1992 (8) TMI 113 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Appellate Commissioner was justified in holding that the Assessing Officer cannot withdraw the interest allowed under section 244(1A) of the Income-tax Act.
2. Whether the Appellate Commissioner possessed the power to reduce or withdraw the interest granted under section 244(1A) while giving effect to the direction of the appellate authority.
3. Whether the Appellate Commissioner erred in suggesting that the Assessing Officer could modify or refuse the amount of interest already paid under section 244(1A) by rectifying his order.

Detailed Analysis:

Issue 1: Withdrawal of Interest under Section 244(1A)
The revenue's appeals contended that the Appellate Commissioner was not justified in holding that the Assessing Officer cannot withdraw the interest allowed under section 244(1A) of the Income-tax Act. The Appellate Commissioner had ruled that the Assessing Officer did not have the power to withdraw the interest already granted to the assessee-company under section 244(1A), even though the assessments for the years under appeal were made under section 147 pursuant to notices issued under section 148. The Appellate Commissioner agreed with the assessee's contention that any modification or reduction of the interest should have been done by rectifying the order under which such interest payment was allowed.

The tribunal, after hearing the rival submissions and perusing the relevant provisions of the Income-tax Act, supported the Appellate Commissioner's decision. It was held that the Assessing Officer does not possess any power or authority to withdraw, reduce, or increase the interest already granted under section 244(1A). The tribunal emphasized that legislative intent did not provide such powers to the Assessing Officer, and any such action would require explicit legislative provision, which was absent in this case.

Issue 2: Power to Reduce or Withdraw Interest
The assessee's cross objections argued that the Appellate Commissioner did not possess the power to reduce or withdraw the interest granted under section 244(1A) while giving effect to the direction of the appellate authority. The tribunal agreed with the assessee, stating that the Appellate Commissioner was correct in holding that the reassessment order under section 147 cannot affect the provisions of section 244(1A) under which the assessee got interest for the excess payment of tax.

The tribunal further clarified that interest granted under section 244(1A) was for the excess payment of tax found at a particular point of time, and any subsequent reassessment increasing the tax liability does not empower the Assessing Officer to withdraw the interest already granted. The tribunal cited the Supreme Court rulings in CST v. Modi Sugar Mills Ltd. and Baidyanath Ayurved Bhawan (P.) Ltd. v. Excise Commissioner, emphasizing that assumptions and presumptions are not permissible in fiscal provisions.

Issue 3: Rectification of Interest Payment
The assessee also contended that the Appellate Commissioner erred in suggesting that the Assessing Officer could modify or refuse the amount of interest already paid under section 244(1A) by rectifying his order. The tribunal found merit in this argument, stating that the Appellate Commissioner's suggestion amounted to interference with the judicial or quasi-judicial function of the Assessing Officer. The tribunal held that any rectification order passed upon instigation or direction from a higher authority would not be valid.

The tribunal referenced the decision of the Hon'ble Calcutta High Court in the case of ITO v. Eastern Scales (P.) Ltd., which supported the position that rectification orders must be passed independently by the Assessing Officer without external influence.

Conclusion:
The tribunal dismissed the revenue's appeals and allowed the assessee's cross objections. It was concluded that the Assessing Officer does not have the power to withdraw, reduce, or increase the interest granted under section 244(1A) of the Income-tax Act. Additionally, the tribunal held that the Appellate Commissioner's suggestion for rectification was unjustified and amounted to undue interference with the Assessing Officer's judicial functions.