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TMI Blog2014 (10) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is justified in invoking the powers of the Court under Article 226 of the Constitution of India seeking direction to refund the amount of penalty. Claim of interest on amount to be refunded – Held that:- Section 244 of the Act provides for interest on refund where no claim is needed - Section 244 shall not apply in respect of any assessment for the AY commencing on 1st May, 1989 or any subsequent assessment orders - Section 244A of the Act would apply for interest on refunds – relying upon Sandvik Asia Ltd. Vs. Commissioner of Income Tax I, Pune and others [2006 (1) TMI 55 - SUPREME Court] - a person should only be taxed in accordance with law and hence where excess amounts of tax are collected from an assessee or any amounts are wrongfully withheld from an assessee without authority of law the revenue must compensate the assessee – revenue are directed to refund the penalty amount of ₹ 1,13,32,499.00 to the assessee within a period of two months from the date of receipt of this order with interest on such amount of penalty as per the provisions of section 244(A)(1)(b) of the Act – Decided in favour of assessee. - Special Civil Application No. 5717 of 2014 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. The petitioner through its Chartered Accountant wrote many letters to refund the penalty. However, since no action was taken, the petitioner preferred revision application under section 264 of the Act against the order of penalty. The revision application came to be rejected on the ground of delay. The petitioner has contended that since the petitioner succeeded before the Tribunal against the order of assessment, by virtue of provisions of section 275(1A) of the Act, the respondents were required to delete the penalty and refund the amount of penalty. 3. The petition is opposed by affidavit in reply mainly stating that the petitioner had made request to cancel the penalty only on 3.8.2012 and by that time, more than six months had already lapsed after the order of the Tribunal and, therefore, no order cancelling penalty could have been made under section 275(1A) of the Act. It is further stated that the petitioner was though served with the order of penalty, still however, to cover up the lapse on the part of the petitioner of not preferring revision application within the time limit, the petitioner came out with false story of non service of the order of penalty. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act are not for the purpose of refund of penalty amount on account of subsequent orders passed in appeal of the assessee. Mr. Mehta submitted that even if the petitioner wanted the powers under section 275(1A) to be exercised for cancelling the penalty, the petitioner was required to move the concerned authority within the period of six months as provided in the said section. Mr. Mehta submitted that the refund of penalty amount is not automatic but timely action is required for getting the order of penalty cancelled which the petitioner did not take within the time prescribed under section 264 of the Act. Mr. Mehta submitted that the respondents have stated in the affidavit in reply that the petitioner was duly served with the order of penalty and still the petitioner did not file any revision application within the time limit of one year and did not provide sufficient cause for delay. Mr. Mehta submitted that since the claim for refund of penalty was not made within the time limit, the petitioner even cannot claim interest on the amount of penalty. Mr. Mehta submitted that the petitioner did not file appeal against the order of penalty and present petition is to challenge t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of refund on his becoming successful in appeal against the order of assessment. Further, if there is failure to exercise power under Section 275(1A) within outer limit of six months, the assessee would be justified in approaching before this Court under Article 226 of the Constitution. In our view, word MAY should be construed to create an obligation upon the authority to pass consequential order upon conclusion of the litigation. 9. Sub-section (1A) of Section 275 was inserted by Taxation Law (Amendment Act, 2006 with effect from 13.7.2006. The same reads as under:- (1-A) In a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 26A or an appeal to the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to the order made in favour of the petitioner since failed in passing necessary order for cancelling of penalty and for refund of the penalty amount to the petitioner, the petitioner is justified in invoking the powers of this Court under Article 226 of the Constitution of India seeking direction to the respondents to refund the amount of penalty by giving effect to the order made in the appeal preferred by the petitioner and confirmed by this Court. 13. As regards claim of interest on the amount to be refunded, it appears that Section 244 of the Act provides for interest on refund where no claim is needed. Section 244 shall not apply in respect of any assessment for the Assessment Year commencing on 1st May, 1989 or any subsequent assessment orders. But then in the case like the present one, Section 244A of the Act would apply for interest on refunds. Section 244A reads as under: 244A. Interest on refunds. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:- (a) W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im and it is for this reason that Section 237 of the Act is phrased in terms of tax paid in excess of amounts properly chargeable. It is, however, of importance to appreciate that Section 240 of the Act, which provides for refund by the Revenue on appeal etc., deals with all subsequent stages of proceedings and therefore is phrased in terms of 'any amount' becoming due to an assessee. 32. The Delhi High Court in Goodyear India Ltd. case (supra) held that an assessee is entitled to further interest under Section 244 of the Act on interest under Section 214 of the Act which had been withheld by the Revenue. The case of the Revenue was that interest payable to an assessee under Section 214 of the Act was not a refund as defined in Section 237 of the Act and hence no interest could be granted to the assessee under Section 244 of the Act. The Court held that for this purpose Section 240 of the Act was relevant which referred to refund of 'any amount becoming due to an assessee' and that the said phrase would include interest and hence the assessee was entitled to further interest on interest wrongfully withheld. It is also important to appreciate that the Delhi High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee without the assessee being required to make any claim in that behalf. The expression other proceedings under the Act used in Section 240 of the Act, are wide enough to include any order passed in proceedings other than the appeals under the Act. 16. Section 244 of the Act provides for interest on refunds where no claim is made or required to be made by the assessee. The said section envisages that where a refund is due to the assessee in pursuance of an order passed under Section 240 of the Act, and the assessing officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee a simple interest of 15% per annum on the amount of refund due from the date immediately following the expiry of the period of three months as aforesaid to the date on which the refund is granted. 17. Since there was disconcert in the minds of both the assessee and the Revenue regarding the cases where payment of interest was required to be made to the assessee by the Revenue, the Parliament has thought it fit to insert a new Section 244A in the place of Sections 214, 243 and 244 in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of the Statute, assign its ordinary meaning. 24. This Court in Shyam Sunder vs. Ram Kumar (2001) 8 SCC 24 has observed that in relation to beneficent construction, the basic rules of interpretation are not to be applied where (i) the result would be re- legislation of a provision by addition, substitution or alteration of words and violence would be done to the spirit of legislation, (ii) where the words of a Provision are capable of being given only one meaning and (iii) where there is no ambiguity in a provision, however, the Court may apply the rule of beneficent construction in order to advance the object of the Act. 25. Before the insertion of Section 244A as a composite Section by the Direct Tax Laws (Amendment) Act, 1987, the liability to pay interest on refund of pre-paid taxes was contained in Sections 214, 243 read with Section 244 (1A) of the Act. The Parliament has introduced a new Section in the place of Sections 214, 243 and 244 in respect of assessment for the assessment year 1989-90 and onwards. 26. The language of the Section is precise, clear and unambiguous. Sub-Section (1) of Section 244A speaks of interest on refund of the amounts due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period for which the proceedings resulting in the refund are delayed for the reasons attributable to the assessee (wholly or partly). The rate of interest and entitlement to interest on excess tax are determined by the statutory provisions of the Act. Interest payment is a statutory obligation and non- discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244A is drafted and enacted. The language employed in Section 244A of the Act is clear and plain. It grants substantive right of interest and is not procedural. The principles for grant of interest are the same as under the provisions of Section 244 applicable to assessments before 01.04.1989, albeit with clarity of application as contained in Section 244A. 36. Section 240 of the Act provides for refund of any amount that becomes due to an assessee as a result of an order in appeal or any other proceedings under the Act. The phrase other proceedings under the Act is of wide amplitude. This Court has observed, that, the other proceedings under the Act would include orders passed under Section 154 (rectification proceedings), orders passed by the High Court or Supreme Court under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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