1987 (6) TMI 82 - AT - Income Tax

Summary

Issues:
Challenge of disallowance of interest u/s. 244(1A) of the Income-tax Act, 1961.

Analysis:
The assessee challenged the disallowance of interest u/s. 244(1A) of the Income-tax Act, 1961, opposing the department's decision. The initial assessment for the year 1981-82 calculated the total income at Rs. 22,72,530, leading to a tax payable amount. The assessee appealed against this assessment, primarily objecting to the disallowance of a claim by the company. The CIT(A) set aside the assessment for fresh consideration by the ITO, emphasizing the need for a reevaluation based on the evidence presented by the assessee. After the reassessment, the ITO accepted the total income but recalculated the tax payable, leading to a dispute regarding the claim of interest under sec. 244(1A).

The ITO rejected the assessee's claim of interest under sec. 244(1A), stating it was not a simple reduction of demand due to an appeal effect but a case of fresh assessment. The CIT(A) upheld this decision, considering it a partial setting aside of the original assessment order. The assessee appealed, arguing for the entitlement to interest under sec. 244(1A), supported by a legal precedent. The department contended that the term 'other proceeding' in the sub-section did not include an order made in compliance with an appellate decision.

Upon careful consideration, the tribunal found that the interpretation of sec. 244(1A) was crucial. It clarified that 'other proceeding' included assessments under sec. 251, and in this case, the amount found in excess was subject to interest payment. The tribunal determined that all conditions under sec. 244(1A) were met, entitling the assessee to simple interest on the excess amount paid. The tribunal directed the ITO to calculate and pay the interest to the assessee, ultimately allowing the appeal.

Therefore, the tribunal ruled in favor of the assessee, granting the claim for interest under sec. 244(1A) based on a thorough analysis of the legal provisions and precedents cited during the proceedings.