1986 (2) TMI 107 - AT - Income Tax

Summary

Issues Involved:

1. Entitlement to interest under sections 214 and 244 of the Income-tax Act, 1961.
2. Applicability of the Delhi High Court judgment in the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India.
3. Requirement of furnishing a bank guarantee for the refund.
4. Applicability of section 154 for rectifying mistakes apparent from the record.
5. Binding nature of High Court judgments on Income-tax authorities.

Issue-wise Detailed Analysis:

1. Entitlement to Interest Under Sections 214 and 244 of the Income-tax Act, 1961:

The assessee, Dalmia Dairy Industries (P.) Ltd., filed a return declaring an income of Rs. 1,26,19,211 for the assessment year 1979-80. Following a provisional assessment, a refund of Rs. 5,69,879 was issued. The regular assessment determined the total income at Rs. 1,35,64,870, resulting in a tax payable of Rs. 5,46,170 after considering the advance tax and previous refunds. Upon appeal, the ITO computed a refund of Rs. 7,17,971. The assessee claimed interest on this refund under sections 214 and 244, citing the Delhi High Court judgment in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India.

2. Applicability of the Delhi High Court Judgment:

The Delhi High Court's judgment in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India was central to the assessee's claim for interest on the refund. The ITO initially refused to grant interest, citing conflicting judgments, particularly from the Allahabad High Court. The Commissioner (Appeals) upheld this view, deeming the issue debatable and thus not rectifiable under section 154. However, the Tribunal emphasized that the ITO must follow the Delhi High Court's ruling as it operates within its jurisdiction, regardless of contrary judgments from other High Courts.

3. Requirement of Furnishing a Bank Guarantee for the Refund:

The ITO requested the assessee to furnish a bank guarantee to safeguard the revenue's interest in case the Delhi High Court's judgment was overturned by the Supreme Court. The assessee contested this requirement, asserting that no such condition was stipulated by law for issuing refunds. The Tribunal agreed with the assessee, stating that the ITO erred in imposing such a condition and should have followed the Delhi High Court's judgment unconditionally.

4. Applicability of Section 154 for Rectifying Mistakes Apparent from the Record:

The assessee argued that the omission to apply the relevant legal provision constituted a mistake apparent from the record, rectifiable under section 154. The Commissioner (Appeals) rejected this, citing the issue's debatable nature due to conflicting judicial opinions. However, the Tribunal highlighted that an ITO must adhere to the jurisdictional High Court's decisions, and the conflicting opinions from other High Courts do not render the issue debatable within the meaning of section 154.

5. Binding Nature of High Court Judgments on Income-tax Authorities:

The Tribunal reiterated the principle that an ITO is bound by the decisions of the High Court within whose jurisdiction they operate. This principle was supported by judgments from the Bombay High Court in Siemens India Ltd. and the Allahabad High Court in Omega Sports & Radio Works. The Tribunal criticized the ITO and Commissioner (Appeals) for not following the Delhi High Court's binding judgment and for incorrectly deeming the issue debatable due to conflicting judgments from other jurisdictions.

Conclusion:

The Tribunal concluded that the authorities below erred in their approach. The ITO should have granted interest on the refund as per the Delhi High Court's judgment without imposing conditions. The Tribunal set aside the orders of the lower authorities and directed the ITO to entertain the assessee's application for rectification under section 154 in light of the Delhi High Court's judgment. The appeal was allowed.