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2015 (4) TMI 3 - ITAT MUMBAI

2015 (4) TMI 3 - ITAT MUMBAI - TMI - Eligibility for interest on refund - Held that:- No substance in the argument of the Revenue that the delay n the refund was caused because of the conduct of the assessees. In fact, the assessee was questioning the proposition of the Revenue to assess the income in the hands of the Main Trusts. That is why the beneficiary trusts have filed their individual returns of income disclosing the benefits received from the main trusts also. But when KVSS was pronounc .....

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he assessees on refunds due to them. - Decided in favour of assessee.

Interest on interest - Held that:- According to decision of CIT vs. Gujarat Flouro Chemicals, [2013 (10) TMI 117 - SUPREME COURT]the interest which can be granted to the assessee on refund as per section 244A would be the interest provided in that section and no other interest on such statutory interest can be provided. Thus, it was pleaded by Ld. DR that there is no provision according to which assessee can be gran .....

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essment year 1984-85. Grounds of appeal in all these appeals are identical and read as under: 1) In law and in facts and circumstances of the Appellant s case, the learned CIT(A) has grossly erred in the points of law and facts. 2) In law and in facts and circumstances of the Appellant s case, the learned CIT(A) has grossly erred in holding that appellant is not entitled to interest on refund of ₹ 40,442/-. 3) In law and in facts and circumstances of the Appellant s case, the learned CIT(A .....

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e can be made applicable to other appeals. 3.Briefly stated the facts are as under: The assessees are beneficiary of K. Kacharadas Patel Specific Family Trust having 0.5% present share in parent Trust . The assessee Trust also derived 0.5% deferred share . For assessment year 1984-85 return was filed with ITO,A-1, Mumbai on 23/6/1984 showing total income of ₹ 1,10,290/- of which taxes were paid at a sum of ₹ 51,580/-. The returned income was accepted vide order dated 27/2/1987 passed .....

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O under section 16(5) of the Act vide order dated 28/11/2000 passed under section 155 of the Act and income of these assessees were computed at Nil. The AO allowed the refund as under: Total taxes paid ₹ 51,580/- Less: Refunded vide order dt. 29/2/88 ₹ 40,442/- Bal. refund due ₹ 11,138/- The Assessing Officer allowed refund of ₹ 11,138/- as per the above calculation The assessee submitted rectification application dated 7/12/2000 seeking following refund: 1) Refund of  .....

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hat assessee has paid advance tax of ₹ 31,780/- and self assessment tax of ₹ 19,800/-. The total amount of tax paid by the assessee is a sum of ₹ 51,580/-. As per income tax computation form dated 28/11/2000, copy of which has been filed at pages 10 to 11 of the paper book. It is in pursuance to order passed under section 155(2) of the Act and as per said computation a refund of ₹ 40,442/- was granted vide order dated 29/02/1988 and balance amount of ₹ 11,138/- was .....

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he provisions of section 244(1A) of the Act. It is the case of the assessee that on similar facts and circumstances in the cases of other beneficiaries there is decision of Special Bench, which is dated 7/7/2006, copy of which is filed at pages 33 to 63 of the paper book and it was decided by the Special Bench that the beneficiaries are entitled to get the interest. The Special Bench while deciding this issue in favour of the assessee has considered the provisions of KVSS 1998 and after consider .....

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ra of materials placed before us along with assessment, appeal and revision orders. 28.the first issue that came up for consideration is whether the dispute regarding the issue involved in these appeals were continued to exist at that point, of time. We find that this question is quite academic. The Main Trusts have sought settlement of their substantive assessments under KVSS which have been accepted and acted upon by the department. That itself showed that the controversy continued and existed .....

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stion and answer to the question. The CBDT has stated in unequivocal terms that declarations are to be made in respect of substantive assessments. The Board has clarified that the protective demand is not subject to recovery unless it is finally upheld. The Board has further explained that once the declaration in a substantive case or year is accepted, the tax arrear in protective case / year would no longer be valid and will be rectified by suitable orders in the normal course. In the present c .....

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assessment would no longer be valid. When the assessment is not subsisting and the demand is not valid, the amount paid by the assessee along with the return subject to protective assessment becomes refundable to the assessee. Therefore, we are of the considered opinion that the assessing officer has rightly accepted the prayers of the assessees and passed appropriate orders excluding the incomes which have already been considered in the hands of the Main Trusts under KVSS. Therefore, obviously, .....

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e tax once for all and reach finalities in the matters connected thereto. Even though KVSS was a special scheme, the KVSS did not propose to tax any income twice. Whether under the regular provisions of the Income-tax Act or under the scheme of KVSS what is to be assessed and subjected to tax is the real income once for all. KVSS does not create any artificiality. A case of double taxation of the same income cannot be endorsed under the KVSS. In other words, the Kar Vivad Samadhan Scheme, 1998 d .....

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made in the hands of the respective beneficiary trusts. Suppose the proposition made out by the department was acceptable to the assessee and the substantive assessments made in the hands of the Main Trusts have been accepted by the assessee, what would be the Position of the corresponding protective assessments made in the hands of the beneficiary trusts? The protective assessments would have become invalid as a result of which the Revenue would refund the amount of tax if any paid by the bene .....

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essments having been accepted by the assessees as such or having been settled under an available scheme known as Kar Vivad Samadhan Scheme, 1995. In either case the protective assessments become invalid whereby no demand can be enforced against those protective assessments. The consequence is that if the assessees have paid any amount of tax along with their returns considered for protective assessments, such taxes have to be refunded to them. 32. We do not find much force on the reliance placed .....

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the demand subsequently settled under KVSS. It is quite unnecessary to repeat that the income has already been assessed in the hands of the Main Trusts. Therefore, nothing remains thereafter to be assessed in the hands of the beneficiary trusts, as far as the income of Main Trust is concerned. Moreover, a case of assessment can be contemplated in the pre5ent cases because the stand taken by the assessees is that the, income of the Main Trusts has to be assessed in the hands of the individual be .....

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be accompanied alongwith the return of income. This is called self-assessment. When an assessee files a return with positive income and remits tax thereon u/s 140A, in fact, an assessment is being contemplated even though it is a self-assessment . Later on, when it is found that the income covered by the said return is not taxable the tax paid by the assessee in pursuance of that return has to be returned by the Revenue. Therefore, refund of tax is a must in this case. The proposition made by th .....

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act, the assessee was questioning the proposition of the Revenue to assess the income in the hands of the Main Trusts. That is why the beneficiary trusts have filed their individual returns of income disclosing the benefits received from the main trusts also. But when KVSS was pronounced by the Government of India, it was for the assessees to decide whether to take benefit out of that or not. Therefore, it is only when KVSS was promulgated, the assessee had an occasion to make a move and settle .....

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6/6/2008 in I.T Appeals Nos. Punitben K. Patel OSFDT And Others 284 cases Tax Appeal Nos. 1514 to 1797 of 2006, Manjulaben Pramodbhai Patel and Others, 64 Cases, Tax Appeal Nos. 573 to 618 and 1216 to 1233 of 2007 and Janak Pramodbhai Patel and Others 6 cases, Tax Appeal Nos. 182 & 204 of 2002 with Tax Appeal Nos. 27 of 30 of 2004. Copy of this order is filed at pages 64 to 96 of the paper book. 3.5 So far as it relates to findings of their Lordships on grant of interest our attention was in .....

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s regard was made to the case of M/s.Vruti Discretionary Family Trust, in respect of which AO disallowed the application of the assessee for grant of interest and Ld. CIT(A) restored the matter back to the file of AO to allow the interest as per law and AO vide his order dated 11/2/2010 has allowed such interest. Reference in this regard was made to the papers filed in the paper book as follows: (1) Rectification application of the assessee from pgs. 106 to 108 (2) Order passed by Ld. CIT(A) dat .....

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relates to Ground No.4, it was submitted by AR that since Revenue has deprived the assessee for long time for granting the interest or refund without any just cause, assessee should also be held entitled for receiving interest on interest. 5.On the other hand, after narrating the facts, it was submitted by Ld. DR that AO has rightfully denied interest to the assessee and referring to the order passed by Ld. CIT(A) it was submitted by Ld. DR that it has been clearly held by Ld. CIT(A) that accord .....

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me as its own and had paid the tax on its own volition, and in order to protect interest of Revenue the AO only made the protective assessment. No enforceable demand was created on the assessee. According to well settled position of law, in protective assessment demand is only contingent demand and not legally enforceable and thus, in reality assessee did not pay tax in pursuance of any order of assessment. Ld. DR further referred to the decision of Hon ble Supreme Court in the case of Modi Indu .....

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t relates to ground No.4, it was submitted by Ld. DR that according to decision of Hon ble Supreme Court in the case of CIT vs. Gujarat Flouro Chemicals, 358 ITR 291 (SC) w.e.f. 1/4/1989 the interest which can be granted to the assessee on refund as per section 244A would be the interest provided in that section and no other interest on such statutory interest can be provided. Thus, it was pleaded by Ld. DR that there is no provision according to which assessee can be granted interest on interes .....

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Bench has decided this issue in favour of the assessee and relevant observation of Special Bench have already been reproduced above. 7.1 The Revenue challenged the aforementioned order of Special Bench before Hon ble Gujarat High Court and Gujarat High Court has not only upheld the decision of Special Bench on the issue regarding grant of interest but Hon ble High Court has also directed Revenue authorities that they should not drag the assesseess to unnecessary avoidable litigation. In spite o .....

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