1994 (6) TMI 14 - HC - Income Tax

Summary

Issues:
Challenge to order denying interest under section 244(1A) of the Income-tax Act on refunds resulting from section 154 rectification orders.

Analysis:

The petitioner challenged the order of the Commissioner of Income-tax denying interest under section 244(1A) of the Income-tax Act on refunds arising from section 154 rectification orders. The Commissioner concluded that refunds from section 154 orders do not fall under the phrase "other proceedings" in section 240 of the Act. The petitioner claimed interest on refunds due to rectification orders for assessment years 1975-76 and 1977-78. The Commissioner rejected the claim solely on the ground that section 244(1A) did not apply to refunds from section 154 orders.

During the hearing, the petitioner's counsel argued that the Commissioner's order was illegal and contrary to section 244(1A) of the Act. He contended that sections 240 and 244 should be read together, emphasizing that section 240 mandates refunds without a claim when due as a result of any order passed in appeal or other proceedings. Conversely, the respondent's counsel argued that sections 240 and 244 do not apply to refunds from section 154 rectification orders.

The Court examined the relevant provisions under Chapter XIX of the Income-tax Act concerning refunds. Section 240 stipulates that refunds due to the assessee as a result of orders in appeal or other proceedings must be refunded without a claim. Section 244 provides for interest on such refunds. The Court noted that the phrase "other proceedings" in section 240 encompasses various orders beyond appeals, including those under section 154 rectification proceedings.

Referring to the Allahabad High Court's decision in Raj Kishore Prasad v. ITO, the Court emphasized that the term "other proceedings" in section 240 is broad and covers orders under section 263, supporting the assessee's claim for refund. The Court concluded that the Commissioner's order was illegal and that the assessee is entitled to interest under section 244(1A) for refunds resulting from section 154 rectification orders.

In the final judgment, the Court allowed the petition, quashed the Commissioner's order, and directed the respondent to grant interest on refunds for the relevant assessment years. The Court held that the assessee is entitled to benefit under section 244(1A) for refunds arising from section 154 rectification orders.