1990 (4) TMI 96 - AT - Income Tax

Advance Tax, Application For Rectification, Debatable Issue, High Court, Interest On Refund, Mistake Apparent From Record

Summary

Issues Involved:
1. Entitlement to interest under Section 244(1A) read with Section 214(2).
2. Applicability of Section 154 for rectification of the order.
3. Binding nature of High Court decisions on Income Tax Authorities.
4. Interpretation and application of Section 244(1A) and Section 214(2).

Issue-wise Detailed Analysis:

1. Entitlement to Interest under Section 244(1A) read with Section 214(2):

The core issue revolves around whether the assessee is entitled to interest under Section 244(1A) in addition to Section 214(2). The Income Tax Officer (ITO) had allowed interest only under Section 214 but rejected the claim for interest under Section 244(1A). The CIT(Appeals) upheld this decision, stating that Section 244 applies only if the refund is not granted within three months from the end of the month in which the order was passed. Since the refund was granted within one month, the CIT(Appeals) held that the assessee was not entitled to interest under Section 244(1A).

2. Applicability of Section 154 for Rectification of the Order:

The assessee moved an application under Section 154 for rectification, which the ITO rejected, considering the issue debatable and not tenable for rectification under Section 154. The Tribunal clarified that a point is not debatable merely because a different High Court has taken a different view. The Tribunal emphasized that the ITO and any Tribunal under the jurisdiction of a High Court must follow the decision of that High Court, even if another High Court has a contrary view. This principle was supported by the ITAT Delhi in the case of Dalmia Dairy Industries v. ITO and other High Court decisions.

3. Binding Nature of High Court Decisions on Income Tax Authorities:

The Tribunal reiterated that the decision of the jurisdictional High Court is binding on all authorities and Tribunals under its jurisdiction. This includes the ITO, Income-tax Commissioners, and the Income-tax Appellate Tribunal. The Tribunal cited the Delhi High Court decision in the case of National Agricultural Co-operative Marketing Federation of India Ltd., which held that the assessee is entitled to interest on the refund of advance tax from the date of initial payment up to the date of refund.

4. Interpretation and Application of Section 244(1A) and Section 214(2):

The Tribunal applied the Delhi High Court's interpretation that advance tax loses its separate existence after the initial regular assessment and merges into the tax demand payable by the assessee. Consequently, advance tax can be worked into the provisions of Section 244(1A), entitling the assessee to interest on the refund from the date of excess payment to the date of actual refund. The Tribunal found force in the assessee's submission and accepted it, directing the department to calculate the interest under Section 244(1A) and grant it to the assessee.

In conclusion, the Tribunal allowed the appeal, directing the department to grant interest under Section 244(1A) to the assessee, reinforcing the binding nature of the jurisdictional High Court's decisions and clarifying the application of Sections 244(1A) and 214(2).