2022 (5) TMI 1410 - AT - Income Tax

Rectification u/s 154 - validity of rectification order u/s 154 - levy of interest under section 234D of the Act from the date of grant of refund instead of date of receipt of cheque of refund, renders the issue to be debatable issue - HELD THAT - We are of the considered view that the very fact that assessee objected to the levy of interest under section 234D of the Act from the date of grant of refund instead of date of receipt of cheque of refund, renders the issue to be debatable issue As without commenting upon the merit of the issue, the fact that in Development Bank of Singapore 2013 (8) TMI 175 - ITAT MUMBAI the Co-ordinate Bench of Tribunal held that interest under section 234D of the Act shall be chargeable from the date of grant of refund and while interpreting similar expression in section 244A, another Co-ordinate Bench of the Tribunal in M/s Small Industries Development Bank of India 2017 (9) TMI 1971 - ITAT MUMBAI held that interest under section 244A shall be granted up to actual date of receipt of the refund by the assessee, also renders this issue to be a contentious issue, which requires long-drawn process of reasoning and arguments from both the sides. The Hon ble Supreme Court in T.S. Balaram, Income Tax Officer v/s Volkart Brothers, 1971 (8) TMI 3 - SUPREME COURT held that for initiating proceedings under section 154 of the Act, the mistake apparent from record must be an obvious and patent mistake and not something which can be established by long drawn process of reasoning on points on which there may conceivably be two opinions. The point on which rectification under section 154 of the Act was done by the Assessing Officer in the present case is capable of divergent views and since, this issue is not alleged to have been settled by any decision of Hon ble Supreme Court, therefore, we are of the considered view that the present case clearly falls beyond the ambit of the expression mistake apparent from the record , and thus, the rectification order dated 14/03/2017 passed under section 154 of the Act is set aside. As a result, ground Nos. 1.1 and 1.2 raised in assessee s appeal are allowed.

Issues Involved:
1. Validity of rectification order under section 154 of the Income Tax Act.
2. Excess levy of interest under section 234D.
3. Short grant of credit for taxes.
4. Short grant of interest under section 244A.

Issue-Wise Detailed Analysis:

1. Validity of Rectification Order under Section 154:
The primary issue in this appeal is the validity of the rectification order passed by the Assessing Officer under section 154 of the Income Tax Act. The assessee contended that the issue of whether interest under section 234D should be computed from the date of grant of refund or from the date of receipt of the refund cheque is debatable and thus outside the purview of section 154. The Tribunal found that the issue is indeed contentious and requires a long-drawn process of reasoning, which is not permissible under section 154. The Tribunal cited the Supreme Court's decision in T.S. Balaram, Income Tax Officer v/s Volkart Brothers, which held that a mistake apparent from the record must be an obvious and patent mistake, not one that requires extensive reasoning. Consequently, the rectification order dated 14/03/2017 was set aside, and ground Nos. 1.1 and 1.2 raised by the assessee were allowed.

2. Excess Levy of Interest under Section 234D:
The assessee argued that the interest under section 234D was wrongly levied for 12 months instead of 11 months. The Tribunal noted that the assessee's objection to the levy of interest from the date of grant of refund instead of the date of receipt of the refund cheque renders the issue debatable. The Tribunal referenced the Development Bank of Singapore case, which held that interest under section 234D should be charged from the date of grant of refund. Given the contentious nature of the issue, the Tribunal found that it falls beyond the ambit of "mistake apparent from the record." Therefore, ground Nos. 2.1 to 2.5 were rendered academic and dismissed.

3. Short Grant of Credit for Taxes:
The assessee claimed that the Assessing Officer failed to grant credit for taxes deducted on income from foreign centers amounting to Rs. 24,77,010. The Tribunal noted that this issue does not arise from the rectification order under section 154 and upheld the learned CIT(A)'s decision. However, the assessee was given the liberty to raise this issue in pending proceedings against the assessment order dated 27/02/2015. Consequently, ground Nos. 3.1 and 3.2 were dismissed as infructuous.

4. Short Grant of Interest under Section 244A:
The assessee contended that the Assessing Officer did not correctly compute interest under section 244A, resulting in a shortfall of Rs. 2,97,241. The Tribunal observed that this issue also does not emanate from the rectification order under section 154 and upheld the learned CIT(A)'s decision. The assessee was allowed to raise this issue in the pending proceedings against the assessment order dated 27/02/2015. As a result, ground Nos. 4.1 to 4.3 were dismissed as infructuous.

Conclusion:
The appeal was partly allowed. The rectification order under section 154 was set aside due to the debatable nature of the issue concerning the levy of interest under section 234D. Other issues related to the short grant of credit for taxes and interest under section 244A were dismissed as they did not arise from the rectification order but could be raised in pending proceedings.

← Previous Next →