1997 (11) TMI 50 - HC - Income Tax

Court rules interest on tax refund appealable under Income-tax Act. Section 244(1A) provisions apply.

The court held that the order of the Income-tax Officer refusing to grant interest on the refund is appealable. Additionally, the court determined that ... Refund, Interest, Additional Tax, Undistributed Income, Competency Issues Involved:1. Whether the order of the Income-tax Officer without granting the interest on the refund paid to the assessee is an appealable order.2. Whether the order passed u/s 104 of the Income-tax Act, 1961, is an order of assessment within the meaning of section 244(1A) of the Act.Summary:Issue 1: Appealability of the Order Without Granting Interest on RefundThe court examined whether the order passed by the Income-tax Officer granting refund but without granting interest u/s 244(1A) of the Act is an appealable order. The court noted that the Income-tax Officer invoked his powers u/s 154 of the Act to rectify the order passed u/s 104 of the Act. Clause (f) of sub-section (1) of section 246 of the Act provides for an appeal against the order made u/s 154 or 155 of the Act having the effect of enhancing the assessment or reducing the refund or an order refusing to allow the claim made under either of the said sections. Clause (n) of sub-section (1) of section 246 of the Act provides for an appeal against the order passed u/s 237 of the Act.The court cited several precedents, including Gopi Lal v. CIT [1967] 65 ITR 477 and CIT v. Ashoka Engineering Co. [1992] 194 ITR 645, to support a liberal construction of the right to appeal. It was concluded that the order of the Income-tax Officer refusing to grant interest is an appealable order. The court also referred to the decision in Smt. Shantibai v. CIT [1984] 148 ITR 49, which held that an order refusing to refund any amount claimed by the assessee is an order u/s 237 of the Act for the purpose of the right of appeal conferred u/s 246(n) of the Act.Issue 2: Applicability of Section 244(1A) to an Order Passed Under Section 104The court considered whether the provisions of sub-section (1A) of section 244 of the Act would apply to an order passed u/s 104 of the Act. Section 244(1A) provides for interest on refunds due to the assessee as a result of any amount paid in pursuance of any order of assessment or penalty found in appeal or other proceedings to be in excess of the amount which the assessee is liable to pay.The court examined several Supreme Court decisions, including M. M. Parikh, ITO v. Navanagar Transport and Industries Ltd. [1967] 63 ITR 663, which held that an order u/s 23A of the Indian Income-tax Act, 1922 (corresponding to section 104 of the Act), is not an order of assessment within the meaning of section 34(3) of the 1922 Act. However, the court also referenced CIT v. J. K Commercial Corporation Ltd. [1976] 105 ITR 219, where the Supreme Court held that an order u/s 23A of the 1922 Act could be regarded as an assessment order for the purpose of section 35(1) of the 1922 Act.The court concluded that the expression 'order of assessment' in section 244(1A) should be given a wider meaning to include an order passed u/s 104 of the Act. The court held that the order u/s 104 of the Act is an order of assessment within the meaning of section 244(1A) of the Act, and the assessee is entitled to interest on the refund of tax paid under section 104 of the Act till the date of the refund order.Conclusion:(a) First question of law: Answered in the affirmative and against the Revenue.(b) Second question of law: Answered in the affirmative and against the Revenue.There will be no order as to costs.