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2017 (8) TMI 527 - AT - Income TaxPower of AO to withdraw the interest granted u/s 244 by way of rectification of mistake u/s 154 - Held that - Interest u/s. 244 could not be withdrawn in absence of clear cut provision in the section for the year under consideration. It is also a fact that the proceedings to withdraw the interest were initiated u/s. 244(1A) whereas vide rectification order dated 28/03/2014 the Assessing Officer had withdrawn the interest invoking provision of section 244(3) of the Act. Thus in our opinion the appeal of the assessee has to be allowed on Jurisdictional issue as well as on merits. - Decision in the case of Tata Power Company. Ltd.(2015 (8) TMI 87 - BOMBAY HIGH COURT) followed - Decided in favor of assessee.
Issues Involved:
1. Admission of additional grounds by the assessee. 2. Withdrawal of interest under Section 244 of the Income Tax Act. 3. Validity of rectification order under Section 154 of the Income Tax Act. 4. Jurisdictional issue regarding the withdrawal of interest. Issue-wise Detailed Analysis: 1. Admission of Additional Grounds: The assessee requested the admission of additional grounds, stating that they involved pure questions of law and did not require the establishment of new facts. The Departmental Representative left the issue to the discretion of the Bench. After review, the Tribunal admitted the additional grounds raised by the assessee, noting that they did not necessitate the establishment of new facts. 2. Withdrawal of Interest under Section 244: The main issue was the withdrawal of interest amounting to ?23.91 crores under Section 244 of the Act. The AO had initially granted interest under Section 244(1A) amounting to ?19.12 crores. The assessee sought further interest of ?47.02 crores, which led to the AO withdrawing the previously granted interest via a rectification order dated 28.03.2013. The First Appellate Authority (FAA) upheld the AO's decision, noting that the interest granted in excess could be withdrawn through a rectification order and that the legality and validity of the rectification order were not in doubt. The FAA also referred to the Supreme Court's decision in the HEG Ltd. case, which held that there could be no claim for compound interest under Sections 244A or 244 of the Act. 3. Validity of Rectification Order under Section 154: The assessee argued that the rectification order was initiated for the withdrawal of interest under Section 244(1A), but the AO withdrew the interest under Section 244A(3). The assessee contended that there was no apparent mistake in the AO's order that could be rectified under Section 154 and that the issue was highly debatable. The Tribunal found merit in the assessee's arguments, citing various case laws, including Cibatul Ltd., Udaipur Distillery Co. Ltd., and Tata Power Co. Ltd., which supported the view that interest under Section 244A could not be withdrawn in the absence of a clear provision in the section for the relevant year. 4. Jurisdictional Issue Regarding Withdrawal of Interest: The Tribunal noted that the proceedings to withdraw the interest were initiated under Section 244(1A), but the rectification order was issued under Section 244A(3). This discrepancy led the Tribunal to conclude that the appeal of the assessee should be allowed on jurisdictional grounds as well as on merits. The Tribunal directed the AO to re-calculate the interest on the refund under Section 244A, considering only the tax portion and not the interest element, following the decision in the Tata Power Co. Ltd. case. Conclusion: The Tribunal allowed the appeal filed by the assessee and dismissed the appeal of the AO. It held that the rectification proceedings and the resultant withdrawal of interest were not in accordance with the provisions of the Act. The order was pronounced in the open court on 26th July 2017.
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