TMI Blog1991 (12) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rs. 10,157 for the assessment year 1971-72 became due. The following chart filed by the assessee would more clearly show the dates of payment of the taxes by the assessee and the dates of assessment orders. This chart would also show that the refunds were due for the assessment year 1969-70 for over a period of 13 years and for the assessment year 1970-71 for over a period of 18 years and for the assessment year 1971-72 for over a period of 19 years: 1969-70 1970-71 1971-72 Previous year ended31-3-196931-3-197031-3-1971 Date of assessment order21-2-19721-3-197311-1-1974 Taxes paid: Under section 240 9-7-1969 Rs. 5,220 Adv.17-1-1970Rs. 7,846 Rs. 13,200 on 26-10-1972 Under section 210 6-2-1969 Rs. 6,500 Adv.14-3-1970Rs. 3962 Rs. 6,670 on 21-4-1977 Under section 140A 2-8-1969 Rs. 870 Rs. 1,824 on3-5-1977 Refund Cr. (Advance in reality) ------------- ------------- ----------- Total tax 12,590 11,808 22,349 ------------- ------------- ----------- The periods and the figures are submitted by the assessee's representative Shri R.K. Tandon,C.A.which are not disputed by the Department. Nor are we going into that question. 2 The claims that the assessee made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be considered for the purpose of grant of interest under section 214. Thus, more or less, for the same reason the claims made by the assessee were rejected. 4. The assessee then appealed to the Appellate Assistant Commissioner and urged for the grant of interest on the refunds under these three sections. These appeals were dismissed agreeing with the views expressed by the Income-tax Officer. 5. For the years 1969-70 and 1970-71, the Dy. Commissioner (Appeals) held that the assessee was not entitled to interest either under section 214 or under section 244 as no such claim was ever made before the Income-tax Officer. For the assessment year 1971-72, interest under section 244A was already allowed to the assessee. The Dy. Commissioner (Appeals) held that no further interest was due to the assessee under any other section including section 214. Thus except the factual aspect, legal aspects were not discussed in depth. 6. Aggrieved by these decisions, the assessee appealed to the Tribunal. Soon thereafter, a request was made on behalf of the assessee by letter dated27-1-1989that these appeals in view of their importance of the questions of law involved, a Special Bench shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to compensate the assessee for the deprivation of the use of the money, the question would have to be whether the assessee paid excess money or not and not whether the assessee paid the taxes on the due dates either as advance tax or as self-assessment tax or as provisional tax. If taxes were paid under these three heads before the assessment was made and if those taxes are in excess of the assessed tax, the assessee would be entitled to interest. The question that would then arise is as to from which date the interest has to be calculated. In the case of excess payment of advance tax section 214 provided that the interest will be calculated from the end of the financial year to which it related to or in which they have to be paid. Though the requirement of the law is that advance tax should be paid on specified dates, the Courts have gone to the extent of saying, that if advance tax was not paid on the due dates but if paid before the end of the financial year, those payments would retain the character of advance tax and will have to be treated as such. Thus, strict adherence to the payment of advance tax on the due dates to be called as "advance tax" for the purposes of granting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He, therefore, submitted that on the entire excess amounts paid by the assessee, the assessee should be allowed interest and also interest on the interest under section 244A either from the end of the financial year to which these assessments relate or from the dates of the assessment orders. The Department have denied the assessee the refund for over decades. This is very arbitrary and unjust and this kind of attitude on the part of the Department led to loss of faith of the assessees in the administration of the Income-tax Act by the Income-tax Department. This must be rectified by the Tribunal. The Revenue is not expected to be arbitrary or partisan. Since there is no penal element in volved in the grant of interest, as held by the Supreme Court-See Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 the assessee has to be compensated for the loss of the user of the money. 9. On the other hand, the learned representative for the Department Shri Amitab Mishra submitted that when the Statute made certain provisions, they are meant to be complied with. By non-complying with those provisions, the assessee cannot plead for the grant of benefit of those sections on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 of the Constitution do not simply, merit consideration. The claims made by the assessee were rightly dealt with by the Department and either rightly rejected or rightly granted and no grievance whatever was caused to the assessee. The claims made now are all imaginary, do not fall within the provisions of the Income-tax Act and therefore, the assessee cannot claim the benefit of interest. That is how the counter Arguments of the Department proceeded before us. 10. We have carefully considered the arguments and the relevant orders passed by the authorities below as well as the sections providing for the payment of interest by the Government to the assessees. Section 214 provides for the payment of interest by the Central Government on the excess amount of tax paid. It provides: "214. (1) The Central Government shall pay simple interest at fifteen per cent per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the assessed tax from the 1st day of April next following the said financial year to the date of the regular assessment for the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and preserved while making provision for the payment of interest. 11. Insofar as the interest payable under section 214 is concerned, according to this Section the aggregate sum of instalments of advance tax paid during any financial year in which they are payable must exceed the amount of the assessed tax. A strict interpretation of this Section would mean that the instalments paid must be of advance tax and they must have been paid during the financial year on the due dates on which they are payable. Conversely if those instalments were paid, though payable in a financial year, but after the expiry of the financial year, they may not be considered as advance tax but is this interpretation correct? According to us, the strictness attached to the due dates under section 214 has been diluted by the very section itself and several High Courts interpreted section 214 as laying down that interest becomes payable, even if the advance tax was not paid on the due dates, but paid before the end of the financial year See Santha S. Shenoy v. Union of India [1982] 135 ITR 39 (Ker.) Secondly, this literal interpretation is not strictly in accordance with the scheme of the advance tax and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thirty-five days aforesaid is allowed, he may, with the previous approval of the, Inspecting Asstt. Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty-five days aforesaid, as may be specified by him in the notice of demand. (2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at fifteen per cent per annum from the day commencing after the end of the period mentioned in sub-section (1): Provided that, where as a result of an order under section 154 or section 155, or section 250 or section 254 or section 260 or section 262, or section 264, the amount on which interest was payable under this section had been reduced, the interest shall he reduced accordingly and the excess interest paid, if any, shall be refunded. (2A) Notwithstanding anything contained in sub-section (2) the Board may reduce or waive the, amount of interest payable by an assessee under the said sub-section if, on the recommendation made by the Commissioner in this behalf, it is satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be deemed to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form." This shows the scheme of advance tax payments, that advance tax instalment not paid on the due date, or before the expiry of the financial year, can be recovered subject to the levy of penalty or as the case may be by the Income-tax Officer exonerating the assessee as not in default. The amounts so paid, i.e., whenever paid before assessment do not cease to be advance tax. 12. Now in this context, we can also make a reference to section 222 of the Income-tax Act whereunder when an assessee is in default or is deemed to be in default in making a payment of tax, the Income-tax Officer can forward to the Tax Recovery Officer a certificate specifying the amount of arrears due from the assessee. The Tax Recovery Officer on receipt of such certificate shall proceed to recover from such assessee the amount specified therein in one or more of the modes specified in that section. This means that the arrears of advance-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re adjusted against the tax payable on regular assessment. Advance tax paid after the expiry of the financial year thus continues to be regarded only as advance tax. Thus, if the aggregate of the instalments so paid exceed the assessed tax then the excess shall be refunded to the assessee. There is no dispute thus for, except for the nature of the payments made after the financial year which we have shown that it retains its nature as advance tax because for failure to pay tax after due dates, they have to be recovered as advance tax. Section 214 not only provided for payment of interest by the Central Government on the excess amount of advance tax paid but also the method of calculation of such interest. When the amounts paid after the expiry of the financial year as we have seen continue to retain their character as advance tax, the excess payments of which are to be refunded along with the interest, the question would then arise as to from what date and how that interest is to be calculated. Interest cannot be calculated on such payments made after the expiry of the financial year from the first day of the financial year because by then the amounts were not paid. Payment of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings. Under section 237 a person has to satisfy "the income-tax Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf exceeds the amount with which he is properly chargeable under the Act" then the person shall be entitled to the refund of the excess. Thus if a person satisfies the Income-tax Officer that as a consequence of excess payment of advance tax, the tax payable by him exceeded the amount with which he was properly chargeable under the Act, he shall be entitled to the refund. Under section 243, if the Income-tax Officer does not grant the refund that became due under section 237, the Central Government shall pay the assessee simple interest at 15 per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of 3 months aforesaid to the date of the order granting the refund, subject to such other provisions as are made. Therefore, delay in the grant of refund entails the payment of interest, subject to the provisions of section 243. The claim of the assessee is that he would be entitled to interest under this section also from the date immediately following the expiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under section 237. Since section 237 referred only to tax and not to Interest due on the tax paid as a consequence of the operation of section 214, such interest even though payable to the assessee by the Central Government, does not reckon as refund within the meaning of section 243 read with section 237 and, therefore, the interest mentioned therein does not cover the interest that became payable by the Central Government under section 214. 15. Now we go to the third nature of interest agitated before us namely the interest under section 244. This section requires to be quoted in full to understand the object with which this is enacted. This section has intimate connection and is based upon section 240 which also needs to be quoted to understand it in the proper perspective : "Section 240. 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. Section 244. (1) Where a refund is due to the assessee in pursuance of an order referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee without the assessee having to make any claim in that behalf. In other words, under this section, the obligation of granting the refund was cast upon the Income-tax Officer. The only requirement is that the amount of refund must become due to the assessee as a result of appellate proceedings or other proceedings under the Act. The phrase "Other proceedings under the Act" used in section 240, in our opinion, covered the assessment proceedings. Thus if as a result of assessment proceedings, refund of any amount became due to the assessee, the Income-tax Officer shall refund the amount to the assessee without the assessee making any claim in that behalf. If our understanding of the section is correct, then once the Income-tax Officer finds that the advance tax paid by the assessee is in excess of the assessed tax, he has to refund that amount on his own without waiting for the assessee to make any claim in that behalf. This appears to us to be a rational construction to be placed upon section 240, particularly on the phrase "or other proceedings under this Act", it not having been defined anywhere. 16. Now section 244 intervenes to say that where a refund due in pursuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned above, any penalty or interest or any other sum levied on the assessee and later became payable to him as a consequence of any appellate order or other proceedings. It is that refund which if not paid by the Income-tax Officer on his own within the stipulated period, the Central Government is obligated to pay to the assessee simple interest because under General Law, which now stands settled by the Supreme Court in 160 ITR 958 (sic), the Central Government has to compensate the assessee for the deprivation of the money due to it. There is enough of evidence filed before the Income-tax Officer by way of challans to show that what was paid even after the expiry of the financial year was by way of advance tax. The Challans of tax payments clearly show that the amounts paid were by way of provisional and self-assessment tax in addition to advance-tax. We are, therefore, of the opinion that the assessee is entitled to interest under section 244 on the interest due under section 214 and also on the refunds due as a consequence of assessments made. Thus, to sum up, the assessee, according to us, is entitled to refunds of the excess amounts paid over the assessed tax, and to intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
