entitlement to Interest under Section 214(2):
The appellant contended that the CIT(A) wrongly upheld that the appellant's claim for interest under section 214(2) was not covered by provisions of section 154. The appellant argued that based on the judgment in Deep Chand Jain v. ITO [1984] 145 ITR 676, the claim for interest was not debatable and should have been granted. However, the Assessing Officer rejected the application under section 154, stating that the matter was still pending in the High Court and the judgment in Deep Chand Jain was not applicable due to differing facts. The CIT(A) confirmed this view, leading to the present appeal.

2. Interpretation of Section 214(2) and Its Applicability:
The Tribunal examined the interpretation of section 214(2) and noted that different High Courts had varied interpretations. The Bombay High Court in Carona Sahu Co. Ltd. [1989] 146 ITR 452 held that section 214(2) had no significance after the deletion of the proviso to section 210(3). Conversely, the Madras High Court in Rayon Traders (P.) Ltd. v. ITO [1980] 126 ITR 135 held that interest should be paid up to the date of refund under section 214(2). The Delhi High Court in National Agrl. Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928, despite hesitation, followed the Madras High Court's view. Given these differing interpretations, the Tribunal concluded that the issue was debatable and beyond the scope of section 154, thus denying the claim under section 214(2).

3. Entitlement to Interest under Section 244(1A):
The appellant also claimed interest under section 244(1A). The Tribunal referred to the Supreme Court's judgment in Modi Industries Ltd. v. CIT [1995] 216 ITR 759, which clarified that interest under section 244(1A) is payable from the date of payment of excess tax to the date of refund. The Tribunal noted that the Department had already refunded the principal amount of prepaid taxes, and therefore, interest under section 244(1A) was a necessary consequential relief. The Tribunal directed the Assessing Officer to grant interest under section 244(1A) on the entire amount of excess taxes paid by the assessee.

4. Validity of the Orders Passed by the Assistant Commissioner and CIT(A):
The Tribunal examined the validity of the orders passed by the Assistant Commissioner and CIT(A). It was noted that the Department had itself granted a refund of the entire amount of prepaid taxes pursuant to the Tribunal's order annulling the assessment. The Tribunal held that once the refund of the principal amount had achieved finality, the interest payable thereon under the relevant provisions of the Income-tax Act, 1961, was mandatory. Therefore, the orders of the Assistant Commissioner and CIT(A) were found to be against the law and facts of the case.

Conclusion:
The Tribunal concluded that the appellant's claim for interest under section 214(2) was debatable and beyond the scope of section 154. However, the appellant was entitled to interest under section 244(1A) as per the principles laid down by the Supreme Court in Modi Industries Ltd. The appeal was partly allowed, directing the Assessing Officer to grant interest under section 244(1A).