1985 (10) TMI 150 - AT - Income Tax

Summary

Issues:
1. Whether interest under section 214 of the Income-tax Act is admissible to the assessee by way of rectification under section 154 of the Act of the order of the ITO giving effect to the order of the Commissioner (Appeals) in which a refund has been determined to be issued to the assessee.

Analysis:
The appeal involved a question regarding the admissibility of interest under section 214 of the Income-tax Act to the assessee through rectification under section 154 of the Act. The case pertained to the assessment year 1975-76, where the ITO determined a refund for the assessee without granting interest under section 214. The assessee sought rectification for the interest amount, which was declined by the ITO. The Commissioner (Appeals) upheld the decision, stating that the issue of interest under section 214 in such cases was controversial due to differing opinions among High Courts on what constituted a 'regular assessment.'

The assessee argued, citing the Madras High Court's decision in Rayon Traders (P.) Ltd.'s case, that the order giving effect to the appellate authority's order should be considered a 'regular assessment,' making the interest under section 214 admissible. Additionally, reference was made to a Bombay Tribunal decision in IAC v. Garware Paints Ltd., where interest under section 214 was allowed up to the date of the original assessment. The Tribunal, following the Bombay High Court's decision in Binod Mills Co. Ltd. v. S.A. Kadre, EPTO, held that 'regular assessment' included orders giving effect to appellate orders, and interest was allowable up to the date of such orders.

On the department's side, it was argued that there was a wide divergence of judicial opinion on the term 'regular assessment,' as seen in various High Court decisions. The Bombay High Court's ruling in CIT v. Carona Sahu Co. Ltd. and the Kerala High Court's decision in CIT v. G.B. Transports interpreted 'regular assessment' as the first assessment made by the ITO. The department highlighted that when there is a divergence of opinion on a legal question, rectification under section 154 is not applicable.

The Tribunal considered the conflicting judicial opinions on whether an order giving effect to an appellate authority's order constituted a 'regular assessment.' Citing T.S. Balram, ITO v. Volkart Bros., the Tribunal emphasized that rectification should correct mistakes apparent from the records without controversy. The Tribunal noted the Calcutta High Court's stance that in cases of judicial divergence, rectification is not warranted. Relying on the Madhya Pradesh High Court's decision in CIT v. Jagannath Narayan Kutumbik Trust, the Tribunal concluded that the issue of interest under section 214 was debatable, and rectification under section 154 was not justified.

In conclusion, the Tribunal affirmed the Commissioner (Appeals)'s decision, stating that due to the wide divergence of judicial opinions on the term 'regular assessment,' the ITO's refusal to rectify the order under section 154 was justified. The appeal was dismissed.