TMI Blog2018 (5) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... ny refund claim at all, the existing statute does not provide for levying interest. Clearly the legislature was of the opinion that even with the aid of the provisions of subsection (4) of section 143 of the Act, the existing provisions cannot be so interpreted as to levy interest in such a case. It is well settled that interpreting a statutory provision, one of the useful external aids is to ascertain what was the position prior to enactment of the statute and what mischief the statute seeks to address. If the very object of inserting section 234D to the Act was to address a situation which was inadequate to levy interest in a case like the present one, interpretation advanced by the Revenue must be rejected. If we accept the contention of the Revenue that existing section 234B of the Act already covered such a situation, insertion of section 234B of the Act would be rendered meaningless and the provisions of section 234D superfluous. Appeal allowed. - Tax Appeal No. 33 of 2007 - - - Dated:- 27-2-2018 - MR. AKIL KURESHI AND MR. B.N. KARIA, JJ. For The Petitioner : Mrs Swati Soparkar For The Respondent : Mr Nitin K Mehta, Mrs Mauna M Bhatt And Ms Pauramib Sheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter on it is found that the refund was eventually to be withdrawn upon the assessee's finally assessed tax liability. On the other hand, the Revenue contends that section 234B of the Act would encompass such a situation and the Assessing Officer therefore correctly charged the interest for the period during which the assessee enjoyed the benefit of the refund amount which was eventually found not payable to the assessee. 5. We will examine these contentions a while later. For the time being, we may complete the narration of the events. So far as the Assessing Officer's final assessment of the assessee's tax liability is concerned, there was a minor modification by virtue of the implementation of the rectification order passed by the Commissioner (Appeals). The final result was that against the returned income of ₹ 20,39,77,990/, the assessee's assessed income came to ₹ 23,15,58,790/. This is, however, of no great significance to us. 6. The issue of charging of interest on refund amount came up for consideration before the Commissioner of Income Tax (Appeals) who by his order dated 29.08.2000 allowed the assessee's appeal. He deleted charging of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, the assessee must pay interest. Section 234B of the Act would cover such a situation. Even if the area of operation of section 234D in some ways overlaps with that of section 234B of the Act, charging of interest under section 234B of the Act cannot be held impermissible if the case otherwise falls under section 234B of the Act, failing which, a situation would arise where assessee would enjoy sizable refund which is later on found to have been not due to him on which during the period when he enjoyed such refund, no interest would be charged. 9. Facts are undisputed and brief. We may summarize them as follows. For the assessment year 1994-95, the assessee's return of income was processed under section 143(1)(a) of the Act. This gave rise to a refund claim which was sanctioned. Refund was actually paid on 22.02.2005. Upon final assessment initially by the Assessing Officer and thereafter by the order of Commissioner (Appeals), it was found that the assessee's income was much higher than the assessee's returned income. Even after giving credit to the tax deducted at source, advance tax and self assessed tax, there was still outstanding tax dues of the department a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liable to pay simple interest at the rate of [onehalf] per cent on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. (2) 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 263 or section 264 or an order of the Settlement Commission under subsection (4) of section 245D, the amount of refund granted under subsection (1) of section 143 is held to be correctly allowed, either in whole or in part, as the case may be, then, the interest chargeable, if any, under subsection (1) shall be reduced accordingly. 12. Two explanations were added to the said section by Finance Act, 2012 but with retrospective effect from 01.06.2003. These explanations read as under: Explanation [1] -Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 2 . -For the removal of doubts, it is hereby declared that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses (a) and (b) thereof arises, the assessee would be liable to pay interest at the prescribed rate. These situations are; (a) upon regular assessment it is found that no refund was due or, (b) the amount refunded under subsection (1) of section 143 exceeds the amount refundable on regular assessment. This provision thus clearly covered the situation as in the present case, where initially refund was granted upon processing of the return under section 143(1) of the Act but upon regular assessment it is found that the case of the assessee is not one of refund but of recovery of unpaid tax. Contention of the counsel for the assessee that if section 234B of the Act already covered a situation as in the present case, what was the need for the legislature to introduce section 234B, would become relevant. In this context, we may refer to memorandum explaining the clause inserting section 234D in the Act, which reads as under: Charging of interest on excess refund granted at the time of summary assessment Under the provisions of section 143(4), where a regular assessment under section 143(3) or section 144 is made, any tax or interest paid under section 143(1) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 147 or section 153A shall be regarded as a regular assessment for the purposes of aforesaid section. This amendment will take effect from 1st June, 2003. 15. Perusal of above memorandum would immediately show that in order to address the mischief as in the present case, the legislature found it necessary to insert section 234D to the Act. In the preamble to this memorandum, reference is made to subsection (4) of section 143 of the Act providing that where a regular assessment under section 143(3) or section 144 is made, any tax or interest paid under section 143(1) shall be deemed to have been paid towards such regular assessment and if no refund is due on regular assessment or the amount refunded under section 143(1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded would be deemed to be tax payable by the assessee. Despite this, the legislature was of the opinion that in a case where refund is already granted upon processing return under section 143(1) of the Act but in eventual assessment it is found that the refund granted is in excess or that return does not give rise to any refund claim at all, the existing statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be done by the Legislature in enacting this amendment may be gleaned to a certain extent from the statement of objects and reasons appended to the Bill which eventually became the amending Act. Though it is not legitimate to refer to the statement of objects and reasons as an aid to the construction or for ascertaining the meaning of any particular word used in the Act or Statute (See Aswani Kumar Ghose v. Arabinda Bose,1953 S C R 1: (A I R 1952 S C 369) (1), nevertheless, this Court in The State of West Bengal v. Subodh Gopal Bose, 1954 S C R 587 at p 628 : (A I R 1954 S C 92 at pp. 104105) (J), referred to the same for the limited purpose of ascertaining the conditions prevailing at the time which actuated the sponsor of the Bill to introduce the same and the extent and urgency of evil which he sought to remedy. 18. There is no reason why the same principle cannot be applied by interpolation in order to interpret the existing provision in the background of the need for enacting a new provision. If the very object of inserting section 234D to the Act was to address a situation which was inadequate to levy interest in a case like the present one, interpretation a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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