TMI Blog2013 (11) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly allowable – Decided in favour of Revenue. - Income Tax Reference No. 98 of 1999 - - - Dated:- 8-11-2012 - Hon'ble Sunil Ambwani And Hon'ble Aditya Nath Mittal,JJ. ORDER 1. This Income Tax Reference under Section 256 (1) of the Income Tax Act, 1961 (the Act) is made by the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad, on the orders of the Commissioner of Income Tax, Kanpur, arising out of the Tribunal's order dated 30.12.1996 in ITA No. (64) (Alld)/1996 (consolidated order in ITA Nos. (64), 62 and 63 (Alld)/1996) for the assessment year 1974-75 on the question of law as follows:- "Whether on the facts and in the circumstances of the case, the ITAT was legally justified in holding that withdrawal of refund allowed u/s 244 (1A) of I.T. Act, 1961, could not have been made u/s 154 of the I.T. Act, 1961? 2. We have heard Shri R.K. Upadhyay, learned counsel appearing for the Commissioner of Income Tax. Shri S.K. Garg assisted by Shri Ashish Bansal appeared for the respondent-assessee. 3. The order sheet shows the urgent need of case management in the High Court at Allahabad, for speedy disposal of cases. The papers of this reference were received in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide order dated 26.2.1990. The Income-tax Appellate Tribunal vide its order dated 22.3.1991 rendered in I.T.A. No. 1107 (Alld)/1990 held that the assessment completed by the Assessing Officer under Section 144 of the Income-tax Act was time barred and non-est. Effect to the Tribunal's order was given by the Assessing Officer vide order under section 254 dated 25.9.1991, in which the refund was quantified at Rs. 39,55,474/- consisting of tax of Rs. 31,94,970/- paid under section 140A and interest of Rs. 7,60,504/- under section 244 (1A) of the Income-tax Act. The refund was, however, withheld under section 241 of the Income-tax Act. 3.3 Vide order under section 263 of the Income-tax Act, 1961 dated 10.8.1993, the C.I.T., Kanpur set aside the Assessing Officer's aforesaid order dated 25.9.1991 holding that proviso to section 240 was clarificatory and hence retrospective. It was held that no interest was payable to the assessee and the Assessing Officer was directed to pass a fresh order in accordance with law. In the order dated 11.10.1993 passed by the Assessing Officer in consequence of the C.I.T.'s order uder Section 263, the amount refundable to the assessee was worked out at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the three conditions prescribed under section 244 (1A) of the Income-tax Act were satisfied. The learned C.I.T. (A), after referring to the Tribunal's order dated 11.2.1994 in appeal against the order under Section 263 of the Income-tax Act, observed that the tax paid became refundable not on account of the order of the Tribunal, but because no legal and valid assessment was framed upto the period of limitation. It was held that the first condition under Section 244 (1A) was not satisfied. It was further held that when the refund of tax paid became due on account of limitation for assessment being over, there was no question of adjustment of pre-paid taxes on completion of an assessment. Also that the entire pre-paid taxes were paid before 1.4.1995. The C.I.T. (A) concluded that the prescribed conditions were not satisfied. The ld. C.I.T. (Appeals) dismissed the assessee's appeal vide her order dated 13.12.1995." 5. The assessee filed an appeal against the order of CIT (A) in the Tribunal. The Tribunal rejected the preliminary objections raised by the assessee but reversed the order of CIT (A). The Tribunal allowed the appeal on the ground that the Assessing Officer could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to law or by a process authorised by law, the rights of assessee and the revenue will continue to be governed by that order. The Tribunal, therefore, held that since the question of refund was debatable, the matter was outside the purview of Section 154 of the Act. 8. Shri R.K. Upadhyay, learned counsel appearing for the revenue submits that the AO did not commit any error in law in rectifying the mistake under Section 154 of the Act. The assessee was not entitled to refund under Section 244 (1A) as under this Section the refund pertains to only those cases where payments were made after 31.3.1975 in pursuance of an order of assessment or penalty. In the assessee's case no payment was made after 31.3.1975. The tax was paid by way of self assessment under Section 140-A and not in pursuance of any order of assessment or penalty. The assessee's petition under Section 154 for claiming interest of Rs.82,43,339/- was thus not maintainable and was rightly rejected as the assessee was not entitled to any interest under Section 244 (1) or Section 244 (1A). The interest of Rs. 13,87,906/- and a further amount of Rs.32,240/- already allowed to the assessee on 29.4.1994 and 17.11.1993 was wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soning applying provisions of Section 140-A (2) of the Act and the ratio of the judgment in ITO vs. Delhi Cloth Mills Ltd, 33 ITD 44 the payments under Section 140A of the Act on account of self-assessment get converted into payments towards regular assessments on the date of assessment and thus the matter of allowing refund was debatable. It is not correct to say that there could be conceivably two views, and in any case a view contrary to the view of the department was already taken. Shri S.K. Garg submits that in Seshayee Paper and Boards Ltd v. I.A.C. 157 ITR 342 (Mad) it was held that even a wrong order, which has attained finality, unless that finality is disturbed by any process known to law or by a process authorised by law, the rights of the assessee and the revenue will continue to be governed by that order. The withdrawal of refund of Rs.13,87,906/- by an order under Section 154 could not be made and that the order of CIT (A) thus rightly reversed. 12. The assessee-company paid certain amount of tax as self assessment under Section 140-A. The assessee-company was required to file its return under Section 139 (1) by 31.7.1974. It was, however, filed under Section 139 (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the AO allowing complete refund. 16. On 17.3.1994 the AO passed an order giving effect to the order under Section 254 of the Tribunal dated 11.2.1994. The interest refundable under Section 244 (1A) amounting to Rs.13,87,906/- was computed. 17. The assessee-company filed an application under Section 154 on 5.5.1994 seeking rectification of the quantum of the interest in the order dated 17.3.1994 and claiming the interest of Rs.82,43,349/- as against Rs.13,87,906/- determined by the AO. At this stage on 23.9.1994 the AO issued a notice for rectification under Section 154 proposing to withdraw the interest of Rs.13,87,906/- allowed under Section 244 (1A) in the order dated 17.3.1994, giving rise to the proceedings upto this reference. 18. The argument addressed by the parties revolve around the jurisdiction of the AO under Section 154 of the Act to withdraw the amount of interest under Section 244 (1A) computed at Rs.13,87,906/-. If this interest is allowable without any long drawn process of reasoning on points where there may not be conceivably two opinions, the AO could not have drawn the proceedings. If such interest was not allowable plainly on the facts and cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as paid neither as advance tax, nor as the tax deductible at source. The tax was paid voluntarily by way of self-assessment for the assessment year 1974-75. The assessment could not be completed on account of the interim order passed by the High Court staying the proceedings for special audit under Section 142 (2A) of the Act. The interim order continued from 15.2.1978 upto 3.3.1987. The department did not come to know about the vacation of the interim order. Finally assessment was made on 10.11.1989 after a period of 15 years for which the assessee-company was responsible. The tax was computed on the total income of Rs. 62 lacs on which the tax was assessed giving credit to the payment of Rs. 31,94,970/- by way of an order of rectification under Section 154 passed on 21.11.1989. The assessee company took advantage of the interim order of the Court dated 15.2.1978 which was vacated on 03.3.1987, of which the department did not get any, nor was given information. The assessee-company taking advantage of these facts got the assessment oder set aside as time barred and nonest by CIT (A) vide his order dated 26.2.1990, and got the entire refund of the tax deposited by it and also claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained by the Income Tax Officer and adjusted against the tax demand must be treated as payment of tax pursuant to the assessment order by the assessee. Advance tax or tax deducted at source loses its identity as soon as it is adjusted against the liability created by the assessment order and becomes tax paid pursuant to the assessment order. Therefore, the phrase `any amount having been paid.....after March 31, 1975' occurring in sub-section (1A) of Section 244 must be construed to mean not only the amount which has been paid directly pursuant to the order of assessment but will also include the amount of tax deducted at source and advance tax, which were lying to the credit of the assessee and were ultimately adjusted and set off against the tax demands raised in the assessment order. The excess amount of tax paid under sub-section (1A) of Section 244 must be calculated by treating the amount of tax deducted at source and the amount of advance tax which were adjusted against the assessee's liability to pay tax as well as the amount of tax paid directly upon the assessment under Chapter XVII of the Income Tax Act. In other words, so far as the amount of advance tax is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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