1995 (11) TMI 125 - AT - Income Tax

Summary

Issues Involved:
1. Justification for computing interest under section 244(1A) on the excess amount collected by garnishee action.
2. Interpretation of the phrase "paid by him" in section 244(1A).
3. Entitlement of the assessee to interest on the excess amount refunded.
4. Rectification of mistakes under section 154.

Detailed Analysis:

1. Justification for computing interest under section 244(1A) on the excess amount collected by garnishee action:

The primary issue in this appeal was whether the Appellant Commissioner of Income-tax (A/C) was justified in directing the Assessing Officer to compute interest under section 244(1A) on the excess amount collected by garnishee action under section 226(3). The original assessment resulted in a demand of Rs. 3,13,58,962, and a sum of Rs. 1,70,97,378 was collected by the Assessing Officer from the Chief Commissioner of Income-tax via garnishee action. Upon appeal, the demand was reduced, resulting in a refundable amount of Rs. 1,71,67,838. The assessee claimed interest on this excess amount under section 244(1A), which the Assessing Officer initially denied.

2. Interpretation of the phrase "paid by him" in section 244(1A):

The Assessing Officer argued that section 244(1A) envisages a situation where payment has been made by the assessee himself and does not cover cases where the department forcibly collects the demands through statutory modes of recovery. The tribunal disagreed, stating that the literal interpretation of "paid by him" could not have been intended by the Legislature. The tribunal emphasized that any mode of payment, whether by actual tender or by way of adjustment or otherwise through garnishee proceeding, would be sufficient for the purpose of entitling an assessee to claim the excess, inclusive of interest payable thereon.

3. Entitlement of the assessee to interest on the excess amount refunded:

The tribunal upheld the A/C's direction, stating that the assessee was entitled to interest under section 244(1A) from the date the amount was collected by the Assessing Officer through garnishee action to the date the refund was granted. The tribunal noted that the Assessing Officer's interpretation of the words "paid by him" was erroneous and that the mode of payment is immaterial. The tribunal reiterated that the cause of payment and not the mode of payment sets section 244(1A) in motion, and the assessee has a vested legal right to receive interest on the excess amount.

4. Rectification of mistakes under section 154:

The tribunal addressed the Assessing Officer's view that there was no mistake apparent on record upon failure to grant interest under section 244(1A). Citing the Supreme Court's decision in M.K. Venkatachalam, ITO v. Bombay Dyeing & Mfg. Co. Ltd., the tribunal held that misapplication of law is a mistake apparent on record rectifiable under section 154. The tribunal concluded that the failure to grant interest constituted a mistake that could be rectified under section 154, and there was no judicial controversy regarding the meaning and scope of section 244(1A).

Conclusion:

The tribunal upheld the A/C's order directing the Assessing Officer to compute and pay interest under section 244(1A) on the excess amount collected by garnishee action. The tribunal dismissed the revenue's appeal, affirming that the assessee was entitled to interest on the excess amount from the date of collection to the date of refund. The tribunal emphasized that the mode of payment is immaterial and that any excess payment resulting from garnishee action entitles the assessee to interest under section 244(1A).