2019 (10) TMI 1078 - AT - Income Tax

Interest levied u/s 234A, B and C - order passed charging interest u/s 220(2) - HELD THAT - We find that the interest u/s 220(2) which has been charged in the initial consequential order passed by the AO has been waived by the CIT(A)-V, Hyderabad. Subsequently, pursuant to directions of ITAT to treat the advance amount paid by assessee, as advance tax for the A.Y. 1995-96, the AO has passed the consequential order. We find that in the case of Bakelite Hylam Ltd. 1988 (2) TMI 46 - ANDHRA PRADESH HIGH COURT was considering the case of an assessee wherein while giving effect to the order of the ACIT in the quantum appeal, the interest on refund was not allowed u/s 244. The Hon ble High Court held that the order passed by the ITO giving effect to the decision of appellate authority is as much an assessment order as the one passed by him by way of regular assessment u/s 143 of the Act. As held that in the absence of specific right of appeal conferred by S.246, no appeal lies to the appellate authority against refusal to grant interest, but where there is total denial of liability to pay interest, the order is liable to be challenged in an appeal although there can be no appeal if dispute is only regarding the quantum of interest payable. There is a distinction between the principle of law, i.e. where there is total denial of assessee s claim, it is open to him to show that the claim for interest was well founded. The Tribunal granted certain reliefs to the assessee and in giving effect to the Tribunal s order, the Income tax Officer passed a modification order granting refund to the assessee. The assessee preferred an appeal to the Commissioner (Appeals) against the modification order and claimed that the Income tax Officer was in error in not granting interest on refund under section 244 of the Income Tax Act, 1961. Commissioner (Appeals) held that no appeal lay against an order giving effect to the appellate order of the Tribunal and that, in any event, no right of appeal was provided against the Income tax Officer s omission to grant refund u/s 244. The Tribunal upheld the view taken by the Commissioner (Appeals). On a reference Held - (i) that the assessee had a right of appeal against the modification order as if it were an assessment order itself and the appellate authority was bound to entertain the appeal and decide it on merits. (ii) That since there was total denial of liability on the part of the Revenue to pay interest on the refund, an appeal lay to the next appellate authority.

Summary

Issues:
Appeal against levy of interest u/s 220(2) of the Income Tax Act for AYs 1990-91 to 1995-96. Appeal against order charging interest u/s 220(2) for AY 1995-96. Appeal against consequential order adjusting advance tax paid for AY 1995-96. Appeal against dismissal of appeal challenging interest levied u/s 220(2) for AY 1995-96.

Analysis:
The case involved appeals by the assessee against the levy of interest u/s 220(2) of the Income Tax Act for AYs 1990-91 to 1995-96. The assessee contended that the interest was appealable under section 246 of the Act, citing the decision in Bakelite Highlam Ltd. vs. CIT. The CIT(A) and the DR supported the orders, relying on the decision in ANZ Grindlays Bank PLC vs. CIT. The ITAT considered the arguments and referred to the Bakelite case, emphasizing that an order giving effect to an appellate decision is as much an assessment order as a regular assessment. The ITAT concluded that the interest charged had been waived by the CIT(A) and directed a reconsideration by the CIT(A) based on the principles outlined in the Bakelite case.

The second issue pertained to an appeal against the order charging interest u/s 220(2) for AY 1995-96. The ITAT noted that the AO had passed a consequential order adjusting the advance tax paid by the assessee for that year. The ITAT referred to the Bakelite case to establish that the interest charged was appealable. Consequently, the ITAT set aside the issue for the CIT(A) to reconsider and decide on merits.

The third issue involved an appeal against the consequential order adjusting the advance tax paid for AY 1995-96. The ITAT directed the AO to follow the ITAT's directions and not grant double credit or waive interest levied under various sections of the Act. The ITAT reiterated the appealability of the interest charged u/s 220(2) based on the Bakelite case and set aside the issue for the CIT(A) to reexamine.

The final issue concerned the dismissal of the appeal challenging the interest levied u/s 220(2) for AY 1995-96. The CIT(A) had held that such an order was not appealable under section 234A of the Act. The ITAT, however, disagreed and referred to the Bakelite case to establish the appealability of the order. Consequently, the ITAT directed the CIT(A) to reconsider the issue on its merits.

In conclusion, the ITAT allowed the appeals of the assessee for all the relevant assessment years, emphasizing the appealability of the interest charged u/s 220(2) based on the principles outlined in the Bakelite case. The ITAT's decision was pronounced on 23rd October 2019.