9911796707
TMI Blog2014 (10) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. As per the facts stated in the petition, the petitioner filed his return of income declaring loss of Rs. 4,63,776.00 for the Assessment Year 2005-06. The Assessing Officer completed assessment under section 143(3) of the Act on 31.12.2007 by making addition of Rs. 3,01,58,459.00 on account of suppression of sales and Rs. 8,11,000.00 on account of unproved sales return. The above said order of assessment was unsuccessfully challenged by the petitioner before the Commissioner of Income Tax (Appeals). The petitioner then filed appeal before the Income Tax Appellate Tribunal ("the Tribunal" for short). Pending the appeal before the Tribunal, the assessing officer imposed upon the petitioner penalty of Rs. 1,13,32,499.00 by order dated 12.3.2010 under section 271(1)(c) of the Act on the ground of concealing particulars of income or furnishing inaccurate particulars of such income by the petitioner. The Tribunal allowed the appeal of the petitioner by order dated 22.2.2011. However, the amount of penalty was recovered from the petitioner by giving adjustment against the refund available to the petitioner of the tax paid for the F.Y. 2003-2004. The respondents then preferred appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act even without making the claim for refund of penalty amount. Mr. Shah submitted that the law also makes the assessee entitled to refund of penalty as a result the order passed in favour of the assessee in the appeal or in any other proceedings under the Act and the assessee shall be entitled to interest on such amount to be refunded. Mr. Shah submitted that it was only when the request made by and on behalf of the petitioner for refund of penalty amount was not acceded to, the petitioner was constrained to file the revision application under section 264 of the Act against the order of penalty. Mr. Shah submitted that instead of doing justice to the petitioner by refunding the penalty by making necessary order under Section 275(1A) of the Act or cancelling the penalty by exercising powers under section 264 of the Act, the Commissioner rejected the revision application on the ground of delay. Mr. Shah submitted that the Commissioner ought to have entertained the revision application or exercised the other powers under the Act for refund of the penalty especially when the very base of imposing penalty upon the petitioner was removed by the order of the Tribunal and confirmed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner was pending before the Tribunal against the order of the assessing officer as confirmed by the Commissioner of Income Tax (Appeals). However, the Tribunal, vide its order dated 22.2.2011, allowed the appeal of the petitioner. The effect of such order passed by the Tribunal is of quashing the order of assessing officer of making addition in the income of the petitioner for Assessment Year 2005- 2006. 7. We find that since the addition of the above said amount in the income of the petitioner for the purpose of assessment was removed by the order of the Tribunal, the penalty imposed upon the petitioner under section 271 (1)(c) of the Act was required to be cancelled by making necessary order under Section 275(1A) of the Act and the amount of penalty recovered from the petitioner by adjustment was required to be refunded to the petitioner. 8. What is provided by Section 275(1A) is that the order imposing or enhancing or reducing or cancelling the penalty may be passed on the basis of the assessment as revised by giving effect to the order in appeal. The concerned authority was thus required to make specific order for cancelling the penalty by giving effect to the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed: Provided further that the provisions of sub-section (2) of section 274 shall apply in respect of the order imposing or enhancing or reducing penalty under this sub-section." 10. Though time limit of six month is provided for the order contemplated to be passed of imposing, enhancing, reducing, cancelling penalty or dropping the proceedings for imposition of penalty for giving effect to any order passed in appeal, but when such order is to be passed in favour of the assessee, time limit for passing such order by the concerned officer should not come in the way of the assessee for cancelling the penalty on his getting success before the higher forum in appeal merely because the concerned officials failed to discharge his duty of giving effect to the order made in the appeal in favour of the assessee. 11. We find that when the petitioner had approached the Commissioner under Section 264 of the Act, seeking cancellation of penalty, instead of rejecting his revision application, on the ground of delay, the petitioner could have been given relief by making necessary order for cancelling penalty for giving effect to the order made in the appeal in his favour. 12. In above such vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. (2) * * * (3) * * * (4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years. Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures "1989", the figures "2006" had been substituted. 14. Mr. Shah, learned Senior Advocate submitted that the claim of the petitioner for interest is only under section 244A(1)(b) of the Act. 15. In the case of Sandvik Asia Ltd. Vs. Commissioner of Income Tax I,Pune and others reported in (2006)2 SCC 508, the Hon'ble Supreme Court has held and observed in para 30,31,32 and 34 as under:- 30. In our view, the Act recognizes the principle that a person should only be taxed in accordance with law and hence where excess amounts of tax are collected from an assessee or any amounts are wrongfully withheld from an assessee without authority of law the revenue must compensate the assessee. 31. At the initial stage of any proceedings un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 195(1) casts an obligation upon every person in this Country to deduct tax at the prevailing rates from out of any sum which is remitted to a non resident/Foreign Company. Sub Section (2) of Section 195 provides that where a person responsible for paying any such sum chargeable under the Act to a non resident/Foreign Company considers that the whole of such sum would not be the income chargeable in the case of recipient, he may make an application to the assessing officer/income tax officer to determine, by general or special order, the appropriate proportion of such sum so chargeable. The assessing officer is expected to determine such sum/tax which are deductible out of remittance to be sent to the recipient and only after deduction and payment of such sum/tax, the balance amount is to be remitted to the non-resident. We clarify here that it is the statutory obligation of the person responsible for paying such sum to deduct tax thereon before making payment, if such application is not filed. 15. Section 240 of the Act provides for refund on appeal etc. The Section envisages that if an amount becomes due to the assessee by virtue of an order passed in appeal, reference, rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch order was passed to the date on which refund was granted. The rate of interest under all the three sections was 15 per cent annum. 11.3. These provisions, apart from being complicated left certain gaps for which interest was not paid by the Department to the assessee for money remaining with the Government. To remove this inequity, as also to simplify the provisions in this regard, the Amending Act, 1987, has inserted a new Section 244A in the Income Tax Act, applicable from the assessment year 1989-90 and onwards which contains all the provisions for payment of interest by the Department for delay in the grant of refunds. The rate of interest has been increased from the earlier 15 per cent annum to 1.5% per month or part of a month, comprised in the period of delay in the grant of refund. The Amending Act, 1987, has also amended sections 214, 243 and 244 to provide that the provisions of these sections shall not apply to the assessment year 1989-90 or any subsequent assessment years." 23. It is also well settled principle that the courts must interpret the provisions of the Statute upon ascertaining the object of the legislation through the medium or authoritative forms in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the rate of interest is to be calculated at the rate of one and a half per cent per month or a part of a month comprised in the period or the periods from the date or, as the case may be, either the dates of payment of the tax or the penalty to the date on which the refund is granted. An explanation is appended to clause(b) of the aforesaid sub- Section to explain the meaning of the expression "date of payment of tax or penalty". It clarifies that the "date of payment of tax or penalty" would mean the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. 30. The refund becomes due when tax deducted at source, advance tax paid, self assessment tax paid and tax paid on regular assessment exceeds tax chargeable for the year as a result of an order passed in appeal or other proceedings under the Act. When refund is of any advance tax (including tax deducted/collected at source), interest is payable for the period starting from the first day of the assessment year to the date of grant of refund. No interest is, however, payable if the excess payment is less than 10 percent of tax determined u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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