2021 (8) TMI 922 - AT - Income Tax

Rectification of mistake u/s 154 - debatable issue - Granting short interest u/s 244A - not adjusting the refund granted first towards the interest receivable and the balance remaining against the tax amount receivable by the assessee - HELD THAT - Adjustment of refund issued earlier has to be adjusted against the interest and only thereafter against the principal amount of tax. The issue is squarely covered by the various decisions of Union Bank of India 2016 (8) TMI 688 - ITAT MUMBAI , DCIT vs. State Bank of Saurashtra 2017 (10) TMI 1252 - ITAT MUMBAI , Bank of Baroda vs. DCIT 2018 (12) TMI 1836 - ITAT MUMBAI and DCIT vs. Peerless General Finance Investment Co. Ltd. 2017 (8) TMI 237 - ITAT KOLKATA - Thus a refund issued to the assessee on various dates has to be first adjusted against the interest due on the income tax and thereafter against the principal amount. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to make adjustment of refund as indicated above. - Decided in favour of assessee.

Summary

Issues:
1. Adjustment of refund against interest under section 244A of the Act before adjusting against tax amount.
2. Whether the issue raised by the assessee is debatable and can be rectified under section 154 of the Act.

Issue 1: Adjustment of refund against interest under section 244A of the Act before adjusting against tax amount:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) regarding the adjustment of refund. The assessee argued that the refund should first be adjusted against the interest under section 244A of the Act and then against the tax amount. The assessee relied on various decisions to support this claim. The AO rejected the rectification application by citing a Supreme Court decision that only interest provided under the statute can be given. The Tribunal found that the adjustment of refund against interest before tax is supported by legal precedents cited by the assessee. Therefore, the Tribunal directed the AO to adjust the refund first against interest and then against the principal amount of tax due.

Issue 2: Whether the issue raised by the assessee is debatable and can be rectified under section 154 of the Act:
The assessee contended that the issue raised was not debatable as it was supported by previous judicial pronouncements. The assessee argued that the decision in a Supreme Court case was not applicable to the current situation as the claim was not for interest on interest but for the proper method of refund adjustment. The Tribunal agreed with the assessee's arguments and held that the issue was not debatable. The Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and directed the AO to adjust the refund as per the assessee's request.

In conclusion, the Appellate Tribunal ITAT MUMBAI allowed the appeal of the assessee, directing the AO to adjust the refund first against interest under section 244A of the Act before adjusting against the tax amount. The Tribunal held that the issue raised by the assessee was not debatable and should be rectified under section 154 of the Act based on established legal principles and precedents cited during the proceedings.