2015 (10) TMI 2163 - AT - Income Tax

Levy of interest u/s 234D - excess refund given due to wrong computation of interest u/s 244A - rectification of mistake where barred by limitation - Held that - In the case on hand, there was a mistake in computation of the refund to be granted to the assessee pursuant to the order of the Hon ble High Court. The mistake was due to computation of interest u/s 244A of the Act payable to the assessee. This mistake in computing the interest u/s 244A of the Act has been rectified by passing the order u/s 154 of the Act on 31/3/2012, and with which the assessee has no quarrel. It is not the case of Revenue that the refund has arisen due to order u/s 143(1) of the Act. Therefore, the first necessary condition for charging of interest u/s 234D of the Act is not satisfied. Further, the refund has arisen due to an order giving effect to an appellate order, which was subsequently rectified u/s 154 of the Act, wherein the interest u/s 234D of the Act was charged. In these circumstances, the second condition that refund granted earlier becomes refundable to Revenue on regular assessment is also not satisfied.In view of the factual matrix of the case on hand, as discussed above, we are of the considered opinion that both the conditions for charging of interest u/s 234D of the Act are not satisfied. On the actual dated on which the undated order giving effect has been passed, except to observe that the documents brought on record by the learned DR clearly establish that the OGE was passed in the Fin. Year 2007-08 and, therefore, the Assessing Officer had time till 31/3/2012 to pass any rectification order. - Decided partly in favour of assessee.

Summary

Issues involved:
1. Whether the order u/s 154 of the Act dated 31/3/2012 is barred by limitation and needs to be set aside.
2. Whether the interest charged u/s 234D of the Act in the said order is wrong and requires cancellation.

Analysis:

Issue 1:
The appeal involved a dispute regarding the timeliness of the order u/s 154 of the Income-tax Act, 1961. The Assessing Officer passed the order on 31/3/2012, seeking to rectify an earlier order granting excess refund due to wrong computation of interest u/s 244A of the Act. The assessee contended that the rectification order was beyond the statutory limit and should be set aside. The Revenue argued that the undated order was passed on 8/5/2007, allowing time till 31/3/2012 for rectification. The Tribunal examined the documents and concluded that the rectification order was within the prescribed time limit, considering the order giving effect was passed in the financial year 2007-08. As the substantive issue on interest u/s 234D was decided in favor of the assessee, the timeliness issue was deemed academic.

Issue 2:
Regarding the second issue, the contention revolved around the legality of interest charged u/s 234D of the Act in the rectification order. The assessee argued that the interest charged was incorrect and should be withdrawn. The Tribunal analyzed the provisions of section 234D, which require specific conditions for charging interest, including a refund granted u/s 143(1) of the Act. The Tribunal cited relevant case laws to support the interpretation that interest u/s 234D applies when the refund granted becomes refundable. In this case, the refund arose from an order giving effect to an appellate order, not u/s 143(1) of the Act, and hence, the conditions for charging interest u/s 234D were not met. Consequently, the Tribunal allowed the assessee's appeal on this ground, ruling that the interest charged u/s 234D was not justified.

In conclusion, the Tribunal partially allowed the assessee's appeal for the assessment year 1992-93, setting aside the interest charged u/s 234D and dismissing the timeliness issue as academic.