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TMI Blog2020 (1) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... ing effect dated 11-03-2013 is not only erroneous but also prejudicial to the interest of revenue. Accordingly, the order passed by ld. PCIT fulfils the twin condition of section 263 of the Act. Therefore, we do not find any merit in the appeal filed by the assessee, which is hereby dismissed. - ITA No. 3450/Mum/2015(Assessment year: 2003-04) - - - Dated:- 4-11-2019 - SHRI PAWAN SINGH (JM) AND SHRI G MANJUNATHA (AM) Appellant by Shri Rakesh Joshi Respondent by Shri Manjunatha Swamy CIT-DR And Sh. Nishant Samaiya- Sr. DR ORDER Per Pawan Singh, Judicial Member : 1. This appeal by assessee is directed against the order of learned Principal Commissioner of Income Tax-3 (ld. PCIT), Mumbai dated 27-03-2015 passed under section 263 of the Income-tax Act, 1961 for assessment year (AY) 2003-04. The assessee has raised the following grounds of appeal:- l.(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax erred in initiating proceedings u/s.263 of the Income Tax Act, 1961 vide show-cause notice dated 20.03.2015 and passing the order u/s. 263 of the Income Tax Act, 1961 and the reasons assigned by him f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961, and the Rules made thereunder. 2.(d) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax failed to appreciate that the Id. AO had granted refund of ₹ 15,81,19,323/- vide order dated 11.03.2013 giving effect to CIT(A) order which included interest u/s 244A as per ruling of Supreme Court in case of Sandvik Asia vs. CIT which was operative at that time. 2. The facts in brief are that a summary assessment for AY 2003-04 under section (u/s) 143(1) was completed on 31-03-2014 granting refund of ₹ 53,86,52,675/- along with interest as on 31-03-2004. Subsequently, the case was selected for scrutiny and assessment u/s 143(3) was passed on 28-01-2005. The Assessing Officer (AO), while passing the assessment order made various additions / disallowance which was subject matter of appeal before CIT(A) and further to Tribunal and rectification order u/s 154, resulting into either demand or refund. The AO, while giving effect to the order of CIT(A) dated 24.12.2012, vide his order dated 11-03-2013 granted refund of ₹ 15,81,19,323/- which includes refund of ₹ 4,04,64,132/- being interest on interest. The orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after giving effect to ClT(A)'s order dated 11.03.2013, refund of ₹ 15,81,19,323/- was granted to assessee and it includes excess refund of ₹ 4,04,64,132/- being in the nature of interest on interest. iv) However, from the above table, it is amply clear that the department has not delayed the payment of refund to the assessee and hence interest on interest u/s.244A of the Act, is not allowable to the assessee. 3. On identifying aforesaid four issues, the Ld. PCIT issued a show cause notice u/s 263 dated 20-03-2015 to the assessee. In response to the show cause notice the assessee filed its reply dated 26-03-2015. In the reply, the assessee stated that it is not fit for revision u/s 263 as various claims were allowed by AO after due application of mind to the facts of the case. The AO allowed various claims after due consideration of provisions of law and judicial decision on the grant of alleged refund, the substantial part of reply of the assessee is extracted as under:- Originally assessee has received refund of ₹ 87,58,52,409/- vide order dated 19.02.2010 after giving effect to ITAT order dated 15.07.2009. The said refund included interest of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efund out of tax paid by the assessee or collected from the assessee and not on the amount due to the assessee including interest. 6. On the reliance of the assessee on the decision of Hon ble Supreme Court in Sandvik Asia Ltd Vs CIT (supra), the Ld. PCIT distinguished the said case qua the facts of present case; in the said case, the interest was retained by the department for a period ranging up to 17 years and the assessee was deprived of an amount of interest for the period up to 17 years wherein the Hon ble Supreme Court allowed interest as compensation. The Ld. PCIT further held that the ratio of law in Sandvik Asia Ltd Vs CIT (supra) was discussed d by ITAT, Ahmedabad in Gujarat State Fertilizers Chemicals Ltd Vs DCIT (ITA 2348-2349/Ahd/2004(Ay 1995- 96) Dated 31-07-2006, wherein it was held that the Income tax Authorities cannot pay interest on interest unless statue provides and it cannot be granted on the ground of equity. The Ld. PCIT finally concluded that refund is to be given along with interest which is to be calculated as per section 244A of the Act and if the interest is paid on the excess tax, no further payment is to be made. It is only when excess amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on interest and that case was based on specific facts. However, in the instant case there is neither delay on the part of the revenue in making refund nor in passing the order of giving effect to the order of higher / appellate authority. Therefore, the ratio of decision in Sandvik Asia Ltd Vs CIT (supra) is not applicable. The AO granted excess refund of ₹ 4.04 crores, the order is not only erroneous but also prejudicial to the interest of revenue. 9. We have considered the rival contentions of the parties and carefully deliberated on various case laws relied upon by learned representatives of the parties. In our view, the first question for our consideration is whether the order giving effect dated 11.03.2013 passed by AO in grant of refund of ₹ 15,81,19,923/- which included refund of ₹ 4,04,64,132/- being interest on interest is erroneous and prejudicial to the interest of revenue. There is no dispute that the AO granted additional interest of ₹ 4.04,64,132/- which is in addition to the interest u/s 244A, and the same is defended by ld AR for the assessee by taking benefit of decision of Sandvik Asia Ltd (supra). The other/ second question is wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submissions made by the parties to the lis. 4. We would first throw light on the reasoning and the decision of this Court on the core issue in Sandvik Asia Ltd.'s case (supra). The only issue formulated by this Court for its consideration and decision was whether an assessee is entitled to be compensated by the Income Tax Department for the delay in paying interest on the refunded amount admittedly due to the assessee. This Court in the facts of the said case had noticed that there was delay of various periods, ranging from 12 to 17 years, in such payment by the Revenue. This Court had further referred to the several decisions which were brought to its notice and also referred to the relevant provisions of the Act which provide for refunds to be made by the Revenue when a superior forum directs refund of certain amounts to an assessee while disposing of an appeal, revision etc. 5. Since, there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this Court had thought it fit that the assessee should be properly and adequately compensated and therefore in paragraph 51 of the judgment, the Court while compensating the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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