TMI Blog1996 (5) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... pany filed its return of income on11-11-1980declaring taxable income of Rs. 11,36,270. The appellant had paid advance tax of Rs. 7,09,500 in one instalment on21-12-1979. The accounting year ended on30th June, 1979. The original assessment order was made on23rd September, 1983on taxable income of Rs. 19,76,556. The assessee preferred an appeal against the assessment order and the CIT(A) vide order dated21st January, 1984allowed partial relief to the assessee. The Tribunal vide its order dated9th July, 1985annulled the assessment order by holding that the same was barred by limitation of time. As a result of the said order passed by the Tribunal, the assessee became entitled to the refund of taxes paid as well as the amount adjusted out of the refund due to the assessee for some other years. However, no refund was issued by the Department after the order of the ITAT on the ground that the refund had been withheld under section 241 with the prior approval of the CIT on the ground that the Department was in the High Court against the order of the ITAT. The assessee was not satisfied with the order withholding the refund and as such filed a writ petition before the Hon'ble P H High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication under section 154 vide his order dated29th November, 1988. It was, inter alia, observed in the said order that the Department has filed an appeal in the High Court of P H,Chandigarhagainst the order of the ITAT annulling the assessment and the said appeal is still pending for disposal. Whenever the matter regarding the validity of the assessment order is finally settled by the Hon'ble P H High Court or the Supreme Court, the amount of interest shall be determined and refunded to the assessee if it actually becomes due to it. The Assessing Officer further observed that the judgment of Hon'ble P H High Court in the case of Deep Chand Jain v. ITO [1984] 145 ITR 676 relied upon by the assessee is not applicable on the facts of the assessee's case, as in the case of Deep Chand Jain, the assessee had filed original return showing taxable income of Rs. 38,469 and a revised return was filed on 27-11-1973 showing income of Rs. 6,130 which was below the taxable limits. On the basis of revised return the entire amount of tax paid in advance at Rs. 9,400 had become refundable in that case. Since there was no tax liability on the basis of the return, which had become barred by ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has arbitrarily rejected the assessee's contention for grant of correct amount of interest under section 244(1A) without any valid basis. The learned counsel further submitted that the request made by the assessee for grant of interest under sections 214(2) and 244(1A) cannot be regarded as debatable point in view of the judgment reported in CIT v. Mohanlal Kansal [1978] 114 ITR 583 (Punj. Har.) and Deep Chand Jain's case. In the alternative, the learned counsel submitted that even according to the latest judgment of the Hon'ble Supreme Court in the case of Modi Industries Ltd., the assessee would be entitled to grant of interest under section 214(1) read with section 244(1A) up to the date of refund. He thus strongly urged that interest as claimed by the assessee in its application under section 154 should be granted. 6. The learned Sr. D.R. submitted that the advance-tax was not paid by the assessee as per any demand made by the Assessing Officer under section 210 of the Income-tax Act, 1961 but it was paid according to assessee's own estimate of statement of advance-tax furnished by the appellant-company. It is not a case where no tax was payable as per the return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of an assessment. It has been held that on the failure of a regular assessment being made within the time prescribed or in the event of annullment of assessment order pursuant to which no further demand is required to be made under section 156, no consequence of refund of the entire tax collected on the total income shown in the returns filed by the assessee can ensue and such tax which is collected on the basis of the return filed by the assessee remains a valid and legal recovery in accordance with the provisions of the Act and there is a no question of any violation of Article 265 of the Constitution of India in respect of tax so recovered on the basis of the total income shown by the assessee in his return. There is no warrant for holding that the entire amount of income-tax which is properly chargeable under the Act and is collected by the Department in accordance with the provisions of the Act should be refunded on the failure to make a regular assessment. It has been further held that the tax payable on the basis of the returns filed by the assessee is treated as 'assessed tax' and does not at all made dependent on any regular assessment being made though, in the event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessments were annulled up to31st March, 1989the view taken by Hon'ble Karnataka High Court in the case of R. Gopal Ramnaryan may hold the field. 11. The year with which we are concerned is assessment year 1980-81. There is no doubt that the point as to whether the admitted tax liability on the basis of return of income submitted by the assessee is refundable or not in the event of cancellation or annullment of the assessment by the appellate authorities is a highly debatable point but in the present case the Department itself has chosen to adopt the view which is favourable to the assessee, as the Department has itself granted a refund of the entire amount of prepaid taxes by issuing a refund voucher of Rs. 5,92,695 on 17-12-1988. Such a refund was granted by the Department pursuant to the judgment given by the Hon'ble P H High Court in the case of assessee on13th April, 1987by which the Hon'ble High Court had quashed the order passed by the departmental authorities to withhold the refund. It is not known whether the Department has preferred any further appeal against the said judgment of the Hon'ble High Court before theHon'ble Apex Court. In view of the aforesaid fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer for giving effect of the ITAT's order dated9-7-1985or against the order granting the assessee a refund of Rs. 5,92,695. Therefore, the assessee's claim for grant of interest under section 214(2) will have to be considered keeping in mind the nature and scope of section 154. 14. The provisions of section 214(2) reads as under : " 214(2): On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made. " The Full Bench of the Hon'ble Bombay High Court in the case of CIT v. Carona Sahu Co. Ltd. [1989] 146 ITR 452, inter alia, held as under : " Under sub-section (2) of section 214 "on any portion of such amount as is refunded under this Chapter (Chapter XVII), interest shall be payable only up to the date on which the refund was made". The words "on any portion", "under this Chapter" and "only" negative the interpretation that has found favour in some courts and which Mr. Dastur advanced in the alternative to his submission that the words "regular assessment" in section 214 mean the last operative order of regular assessment. This interpretation is that the period under sub-section (1) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruses Chapter XVII-C dealing with advance tax payments---we say nothing about sections A and B of the Chapter with which we are not concerned---there is no provision which provides or involves the grant of refund except section 219 and that section again refers to the point of regular assessment or provisional assessment. In section 219 the word 'regular assessment' has obviously to be given the same meaning as in sections 214 and 215 and, therefore, section 214(2) can only cover the grant of refund consequent on the initial regular assessment or provisional assessment and at that stage, as already observed, the provisions of section 214(1) and (2) will be in direct mutual conflict. A refund as a result of the modification of the initial assessment order would be, however, a refund under section 240 which falls under Chapter XIX entitled 'refunds' and not under Chapter XXII-A. Thus, there is difficulty in interpreting the provisions of section 214(2) as warranting grant of interest up to the date of the refund. Indeed, even the assessee has claimed interest only up to the date of the revised assessment order and not the actual date of the refund. However, despite these difficulties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's claim for grant of interest, therefore, clearly comes within the provisions contained in Chapter XIX of Income-tax Act, 1961. 20. It is also a well-settled legal proposition that the judgment of Hon'ble Supreme Court can be a valid foundation for making a rectification order. Even if the assessee has made a claim for grant of interest under a wrong provision of law or even if no such claim has been made, it is obligatory on the revenue authorities to grant refund as well as interest which is required to be allowed to the assessee in the light of principles of law laid down by the Hon'ble Supreme Court. 21. In the present case, the regular assessment was made on23-9-1983. The year with which we are concerned is assessment year 1980-81. The Hon'ble Supreme Court in the case of Modi Industries Ltd. has clearly held that 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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussion. It would be recalled that while dealing with the interpretation of the expression "regular assessment". we have laid emphasis on the important consideration that it would be anomalous for an assessee to obtain interest on the advance tax paid by him between the date of the first assessment and its subsequent revision while an assessee who has paid the tax on the first assessment being made is not entitled to any such interest. The present provision amends this position and enables an assessee to get interest on the tax paid by him in pursuance of the original assessment after31-3-1975. If we review the position regarding the interpretation of section 214 in the light of this provision, one of two results will have to follow. Once will be that the expression "regular assessment" should be construed as referring to the revised regular assessment and if this interpretation is adopted then both the assessees, one who paid the tax in advance, and the one who pays it in pursuance of the initial assessment, will be equally placed, with the small difference that the former, apart from section 214(2), will get interest only till the date of the revised regular assessment while the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations made by theHon'ble Apex Courtare reproduced hereunder : " Meanwhile, sub-section (1A) of section 244 had also come into force with effect fromOctober 1, 1975. (S. Ranganathan), speaking for the Bench, held: (a) the payment of advance tax has material significance only till the initial regular assessment is made. Thereafter, it has no separate existence by itself, but gets merged in the tax demand payable by the assessee pursuant to the assessment order ; (b) the expression "regular assessment" from the 1922 Act to the present Act; (c) the fact that earlier no interest was provided on the amount refunded as a result of appeal/revision and the further fact that section 244, even when enacted, did not provide for interest from the date of payment or date of original assessment, but only after expiry of a reasonable period after the passing of the order (which entities the assessee to refund) should induce the Court to hold that interest is payable under section 214 only up to the original assessment order, (d) by interpreting the expression "regular assessment" as referring to original assessment, no anomaly will result; it is consistent with the scheme of the provisions rela ..... X X X X Extracts X X X X X X X X Extracts X X X X
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