2021 (9) TMI 202 - HC - Income Tax

Additional interest envisaged u/s 244A(1A) on refund - meaning of assessment ; difference between assessment assessment order - denial @ 3% of addl. interest for the period between 28.12.2017 i.e., date of ITAT order and 4.5.2019 i.e., the date on which refund was finally granted; this period being seventeen months - It is not my interest to pay the principal, nor my principle to pay the interest HELD THAT - Article 265 of the Constitution of India mandates that no tax shall be levied or collected except by authority of law; if a tax has been paid in excess of the tax specified, the same has to be refunded; in Tata Chemicals 2014 (3) TMI 610 - SUPREME COURT the Apex Court reasoned out why State should pay interest for holding tax payers' money; a tax refund is a refund of taxes when the tax liability is less than the tax paid; when the said amount is refunded, it should carry interest as a matter of course, since it is a kind of recompense for the unauthorized use or retention of money; refund due payable to an assessee is a debt owed; Parliament has enacted this principle in Section 244A of the 1961 Act; in Aluminium Corporation of India Ltd. v UOI 1975 (8) TMI 45 - SUPREME COURT the Apex Court observed that a good government involves not only diligent collection of taxes, but also ready refunds of excess levies. In CIT v. Purshottamdas T. Patel 1993 (8) TMI 21 - GUJARAT HIGH COURT the Hon'ble High Court of Gujarat has observed that, the word assessment cannot be confined to the act of making an order of assessment; there is a certain legal difference between the terms assessment assessment order ; it can be stated that the use of the word assessment would mean the whole process of determination of income and the same should not be restricted to a mere passing of an assessment order. As to meaning of the term setting aside or cancelling an assessment - A second proviso is added to sub-section (5) of section 153 by the Finance Act, 2017. The said proviso states that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the Order Giving Effect to the said order u/s.250 or sec.254 or sec.260 or sec.262 or sec.263 or sec.264 shall be made within the time specified in sub-section (3). The dates specified in the Table above shown as B would be relevant for this purpose. Difference between assessment', 'reassessment' or 'recomputation and fresh assessment - it is clear that the term assessment is used in section 153(1) to mean the entire process of assessment; section 153(2) uses the words, assessment , reassessment or recomputation but in respect of section 147 which deals with income escaping assessment; section 153(3) uses the term fresh assessment in pursuance of the orders passed setting aside or cancelling an assessment; therefore, this term fresh assessment , though not defined, contemplates a new assessment consequent to the higher authorities cancelling or setting aside the assessment; Section 153(5), talks of giving effect to an order passed by the higher authorities, wholly or partly, otherwise than by making a fresh assessment or reassessment. - if the orders to be given effect to are to be made by following the principles already laid down by the higher forum, it would not be a case pf fresh assessment in terms of Section 153(3) or a reassessment in terms of Section 153(2); it would simply mean that the orders of the higher forum are to be applied followed by the assessing officer; Present Case - it is quiet clear from the facts of the case that the respondents have not undertaken any fresh assessment or reassessment; the ITAT has not directed assessment or reassessment at all, but it only asked the TPO to follow its directions in the earlier year; in respect of other issues definitive answers having been given, it cannot be a case of setting aside entire assessment; it is a case of setting aside an assessment only on specific issues Payment of interest on delayed refunds u/s. 244A(1A) - Since it is not a case of fresh assessment, section 244A(1A) would apply to cases covered u/s 153(5). This writ petition succeeds in part- i) A Writ of Certiorari issues quashing the impugned order; petitioner-Assessee is permitted to submit the fresh claim for additional interest at the rate of 3% per annum for the period envisaged in section 153(5) r/w section 244A(1A), within eight weeks. ii) A Writ of Mandamus issues to the respondents to compute the interest amount till date and pay it to the petitioner- Assessee within eight weeks next following. iii) If delay is brooked in complying the above direction, the Revenue shall pay to the petitioner - Assessee an extra interest, at the rate of 1.5 % per month and this amount, after payment, may be recovered personally from the erring officials of the Department.

Summary

Issues Involved:
1. Denial of additional 3% interest on delayed refund under Section 244A(1A) of the Income Tax Act, 1961.
2. Interpretation of "fresh assessment" and "reassessment" under Section 153 of the Income Tax Act.
3. Compliance with time limits for passing orders giving effect (OGE) to appellate orders.
4. Entitlement to interest on delayed refunds.

Detailed Analysis:

1. Denial of Additional 3% Interest on Delayed Refund Under Section 244A(1A):
The petitioner, engaged in manufacturing computer software and providing IT-enabled services, challenged the denial of additional 3% interest on delayed refunds for Assessment Year 2008-09. The second respondent-DCIT had rejected the application for additional interest, stating that the case involved fresh assessment/reassessment, making Section 244A(1A) inapplicable.

2. Interpretation of "Fresh Assessment" and "Reassessment" Under Section 153:
The court examined the terms "assessment," "reassessment," and "fresh assessment" as used in the Income Tax Act. It clarified that "assessment" includes the entire process of determining income and tax liability, not just the act of making an order. The court distinguished between "fresh assessment" (a new assessment following the setting aside or cancellation of an earlier assessment) and "reassessment" (reassessment of escaped income).

3. Compliance with Time Limits for Passing Orders Giving Effect (OGE) to Appellate Orders:
The court noted that Section 153(5) prescribes a time limit for giving effect to appellate orders, which should be adhered to unless a fresh assessment or reassessment is required. The court emphasized that the AO must pass OGE within the specified time, and failure to do so results in the accrual of interest under Section 244A(1A).

4. Entitlement to Interest on Delayed Refunds:
The court held that the petitioner was entitled to additional interest under Section 244A(1A) for the period between the expiry of the time allowed under Section 153(5) and the actual date of refund. It rejected the Revenue's contention that the entire process constituted a fresh assessment, which would exclude the case from Section 244A(1A). The court emphasized fairness and proportionality, noting that the delay in refunding a substantial amount due to a minor issue was unjust.

Conclusion:
The court quashed the impugned order, allowing the petitioner to submit a fresh claim for additional interest. The respondents were directed to compute and pay the interest amount within eight weeks, with an extra interest penalty for any delay in compliance. The judgment underscores the importance of adhering to statutory time limits and ensuring fairness in tax administration.