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TMI Blog2002 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: (A) Income-tax Reference No. 35 of 1994 (CIT v. Udhoji Shri Krishandas): In this reference the assessment years involved are 1972-73 to 1976-77. M/s. Udhoji Shri Krishandas Agarwal is a registered partnership firm in which the following were partners in the relevant year: Ranjana Agarwal, Jagannath Prasad Agrawal, Ramdulari Agrawal, Narsingdas Agrawal, Udhoji Agrawal, Dwarkadas Agrawal, Hari Om Agrawal, Asha Shanti Agrawal, Balmukund Agrawal and Arun Kumar Agrawal. For the assessment years 1972-73,1973-74 and 1974-75, the Income-tax Officer completed the assessment in the cases of all the partners under section 141A of the Income-tax Act, 1961 (hereinafter referred to as the "Act") and excess advance tax was refunded together with interest under section 214 of the Act. On completion of the regular assessment of these three years under section 143(3), taking the share income subject to rectification under section 155, no refund was due to the assessee. For the assessment years 1975-76 and 1976-77 on completion of the regular assessment under section 143(3) no refund was due to the assessee and demands raised as per the assessment were paid. For the assessment years 1972 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners came below the returned income. Thereafter the assessees filed applications for all the five years under section 154 before the Income-tax Officer to allow interest under sections 214(1), 214(2), 244/244(1A) of the Act. The Income-tax Officer rejected the applications on the ground that there was no mistake apparent on the face of the record. Thereafter the assessees preferred appeal before the Appellate Assistant Commissioner of Income-tax. The Appellate Assistant Commissioner held that the assessees were entitled for payment of interest on excess paid tax under sections 214, 244(1A) of the Act, which has not been allowed by the Income-tax Officer. Accordingly he directed the Income-tax Officer to examine the claims of the assessees and to calculate the interest as per sections 214 and 244(1A) and to make payment of the same accordingly. The Department challenged the order of the Appellate Assistant Income-tax Commissioner before the Tribunal. The Tribunal upheld the orders of the "Appellate Assistant Income-tax Commissioner and dismissed the Department's appeal. Thereafter the Department filed applications under section 256(1) of the Act for reference to the High Court for o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the judgment passed by the apex court in the case of Modi Industries Ltd. [1995] 216 ITR 759, whether the Tribunal is justified in law in holding that the assessee was entitled to interest under sections 214 and 244(1A) of the Income-tax Act in respect of the assessment years 1972-73 to 1976-77? 2. Whether the Tribunal was justified in law in holding that the assessee was entitled to the benefit of interest under section 244(1A) on refunds in respect of any amount of tax including self-assessment tax paid or given credit in the assessment completed after March 31,1975?' The matter be placed before the hon'ble Chief Justice for constitution of the appropriate larger Bench." Considering the aforesaid, the Division Bench found that once the Division Bench has answered the reference after the judgment rendered by the apex court in the case of Modi Industries ltd. [1995] 216 ITR 759, the matter has to be adjudicated by a larger Bench because propriety and judicial discipline so command. Accordingly, after framing the aforesaid questions for adjudication the Division Bench recommended the matter to be adjudicated by the larger Bench. That is how the matters have been placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1975, is concerned, it has to be considered as per section 244(1A) and accordingly the reference deserves to be answered in favour of the Revenue. Learned counsel appearing for the assessee has supported the order passed by the Tribunal and contended that in view of the consistent view of this court and various other High Courts, restricted meaning to the term "regular assessment" cannot be given. Section 214 contemplates interest payable up to the date of assessment while section 244 contemplates interest payable during a period after the passing of the order in appeal or other proceedings, i.e., a future period. The words "regular assessment" in section 214 may be construed in respect of the assessment by the Assessing Officer including the order modifying the assessment by the appellate or revisional authority and if it is otherwise construed it will lead to absurdity. Even if the assessment is modified by the appellate or revisional authority the assessee is entitled to interest under section 214 of the Act. The situation will be embarrassing where the Assessing Officer passes an erroneous order, which is corrected by the superior authority, but the assessee would be denied i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted : Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted: Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding: Provided also that where any interest is payable to an assessee under this sub-section, no interest under sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n refund of part of the advance tax paid and the order is not interfered with by the appellate or revisional authority. In such a case the assessee would be entitled to interest on the refundable amount till the date of the regular assessment. Take a case where the Assessing Officer by an erroneous view of law or facts holds that tax payable is equal to the advance tax paid in which case no refund would be due and the appellate authority corrects the error committed by the Assessing Officer and reduces the quantum of taxable income in which case the assessee would be entitled to refund. If this modified assessment is to be regarded as falling outside the purview of the words 'regular assessment' the assessee would not be entitled to interest under section 214. This would mean that where the Assessing Officer passes a correct order, the assessee will be entitled to interest but where he passes an erroneous order which is corrected by a superior authority, the assessee would be denied interest. There is nothing in the scheme of the provisions relating to refund and interest which justifies such a restricted meaning being given to the words 'regular assessment' occurring in section 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount ; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly." In the present case section 214 as it existed prior to April 1, 1985, is relevant. In section 214 the words "regular assessment" have been used. The aforesaid expression clearly means and refers to the original assessment made under sections 143 and 144. It does not speak about any assessment after the year of regular assessment. The words "regular assessment" in section 214 are clear and do not mean any other conclusion, except the first or the original assessment by the Assessing Officer. The advance tax is a tax paid by the assessee before the regular assessment and is a pre-assessment collection of tax by way of advance payment of tax. The assessee may calculate on the basis of the assessed amount of income of the current year of which the regular assessment has to be made and not on the basis of the total income of the relevant previous year. Under section 219 of the Act advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at the stage of any revised assessment passed in consequence of the order of any higher authority. The underlying idea behind section 243 has been taken to the logical conclusion by section 244(1A) which applies where the assessee pays tax or penalty after March 31,1975, pursuant to an order of assessment or penalty. If as a result of appeal or other proceeding the payment of tax is determined to be in excess of the amount which the assessee was liable to pay, the Department has to pay interest to the assessee on the excess amount from the date on which the tax was paid to the date on which the refund was granted. Payment of tax after March 31, 1975, would include the amount of advance tax which was retained by the Income-tax Officer after March 31,1975, and was adjusted towards the tax liability of an assessee pursuant to an order of assessment. There is no right to get interest on refund except as provided by the statute. The interpretation of section 214 or any other section of the Act should not be made on the assumption that interest has to be paid whenever an amount which has been retained by the tax authority in exercise of the statutory power becomes refundable as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alculated in the regular assessment (the first assessment order). The amount on which interest was payable did not vary due to reduction or enhancement of tax as a result of any subsequent proceeding. But with effect from April 1, 1985, while the period for which interest was payable remained constant, the amount on which the interest was payable, varied with the variation in the quantum of refund as a result of any subsequent orders. (ii) If any tax is paid pursuant to an assessment order after March 31, 1975 (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by the Income-tax Officer as payment of tax in discharge of the assessee's tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount under section 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source must be treated as payment of income-tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 simple interest at fifteen per cent, per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted. (1A) Where the whole or any part of the refund referred to in subsection (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted : Provided that . . .' In the case in hand, as indicated earlier, the direction to refund the amount has been made in the appellate proceedings be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter March 31, 1975, as provided under sub-section (1A) of section 244 of the Act." In view of the aforesaid enunciation of law the position that emerges is that under section 214 of the Act as it stood in the statute book at the relevant time, the assessee was entitled under section 214 of the Act to interest on advance tax from April 1, of the relevant assessment year to the date of the regular first assessment under section 143 or 144 and not on the revised assessment order pursuant to the appellate order. Up to March 31, 1975, interest under section 214 is payable from the first day of April of the relevant assessment year to the date of the first assessment order. If any further amount is found refundable as a result of any appellate or other order, then interest under section 244 is payable on the amount of refund. But interest is not payable under both the sections 214 and 244(1A) simultaneously. In view of the aforesaid, the two questions referred by the Division Bench are answered in the following manner: (1) The Tribunal in view of the judgment passed by the apex court in the case of Modi Industries ltd. [1995] 216 ITR 759 was not justified in holding that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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