1986 (5) TMI 52 - AT - Income Tax

Summary

Issues: Original assessment computation, treatment of advance tax, grant of interest on refund, conflict between provisions of s. 214(1) and s. 214(2) of the IT Act

In the judgment by the Appellate Tribunal ITAT CALCUTTA-B, the Department filed two appeals against the assessee. The original assessment for the assessment year 1977-78 computed the tax payable by the assessee, including credit for advance tax paid. Subsequently, the assessment was revised under section 251 of the IT Act, 1961, based on an appellate order by the CIT (A). The assessee filed applications for rectification of the refund amount, which the ITO initially declined. However, the CIT (A) directed the ITO to treat a specific amount paid as advance tax for the grant of interest under section 214 of the Act. The Tribunal noted that the ITO had initially treated the amount as advance tax but later revised his decision, which was deemed incorrect. The Tribunal referenced a relevant case to support the contention that the ITO could not revise the treatment of the amount as advance tax for interest calculation purposes. The Tribunal overruled the Department's objection and upheld the CIT (A)'s direction regarding the treatment of the amount for interest calculation.

In both the assessment years 1977-78 and 1979-80, the Department challenged the CIT (A)'s orders directing the ITO to calculate and grant interest on the refund up to the date of refund under section 214(2) of the Act. The Department argued that there was a conflict between the provisions of sub-sections (1) and (2) of section 214, advocating for following sub-section (1). However, the authorised representative for the assessee relied on specific court decisions to support the CIT (A)'s directive. The Tribunal cited the court decisions to conclude that the CIT (A) was justified in instructing the ITO to calculate and grant interest up to the date of refund instead of the date of regular assessment. Consequently, the Tribunal dismissed both appeals, affirming the CIT (A)'s decision on the interest calculation issue.

In summary, the judgment addressed the original assessment computation, the treatment of advance tax for interest calculation, and the conflict between the provisions of section 214(1) and section 214(2) of the IT Act. The Tribunal ruled in favor of the assessee, upholding the CIT (A)'s directives and dismissing the Department's appeals.