1986 (4) TMI 96 - AT - Income Tax

Summary

Issues:
1. Whether interest on refunds due to the assessee for the assessment years 1968-69 and 1976-77 should be allowed.
2. Determination of the point at which the refund actually arose for the assessment years in question.

Analysis:
The appeals before the Appellate Tribunal ITAT CALCUTTA-B revolve around the allowance of interest on refunds claimed by the assessee for the assessment years 1968-69 and 1976-77. The AAC had allowed the assessee's claim and directed the ITO to grant interest under section 244(1) of the Income-tax Act, 1961. The department filed appeals against these decisions, arguing that the refunds actually arose at a later point than claimed by the assessee. The key contention was whether the refunds arose immediately upon the assessment being set aside or only upon the final assessment being made.

For the assessment year 1968-69, the ITO had initially demanded a sum from the assessee, which was paid. Subsequent assessments were set aside, leading to a final assessment where the entire demand became refundable. The ITO issued a refund voucher, but the dispute arose regarding the timing of the refund. The department contended that the refund arose only upon the final assessment, relying on sections 240 and 244 of the Act. Conversely, the assessee argued that the refund arose when the assessment was first set aside, triggering the start of interest after a specified period.

In the case of the assessment year 1976-77, a similar scenario unfolded where the original assessment was set aside, and a final assessment was made. The dispute centered on whether the amount paid by the assessee before the regular assessment, as advance tax and self-assessment tax, should be considered immediately refundable or kept as deposits for adjustment against the final assessment. The AAC sided with the assessee, but the department contended that the amount paid should not be immediately refundable.

Upon considering the contentions and facts, the Tribunal upheld the AAC's order for the assessment year 1968-69, stating that amounts paid after an assessment on the basis of a regular demand become immediately refundable. However, for the assessment year 1976-77, where the amount was paid before the regular assessment, the Tribunal held that such amounts should be kept as deposits for adjustment against the final assessment. Therefore, the appeal for the assessment year 1968-69 was dismissed, while the appeal for the assessment year 1976-77 was allowed.