1992 (11) TMI 143 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to interest under section 244(1A) of the Income-tax Act.
2. Validity of the Income-tax Officer's (ITO) order under section 154.
3. Commissioner's exercise of powers under section 263.
4. Applicability of section 244(1A) to taxes paid before 31-3-1975.
5. Jurisdiction of the Tribunal to consider new points not raised by the Commissioner.

Detailed Analysis:

1. Entitlement to Interest under Section 244(1A):
The assessee filed a petition under section 154 on 9-1-1986, seeking interest under section 244(1A) for excess tax paid. The original assessment raised a demand of Rs. 5,98,398, collected in full. This assessment was reopened, and a fresh assessment was made, leading to a refund claim with interest under section 244(1A). The ITO granted interest from the date of tax payment to the date of the fresh assessment order. The Tribunal found that the assessee was entitled to interest under section 244(1A) as the refund became due following the cancellation of the ex-parte assessment.

2. Validity of the ITO's Order under Section 154:
The ITO allowed the interest claim under section 154, which was contested by the Commissioner. The Tribunal held that the ITO's order was correct, as the failure to grant interest constituted a "mistake apparent from the record." The Tribunal emphasized that the provisions of section 244(1A) were mandatory and applicable to refunds due prior to 1-4-1989.

3. Commissioner's Exercise of Powers under Section 263:
The Commissioner scrutinized the ITO's order and concluded that granting interest was incorrect, thus invoking section 263 to withdraw the interest. The Tribunal ruled that the Commissioner was not justified in invoking section 263, as there was no error in the ITO's order, nor was there any prejudice to the interests of the Revenue. The Tribunal cited the decision of the Punjab and Haryana High Court in CIT v. Jagadhri Electric Supply & Industrial Co., emphasizing that the Tribunal cannot uphold the Commissioner's order on grounds not mentioned by the Commissioner.

4. Applicability of Section 244(1A) to Taxes Paid Before 31-3-1975:
The Departmental Representative argued that section 244(1A) applied only to amounts paid after 31-3-1975. The Tribunal found this argument factually incorrect, as some payments were made after 31-3-1975. The Tribunal noted that the Commissioner did not raise this point in his order, and thus, it could not be considered by the Tribunal. The Tribunal also referenced the Allahabad High Court's decision in Hari Nandan Agarwal (HUF) v. ITO, supporting the view that refunds due as a result of orders under section 146 are entitled to interest.

5. Jurisdiction of the Tribunal to Consider New Points:
The Tribunal reiterated that it could not consider new points not raised by the Commissioner in his order under section 263. This principle was supported by the Punjab and Haryana High Court's decision, which stated that the Tribunal must decide appeals based on the grounds mentioned by the Commissioner.

Conclusion:
The Tribunal concluded that the assessee was entitled to interest under section 244(1A) and that the ITO's order under section 154 was correct. The Commissioner's order withdrawing the interest was not justified. The Tribunal canceled the Commissioner's order and allowed the appeal, affirming the assessee's entitlement to interest on the refund.