2016 (4) TMI 1239 - AT - Income Tax

Rectification of mistake u/s 154 - withdrawing a portion on interest granted to the assessee u/s. 244A of the Act on the refund - Held that - The issue sought to be rectified u/s. 154 of the Act is a debatable issue, since an identical issue has been decided in favour of the assessee by the co-ordinate bench of Tribunal Tata Power Co. Ltd. (2015 (8) TMI 87 - BOMBAY HIGH COURT). The very fact that an identical issue has travelled up to the level of Tribunal would show that the said issue is a debatable one. The Hon ble Supreme Court in the case of T.S.Balram ITO Vs. Volkar Bros.(1971 (8) TMI 3 - SUPREME Court) has held that the decision taken on a debatable point of law shall not constitute a mistake apparent from record. Accordingly we are of the view that the impugned rectification orders are liable to be quashed. Accordingly we set aside the order of Ld CIT(A) and quash the impugned rectification orders. Even on merit we notice that claim of the assessee is supported by the decision of Hon ble Bombay Court rendered in the case of Tata Power Co. Ltd. (Supra). It is also pertinent to note that the decision rendered by the Co-ordinate bench of Tribunal in the case of Tata Power Co. Ltd (supra) was available on the date of passing of impugned rectification orders. Accordingly, we are of the view that the assessee wins on merits also - Decided in favour of assessee.

Summary

Issues involved:
Cross appeals against orders passed by CIT(A) regarding rectification of interest granted to assessee u/s. 244A of the Income Tax Act for various assessment years.

Detailed Analysis:

1. Rectification Order by Assessing Officer:
- The Assessing Officer passed rectification orders u/s. 154 of the Income Tax Act, withdrawing a portion of interest granted to the assessee u/s. 244A on the refund arising from the appellate order.
- Assessee challenged the validity of the rectification order and the withdrawal of interest before the CIT(A).
- CIT(A) upheld the validity of the rectification order and directed the Assessing Officer to follow a decision for a different assessment year.
- Assessee and revenue both filed appeals against the CIT(A)'s orders.

2. Contentions of the Assessee:
- Assessee argued that interest element should not be deducted, and only the tax portion of the refund should be deducted while calculating interest on the enhanced refund.
- The Assessing Officer initially accepted this claim but later reduced the interest already paid u/s 244A from the tax portion of the refund, leading to a reduction in interest due to the assessee.

3. Legal Arguments and Precedents:
- The assessee cited a similar case decided by a co-ordinate bench of the Tribunal where it was held that the interest element of the refund granted earlier should not be deducted from the enhanced refund.
- Citing the Supreme Court decision in T.S. Balram ITO Vs. Volkart Bros., the assessee argued that debatable issues cannot be rectified u/s. 154 of the Act.

4. Tribunal's Decision:
- The Tribunal found that the issue was debatable as it had been decided in favor of the assessee by a co-ordinate bench previously.
- Quashing the rectification orders, the Tribunal held that the issue did not constitute a mistake apparent from the record.
- The Tribunal also noted that the decision of the Hon'ble Bombay High Court supported the assessee's claim.

5. Final Decision:
- The Tribunal allowed all appeals filed by the assessee and dismissed the appeals filed by the revenue.
- The Tribunal upheld the assessee's claim that interest should not be deducted from the enhanced refund, in line with previous decisions and legal principles.

In conclusion, the Tribunal's decision favored the assessee, holding that the rectification orders reducing the interest granted were not valid as the issue was debatable and supported by legal precedents. The Tribunal emphasized that debatable legal points cannot be rectified under section 154 of the Income Tax Act, ultimately ruling in favor of the assessee and dismissing the revenue's appeals.