2022 (12) TMI 329 - AT - Income Tax

Rectification u/s 154 - Wrongful withdrawal of interest on income tax refund - interest u/s 244A - whether or not the assessee is responsible for delay in refund? - HELD THAT - We find guidance from section 244A(2) itself which inter alia provides that where any question arises about the period to be excluded (for which interest is to be declined), it shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whose decision thereon shall be final . Clearly, therefore, final call about the period to be excluded for grant of interest is to be taken by the higher authority and that exercise is admittedly not done in the present case. We uphold the plea of the assessee to the extent that given the limited scope of section 154 for rectification of mistakes apparent on record and given the fact that the period to be excluded for grant of interest has not yet been taken a call on by the PCCIT/CCIT/PCIT or the CIT, the impugned withdrawal of interest u/s 244A(2) is beyond the scope of rectification of mistake under section 154. The order under section 154 is set aside. Appeal is allowed.

Summary

Issues:
1. Challenge to correctness of order for rectification of mistake under section 154 r.w.s. 143(3) of the Income Tax Act, 1961.
2. Withdrawal of interest on income tax refund under section 244A.
3. Jurisdiction of rectification under section 154 for a debatable issue.

Analysis:
1. The appellant challenged the order dated 24th May, 2022, passed by the CIT(A) regarding the rectification of mistake under section 154 r.w.s. 143(3) of the Income Tax Act, 1961, for the assessment year 2010-11. The appellant raised grievances regarding the withdrawal of interest on income tax refund and the jurisdiction of rectification under section 154 for a debatable issue.

2. The Assessing Officer withdrew the interest granted under section 244A(2) based on the delay by the assessee in making the correct claim of refund. The appellant contended that the withdrawal of interest was beyond what is permissible under section 154. The appellant argued that the decision on the period to be excluded for interest grant should be made by higher authorities, which was not done in this case. The Tribunal referred to a co-ordinate bench decision emphasizing that not declining interest under section 244A for a specific period cannot be considered a mistake apparent on record under section 154.

3. The Tribunal agreed with the co-ordinate bench's view that the withdrawal of interest under section 244A(2) was beyond the scope of rectification under section 154. It was noted that the decision on the period for interest exclusion should be made by higher authorities, which was not done in this case. Therefore, the Tribunal set aside the order under section 154 and granted relief to the assessee. The appeal was allowed in favor of the appellant.

This judgment highlights the importance of following the legal procedures and authorities' roles in making decisions regarding interest on income tax refunds under section 244A, emphasizing that rectification under section 154 is limited to correcting apparent mistakes on record.