TMI Blog1997 (11) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... onal tax before the Commissioner of Income-tax (Appeals), who cancelled the same, which was confirmed by the Income-tax Appellate Tribunal. The Income-tax Officer, on the receipt of the order of the Commissioner of Income-tax (Appeals), gave effect to the order of the Commissioner of Income-tax (Appeals), and in the order said to have been passed under section 215 of the Act, the officer had stated that the original assessment order passed under section 104 of the Act dated April 28, 1976, required revision to give effect to the order of the Commissioner of Income-tax (Appeals) and the mistake being apparent on the records, was required to be rectified under section 154 of the Act. The officer issued a notice to the assessee and after hearing the assessee, the officer passed an order on November 11, 1976, cancelling the order under section 104 of the Act, and consequently the amount of tax paid by the assessee amounting to Rs. 3,57,984 became refundable. He enclosed the refund order for the said sum. The assessee preferred an appeal against the order passed by the officer and contended that the Income-tax Officer should have granted interest under the provisions of section 244( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat interest cannot be granted on refund of tax paid in pursuance of an order under section 104 of the Act under section 244(1A) of the Act and the appeal is not maintainable against the order refusing to grant interest. He also submitted that it is not permissible for the assessee to file an appeal against the refusal to grant interest alone. The main thrust of the argument of learned counsel for the Revenue is that interest is merely consequential to the order passed to give effect to the order of the appellate authority and the assessee would be entitled to the interest as provided under section 240 of the Act and, therefore, no appeal would lie against the refusal to grant interest. Further, he submitted that the order passed under section 104 of the Act is not an order of assessment. He strongly placed reliance on the decisions of the Supreme Court in M. M. Parikh, ITO v. Navanagar Transport and Industries Ltd. [1967] 63 ITR 663, Punjab Produce and Trading Co. Ltd. v. CIT [1971] 82 ITR 619 and Pillani Investment Corporation Ltd. v. ITO [1972] 83 ITR 217 and submitted that the provisions of section 244(1A) of the Act would not apply to an order under section 104 of the Act. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the order made under section 154 or 155 of the Act having the effect of enhancing the assessment or reducing the refund or an order refusing to allow the claim made under either of the said sections. Clause (n) of sub-section (1) of section 246 of the Act provides for an appeal against the order passed under section 237 of the Act. Before considering the question whether an appeal would lie or not, it is necessary to notice some of the decisions relating to the construction that the court must place on the right of appeal. In Gopi Lal v. CIT [1967] 65 ITR 477, the Punjab High Court at Delhi held that the statute pertaining to a right to appeal should be given a liberal construction since it is remedial and the right of appeal should not be restricted or denied unless such a construction is unavoidable. The right of appeal is a valuable right to a litigant and the provision relating to "appeal" should be given a liberal construction and appeal is a remedy that is favoured in law, and it should never be denied unless it is forfeited or abandoned and in the case of any doubt, the appeal should always be allowed. The Supreme Court in the case of CIT v. Ashoka Engineering Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferred on the assessee under clause (n) of section 246 of the Act. Section 239 merely prescribes the procedure for claiming refund and the limitation for it. Section 240, which follows section 239, is in the nature of a proviso to section 239, which carves out an exception from the general rule laid down in section 239 requiring the making of a claim for refund in the prescribed manner and within the prescribed limitation. Section 240 lays down that where refund of any amount becomes due to the assessee as a result of any order passed in appeal or other proceeding under this Act, except as otherwise provided in this Act, the Income-tax Officer shall refund the amount to the assessee without his having to make any claim in that behalf. The result is that where the entitlement to refund is the result of any order passed in appeal or other proceeding under the Act, the procedure prescribed in section 239 for claiming refund is not required to be adopted by the assessee and it is incumbent on the Income-tax Officer to refund that amount without any such claim being made by the assessee. Sections 237, 239 and 240 have to be read together. Section 237 entitles the assessee to refund of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er question that arises is whether the interest and refund can be treated as one and the same. Learned counsel for the Revenue placed strong reliance on a decision of the Karnataka High Court in the case of CIT v. H. V Mirchandani [1986] 161 ITR 800, wherein the Karnataka High Court held that all orders under section 154 or 155 of the Act are not made appealable and the expression, "reducing a refund" envisaged under section 246(1)(f) of the Act presupposes that there should have been already an assessment order in which refund has been ordered and that refund upon rectification under section 154 of the Act is reduced. The court held that an order made for the first time under section 154 of the Act resulting in a refund cannot fall within the fold of section 246(1)(f) of the Act and no appeal would lie to the Appellate Assistant Commissioner or the Tribunal against that order. The court also held that interest to be charged is consequential to the order, and therefore, the interest, by way of giving effect to the appellate order, is an addition to the refund. The case of the Karnataka High Court no doubt supports the case of the Revenue. The Karnataka High Court noticed an earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the judgment of the Bombay High Court, where it was held that an appeal would lie against an order refusing to grant interest on the refund and, therefore, it cannot be held that the Supreme Court has disapproved the decision of the Bombay High Court as a whole. In Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429, the Supreme Court held that the interest payable for the default in the payment of cess is in reality a part and parcel of the liability to pay cess. In the above decision the Supreme Court was considering the case of interest on the delayed payment of cess payable by the assessee, and the principle laid down by the apex court would equally apply to the case where there is delay in refunding the amount by the Department and the interest payable in such circumstances would in reality be a part and parcel of the sum to be refunded. In Suresh B. Jain v. P. K. P. Nair [1992] 194 ITR 148, the Bombay High Court was considering the nature of the refund and the court held that the Income-tax Act is a statute aimed at levy and collection of the net tax liability of an assessee in which different operations are involved such as payment or receipt of interest, levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajan, learned counsel for the Revenue, relied upon a decision of the Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 and a decision of this court in the case of Triplicane Urban Co-operative Society Ltd. v. CIT [1980] 126 ITR 125, and submitted that the levy of interest is a part of the process of assessment and it is not open to the assessee to file an appeal against the refusal to grant interest alone, and if the assessment order is challenged, it is open to him to challenge the order refusing to grant interest. A similar situation was considered by the Andhra Pradesh High Court in the case of Bakelite Hylam Ltd. v. CIT [1988] 171 ITR 344, and the court held that where there is a total denial of liability on the part of the Revenue to pay interest on refund, an appeal would lie to the next appellate authority. The court following the decision in Central Provinces Manganese Ore Co. Ltd.'s case [1986] 160 ITR 961 (SC), held that where the Revenue denies totally the assessee's claim for interest, an appeal would lie to the appellate authority and if, however, there was no objection to grant interest, but the dispute related only to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment' as an assessment made under section 143 and section 144, but the fact remains that whether it is the original/first assessment or the revised assessment made pursuant to the appellate order, they are relatable to section 143 alone---and where it is a best judgment assessment, to section 144. Of course, where section 147 is resorted to, the order of assessment/reassessment will be made under that section but here again the procedural provisions contained in section 143 and section 144 do apply." Therefore, the distinction made by the Supreme Court whether such an order can be regarded as "regular assessment" is not applicable to the facts of the instant case. It is well-settled by the decision of the Supreme Court in the case of CIT v. Sun Engineering Works Private Limited [1992] 198 ITR 297 that the ratio of the case has to be decided with reference to the point in issue that was the subject-matter of consideration before the court. The relevant passage in the abovesaid case is as under : "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Act. Section 244(1A) was introduced by the Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975, and the section in so far as it is relevant for the purpose of this case, reads as under : "Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted." The submission of Mr. C. V. Rajan, learned counsel for the Revenue, is that the order under section 104 of the Act cannot be treated as an order of assessment or an order of penalty and as such the provisions of section 244(1A) of the Act are not applicable. As already stated, he relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly following the expiry of the previous year the statutory percentage of the total income of the company as reduced by the taxes and levies prescribed therein; he has also to determine whether, having regard to the loss incurred by the company in the earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable. It is after making these enquiries that the Income-tax Officer may make the order directing payment of additional super-tax at the rates prescribed. The process to be followed is not the process of assessment, but of determining whether the liability should be charged and imposed." The above decision was followed by the Supreme Court in Punjab Produce and Trading Co. Ltd.'s case [1971] 82 ITR 619 and Pillani Investment Corporation Limited's case [1972] 83 ITR 217, to hold that an order under section 23A does not assess income, profits or gains and as such it is not an order of assessment within the meaning of section 34(3) of the 1922 Act and to pass an order under section 23A of the 1922 Act the period of limitation prescribed therein does not apply. The question wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing for interest on refund amount, we are of the opinion, that the order of assessment under section 244(1A) of the Act should be given a wider meaning to envelop an order passed under section 104 of the Act as well. In so far as the assessee who paid the money in pursuance of the order under section 104 of the Act is concerned, whether the liability was imposed by virtue of the provisions of the Income-tax Act or by virtue of an order passed under section 104 of the Act, he is deprived of the use of the money as long as the order remains in force and when the said order is set aside or modified, the assessee is entitled to the refund of the amount. Though liability under section 104 of the Act is imposed by an order of the Income-tax Officer, the order has a statutory backing and further there is a statutory compulsion to pay the tax by virtue of the order and hence, there is absolutely no reason to restrict the meaning of the expression, "order of assessment" found in section 244(1A) of the Act only to an order of assessment made under sections 143 and 144 of the Act. That apart, section 104 of the Act also uses the expression, "assessee is liable to income-tax" and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
