2015 (2) TMI 812 - HC - Income Tax

Interest under section 244(1A) denied - whether an appeal lies against an order refusing to grant interest? - CIT(A) held that an appeal for claiming interest under section 244(1A) of the Act is not entertainable in a case where the order giving the appeal effect itself is not being challenged on any ground? - Held that - The order passed by the CIT(Appeals) had virtually set aside the earlier order of assessment. Therefore, a fresh assessment was required to be made which the Assessing Officer did and directed refund but omitted to pass an order directing payment of interest. Therefore, it was an order passed under section 143(3) of the Act. It cannot be disputed that an appeal against an order passed under section 143(3) is permissible. It is altogether a different matter that the entitlement to interest arises out of section 244(1A) of the Act. A civil court may pass or refuse to pass an order for payment of pendentelite interest under section 34 of the Code of Civil Procedure. But it cannot be contended that the decree is one passed under section 34 of the Code of Civil Procedure. We are as such of the opinion that the learned Commissioner of Income-tax fell into a grievous error in proceeding on the basis that it was an appeal against an order refusing to grant interest under section 244(1A) of the Act. The appeal was an appeal against the order of assessment under section 143(3) of the Act in which the Assessing Officer omitted to grant interest which he should have done under section 244(1A) of the Act. Therefore, the question which has been posed on behalf of the Revenue does not, in our opinion, arise in the facts and circumstances of the case. - Decided in favour of the assessee.

Summary

Issues:
- Appealability of an order refusing to grant interest under section 244(1A) of the Income-tax Act.
- Interpretation of relevant legal provisions and applicability of previous court judgments.

Analysis:

Issue 1: Appealability of an order refusing to grant interest under section 244(1A) of the Income-tax Act:
The High Court addressed the primary issue of whether an appeal lies against an order refusing to grant interest under section 244(1A) of the Income-tax Act. The appellant contended that an appeal is a statutory remedy and unless explicitly provided for by the statute, it cannot be entertained. The court examined the relevant legal provisions and previous court judgments to determine the appealability of such orders. The court emphasized that the question before them was not considered by the Supreme Court in a previous case, thus rendering the judgment inapplicable to the current issue. The court also highlighted that the entitlement to interest arises from section 244(1A) of the Act, even though the order was passed under section 143(3). The court clarified that the appeal was against the order of assessment under section 143(3) where interest was omitted to be granted, which should have been done under section 244(1A). Ultimately, the court concluded that the appeal of the Revenue was without merit, and the order refusing to grant interest was appealable under section 246 of the Act.

Issue 2: Interpretation of relevant legal provisions and applicability of previous court judgments:
The High Court delved into the interpretation of legal provisions, specifically section 244(1A) of the Income-tax Act, to ascertain the statutory obligation to pay interest on refunds. The court analyzed the provisions of the Act and the implications of orders passed under different sections. Reference was made to the judgment of the Madras High Court, which emphasized that interest on a refund is an integral part of the refund itself. The court agreed with the reasoning of the Madras High Court and also considered the judgment of the Bombay High Court on the same matter. By aligning with the logical and reasonable views of these High Courts, the Calcutta High Court affirmed that the order refusing to grant interest under section 244(1A) is appealable. The court dismissed the appeal of the Revenue, citing the sound legal reasoning provided by the previous court judgments and the statutory provisions of the Act.

In conclusion, the High Court upheld the appealability of an order refusing to grant interest under section 244(1A) of the Income-tax Act, emphasizing the statutory entitlement to interest on refunds and aligning with the logical interpretations of previous court judgments.