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TMI Blog1983 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order, relating to the assessment year 1957-58, was passed on March 24, 1962. Thus, the assessment proceedings in respect of all the four assessment years were completed before the new Act came into force with effect from April 1, 1962. Appeals were preferred by the company in respect of the assessment orders relating to each one of the aforesaid assessment years before the AAC. Against the orders passed by the AAC, further appeals were filed before the Tribunal in respect of all the four assessment orders. The Tribunal decided all the four appeals, relating to the four assessment years referred to above, by its order dated March 31, 1969. As the company was found to be entitled to a refund consequent upon the order passed by the Tribunal dated March 31, 1969, in respect of each of the four assessment years, the ITO passed consequential orders of refund. The ITO also allowed interest to the company on the amount of refund, in accordance with the provisions of s. 244 of the new Act, by different orders passed during the year 1971. After the amount allowed by way of refund along with interest thereon was paid to the company, the ITO issued notices for rectification under s. 35 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of refund. It would be useful at this stage to extract the relevant provisions of s. 297(2)(i) of the new Act, which required to be interpreted in the present case : "297(2)(i). Where, in respect of any assessment completed before the commencement of this Act, a refund falls due after such commencement or default is made after such commencement in the payment of any sum due under such completed assessment, the provisions of this Act relating to interest payable by the Central Government on refunds and interest payable by the assessee for default shall apply." The question, as to whether interest was payable under the new Act in such circumstances, where the assessee became entitled to a refund consequent to the orders passed on appeal or in other proceedings after the new Act came into force, came up for consideration before the Madras High Court in Pandyan Insurance Co. Ltd. v. CIT [1969] 73 ITR 12. In that case, the assessment was completed before the commencement of the new Act and ultimately the matter went to the Supreme Court and consequent upon the decision of the Supreme Court, after the coming into force of the new Act, the assessee became entitled to a refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacking. This contention, which is identical to the one advanced before me by the learned counsel for the Revenue, was rejected by their Lordships of the Madras High Court and it was observed that finality of an assessment has nothing to do with the factual conclusion of an assessment, and although the assessment was completed before the new Act came into force, yet it may not have acquired finality on account of appeal or other proceedings and so one should not confuse between the finality of an assessment and the completion of an assessment. The same view was taken by the Allahabad High Court in Hira Lal Jagarnath Prasad v. CIT [1969] 74 ITR 732, where the assessment was completed before the commencement of the new Act, but the assessee became entitled to a refund by virtue of the answer given by the High Court on a reference and the consequential order passed by the Appellate Tribunal under s. 66(5) of the old Act. It was observed by the learned judges of the Allahabad High Court that so far as the refund was concerned, s.297(2)(i) was a self-contained provision, which made the provisions of the new Act applicable to the question of refund in such a situation, where the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the learned counsel for the Revenue that interest could become payable to the assessee under s. 244 of the new Act only when a refund is due to the assessee in pursuance of an order referred to in s. 240 of the new Act and if the refund is not allowed within the period of six months from the end of the month in which such order was passed. Now, s. 244 has been amended and in place of " six months " the period has been reduced to 3 months. The argument proceeds on the basis that an order of refund under s. 240 of the new Act could only be passed as a result of an order passed in appeal or in any other proceedings under this Act. The emphasis of the learned counsel for the Revenue is that as the order passed on appeal was not passed under the new Act, as such, no order for refund could be passed under s. 240 of the new Act and consequently no interest was payable on such amount of refund under s. 244 of the new Act. There can be no doubt that the proceedings pending at the commencement of the new Act by way of appeal, reference or revision shall be continued and disposed of by the concerned authorities, in accordance with the provisions of the old Act, as if the new Act ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court was reversed on appeal by their Lordships of the Supreme Court in Third ITO v. N. Damodar Bhat [1969] 71 ITR 806, with the following observations (p. 812) "The High Court has expressed the view that `in the case of an assessment under the old Act no notice under section 156 of the new Act was possible ', and `there was no way of taking advantage of the provisions for recovery and collection of tax contained in sections 220 to 234 of the new Act '. The High Court has based its opinion on the premises that all recoveries are possible 'only when the stage mentioned in section 220(4) was reached, namely, that the assessee had become or deemed to have been an assessee in default' and the action under section 226 could be taken only when an assessee was in default. In our opinion, the reasoning adopted by the High Court and the conclusion reached by it is not correct in law. The effect of the judgment of the High Court on this point is that the provisions of section 297(2)(j) of the new Act are nullified and declared to be of no consequence. An interpretation of section 226(3) of the new Act which leads to such a startling result should be avoided as it is opposed to all sound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , were completed after the coming into force of the new Act and proceedings for imposition or levy of penalty were initiated under the new Act, but the Appellate Tribunal held that no penalty could be imposed under s. 271(1) of the new Act, because of the expression "in the course of any proceedings under this Act " occurring therein; and as the assessment proceedings in the case had begun under the old Act, their Lordships of the Madhya Pradesh High Court reversed the view taken by the Tribunal and held as under (p. 419): " Under clause (g) of section 297(2), the initiation of proceedings for imposition of penalty and the levy of penalty under the Act of 1961, is not with reference to the fact whether the assessment was made under the 1961 Act or the 1922 Act. That apart, in this case, the return having been filed on 19th October, 1961, that is, before the commencement of the 1961 Act, the assessment under the 1922 Act was by virtue of the provisions of section 297(2)(a) of the Act of 1961. The proceedings for assessment under the Act of 1922 were thus proceedings under the 1961 Act itself." Thus, the Bench of the Madhya Pradesh High Court expressed the same view as has been t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radesh High Court and by a Division Bench of this court in Shankerlal Naraindas' case [1970] 76 ITR 642 (Raj), in respect of the interpretation of s. 297(2)(g) of the new Act, has also been taken by their Lordships of the Supreme Court in Jain Bros. v. Union of India [1970] 77 ITR 107, wherein their Lordships observed as under (p. 117): " We are further unable to agree that the language of section 271 does not warrant the taking of proceedings under that section when default has been committed by failure to comply with a notice issued under section 22(2) of the Act of 1922. It is true that clause (a) of subsection (1) of section 271 mentions the corresponding provisions of the Act of 1961, but that will not make the part relating to payment of penalty inapplicable once it is held that section 297(2)(g) governs the case. Both section 271(1) and 297(2)(g) have to be read together and in harmony and so read the only conclusion possible is that for the imposition of a penalty in respect of any assessment for the year ending on March 31, 1962, or any earlier year, which is completed after first day of April, 1962, the proceedings have to be initiated and the penalty imposed in accorda ..... 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