2009 (12) TMI 271 - HC - Income Tax

Refund- Interest- Assessing officer imposed interest u/s 234A, 234B, 234C. The assessee went before the Settlement Commission requesting it to waive the interest on the ground that the levy of interest would cause hardship to him. Accordingly, the matter was settled by waiving interest levied by Assessing Officer. The assessee claimed interest on the amount that was refunded as a consequence. The Assessing Officer rejected the claim but the Tribunal held that assessee was entitled to such interest. Held that- The order of refund was passed by the Settlement Commission not on account under the Act in favour of the assessee due to any wrong or any illegal order passed by the Assessing Officer, but only on account of the hardship pleaded by the assessee. The Settlement Commission had exercised its discretionary power. The assessee was not entitle to claim interest on the refund.

Issues:
Challenge to order passed by Income-tax Appellate Tribunal on interest entitlement under section 244A of the Income-tax Act; Jurisdiction of appellate authorities to entertain statutory appeal against Assessing Officer's decision on interest entitlement.

Analysis:
1. The Revenue appealed the Income-tax Appellate Tribunal's decision confirming the Commissioner of Income-tax (Appeals) order, raising questions on interest entitlement under section 244A of the Income-tax Act. The assessee, a partnership firm, sought waiver of interest under sections 234A, 234B, and 234C due to hardship, which was granted by the Settlement Commission. The Deputy Commissioner then refunded the interest, but denied interest under section 244A. The Commissioner of Income-tax (Appeals) allowed the appeal, leading to the Revenue's appeal before the Tribunal.

2. The Tribunal upheld the assessee's right to claim interest under section 244A, prompting the Revenue's current appeal. The court reframed the substantial question of law to address whether the assessee can claim interest under section 244A when interest was waived due to hardship by the Settlement Commission. The court noted that the interest waiver was discretionary and not due to any error by the Assessing Officer.

3. Section 244A of the Act entitles the assessee to interest on refunds due, calculated as per the provision. The court emphasized that the interest waiver was not based on any legal right but on the Settlement Commission's discretion. The court considered precedents cited by both parties, including judgments from the Madras High Court and the Supreme Court, to determine the applicability of interest entitlement in this case.

4. The court distinguished the facts of previous cases from the present situation, emphasizing that the interest waiver here was not under the circumstances outlined in rule 117A of the Income-tax Rules. The court held that the Settlement Commission's discretionary decision to waive interest did not confer a legal right to claim interest under section 244A.

5. The court clarified that while the Act allows interest in specific circumstances, the current case did not meet those criteria. The assessee's attempt to claim interest on the refunded amount was deemed unjustified, as no legal right to such interest existed without the Settlement Commission's discretionary waiver. Consequently, the court set aside the Tribunal and Commissioner of Income-tax (Appeals) orders, ruling in favor of the Revenue.

6. In conclusion, the court allowed the appeal, holding that the assessee was not entitled to claim interest on the refund order issued by the Deputy Commissioner of Income-tax. The judgment emphasized the discretionary nature of the interest waiver by the Settlement Commission and the absence of a legal right for the assessee to claim interest under section 244A in this context.

← Previous Next →