2024 (6) TMI 882 - AT - Income Tax

Re-determination of interest u/s 244A on Refund via rectification u/s 154 - HELD THAT - CIT(A) has fallen in error in making observation that the assessee has sought rectification of the determination of interest under section 244A of the Act while in fact the question was the period for which the interest should have been paid. It was not the question of making a conclusion after a long process so as to be outside the purview of section 154 of the Act. But, merely rectification of a clerical nature arising out of mistake in calculation of period for which interest is payable to assessee. It is settled proposition of law that if interest is reduced by virtue of Sub-section (3) of Section 244A on account of assessment u/s 143(3), the interest granted in earlier year gets substituted and it is the reduced amount of interest that would form part of income of that year. Thus, it would amount to mistake rectifiable under Section 154 of the Act. Reliance can be placed on Avada Trading Co. (P.) Ltd. 2006 (1) TMI 465 - ITAT MUMBAI This certainly leads to conclusion that Section 154 proceedings can be held in matters of calculation of the interest component payable u/s 244A of the Act. Admittedly, in the case in hand the refund has been credited on 25 February 2021 while the refund was determined on 20 February 2009. So assessee was entitled to interest up to 25/02/2021, which should have been rectified by the AO. Therefore we are inclined to allow the grounds raised.

Summary

Issues:
- Appeal against order dated 12.12.2022 for AY 2007-08 and order dated 14.12.2022 for AY 2008-09 of National Faceless Appeal Centre (NFAC)
- Re-determination of interest u/s 244A on Refund
- Jurisdiction of AO to re-determine interest u/s 244A under sec 154
- Rectification of interest under section 244A of the Act

Analysis:
The Assessee appealed against the orders of the National Faceless Appeal Centre (NFAC) for AY 2007-08 and AY 2008-09, challenging the re-determination of interest u/s 244A on Refund. The Assessee contended that the CIT-A erred in dismissing the appeal by holding that re-determination of interest u/s 244A is beyond the scope of sec 154 as it involves investigation of facts. The Assessee argued that the Assessing Officer (AO) passed the order u/s 154 against the application for re-determination of interest u/s 244A. Additionally, the Assessee raised concerns about the jurisdiction of the AO to re-determine interest u/s 244A under sec 154, suggesting that if such jurisdiction requires examining facts, the AO should quash the order u/s 154 and re-determine interest u/s 244A under appropriate provisions of the Act.

The Revenue claimed that the refund processed on 20.02.2009 under section 143(1) already included interest u/s 244A. The Assessee contended that the interest on refunds was not paid up to the date of credit in the bank account. The AO justified the non-payment of interest by citing generic reasons like bank account mismatch, without providing supporting evidence. The Assessee argued that interest should have been paid up to the date of credit of refunds in the account. The Tribunal observed that the AO's rejection of the Assessee's application was based on the absence of any mistake apparent on record, which the Tribunal found erroneous.

The Tribunal held that the CIT(A) erred in concluding that the Assessee sought rectification of interest under section 244A, whereas the issue was the period for which interest should have been paid. The Tribunal noted that rectifying the period for interest payment is a clerical error falling within the purview of section 154. Referring to legal precedents, the Tribunal emphasized that Section 154 proceedings can rectify calculation errors in interest payable u/s 244A. As the refund was credited later than the determination date, the Assessee was entitled to interest until the credit date. Consequently, the appeals were allowed, directing the AO to grant interest under section 244A up to the respective credit dates.

In conclusion, the Tribunal's decision highlighted the importance of rectifying clerical errors in interest calculations under section 244A and upheld the Assessee's entitlement to interest up to the credit dates of the refunds.