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Issues involved: Interpretation of entitlement to interest under section 214 of the Income-tax Act, 1961 on the amount of tax ordered to be refunded as a result of an appellate order.
Summary: The reference under section 256(1) of the Income-tax Act, 1961, raised the question of whether the assessee was entitled to interest under section 214 of the Act. The main issue was whether the assessee should receive interest on the excess tax amount refunded due to the Appellate Assistant Commissioner's order in a quantum appeal. The Tribunal upheld the direction for interest, leading to the Revenue appealing against it. The Revenue contended that "regular assessment" in section 214(1) refers to the original assessment by the Income-tax Officer, not the appellate order. However, the Court disagreed, stating that the final assessment order, post-appellate directions, is by the Income-tax Officer. Therefore, the assessee is entitled to interest on the refund amount as per section 214(1) of the Act. The Tribunal's decision was supported by a previous case law. Various High Court decisions were discussed, with the Court aligning with the view of the Full Bench of the Gujarat High Court in a similar case. The Court rejected the reasoning of decisions opposing this view. Ultimately, the Court ruled in favor of the assessee, stating that the Tribunal was correct in awarding interest under section 214 of the Income-tax Act, 1961, on the tax refund amount. In conclusion, the reference was decided against the Revenue and in favor of the assessee, affirming the entitlement to interest under section 214 of the Income-tax Act, 1961, on the refunded tax amount. No costs were awarded in this matter.
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