1994 (6) TMI 15 - HC - Income Tax

High Court rules in favor of petitioner on interest entitlement under Income-tax Act provisions

The High Court of GUJARAT ruled in favor of the petitioner in a case concerning the entitlement to interest under section 244(1A) on penalty amounts ... Interest Payable On Refund Issues:1. Interpretation of provisions under Chapter XIX pertaining to refunds of excess tax or penalty paid by the assessee under the Income-tax Act.2. Entitlement of interest under section 244(1A) on penalty amount refunded due to waiver under section 273A of the Act.Detailed Analysis:The judgment delivered by the High Court of GUJARAT involved a petition filed against the order passed by the Commissioner of Income-tax, Surat, rejecting the petitioner's refund applications against the Income-tax Officer's refusal to grant interest under section 244(1A) of the Income-tax Act on the penalty amount waived under section 273A of the Act. The petitioner sought a refund with interest following the waiver of penalties for assessment years 1974-75 and 1975-76. The Income-tax Officer refunded the amount without interest, leading to the petitioner filing revision applications under section 264 of the Act, which were rejected by the Commissioner solely on the ground that relief under section 273A does not warrant interest under section 244(1A.The main contention raised by the petitioner's counsel was the entitlement to interest under section 244(1A) on the penalty amount refunded due to the waiver under section 273A, while the respondent's counsel argued against interference with the Commissioner's order. The court analyzed the relevant provisions under Chapter XIX of the Income-tax Act concerning refunds and highlighted the distinction between sections requiring a claim for refund and those where the officer must refund the amount without a claim. Section 240 mandates the Income-tax Officer to refund any amount due to the assessee as a result of an order passed in appeal or other proceedings, without the need for a claim. Section 244 provides for interest on such refunds.The court interpreted the wide scope of section 240, emphasizing that 'other proceedings' encompass orders passed in proceedings beyond appeals, such as rectification proceedings, orders by the High Court or Supreme Court, and orders by the Commissioner in revision applications or under section 273A. Therefore, the phrase 'other proceedings' under section 240 includes orders under section 273A, entitling the assessee to interest under section 244(1A) on refunded penalty amounts. The court cited a precedent from the Allahabad High Court supporting this interpretation, which considered 'other proceedings' to include orders under section 263, expanding the scope beyond mere references.Consequently, the court deemed the Commissioner's order illegal and quashed it, directing the Commissioner to reconsider the petitioner's application and grant interest as per section 244(1A). The petition was allowed, and the impugned order was set aside, with the Commissioner instructed to decide on the merits and provide interest as per the Act.