2015 (3) TMI 639 - AT - Income Tax

Tribunal orders referral on interest calculation exclusion under Section 244A(2) for final decision. Appeal allowed.

The Tribunal directed the Assessing Officer to refer the issue of excluding periods for interest calculation under Section 244A(2) to the Chief ... Interest on refunds under section 244A - Exclusion of period attributable to the assessee and reference to Chief Commissioner/Commissioner for determination - Limitation of AO's jurisdiction in computing interest under section 244A(2) - Remand to AO to refer period-exclusion question to competent authorityInterest on refunds under section 244A - Exclusion of period attributable to the assessee and reference to Chief Commissioner/Commissioner for determination - Whether the AO or CIT(A) could exclude any period for computation of interest under section 244A(1) without referring the question of exclusion to the Chief Commissioner/Commissioner as required by law, and the consequential direction to be issued. - HELD THAT: - The Tribunal found that the AO excluded certain periods while processing the refund claim and denied interest under section 244A(1) without referring the question of exclusion to the Chief Commissioner or Commissioner as mandated by the statute. The CIT(A) upheld the AO's action despite that mandatory referral mechanism in section 244A(2). The Bench held that exclusion of any period for computing interest is outside the AO's competence unless the period-exclusion question is decided by the Chief Commissioner/Commissioner whose decision is final. Relying on the Coordinate Bench decision in Power Finance Corporation Ltd. v. ACIT, the Tribunal concluded that the orders of the AO and CIT(A) suffer from legal infirmity for failing to follow the procedure prescribed in section 244A(2). Consequently, the matter must be restored to the file of the AO with a direction to refer the issue regarding exclusion of period to the Chief Commissioner/Commissioner for final determination under the statutory provision; the AO is then to act in accordance with that decision. [Paras 12, 14, 15, 16]Orders of the AO and CIT(A) set aside to the extent they excluded periods without referral; matter restored to AO with direction to refer the period-exclusion question to the Chief Commissioner/Commissioner under section 244A(2) and proceed in accordance with that decision; appeal allowed for statistical purposes.Final Conclusion: The Tribunal set aside the exclusion-of-period determinations made by the AO and upheld by the CIT(A) as beyond their jurisdiction, restored the matter to the AO with a direction to refer the question of period exclusion to the Chief Commissioner/Commissioner for final determination under section 244A(2), and allowed the appeal for statistical purposes. Issues Involved:1. Reduction of deduction under Section 80HHC.2. Denial of interest under Section 244A on tax refund.3. Calculation of interest under Section 244A.4. Withdrawal of interest allowed on self-assessment tax.5. Non-compliance with Section 245 provisions.6. Non-issuance of balance refund.Issue-wise Detailed Analysis:1. Reduction of Deduction under Section 80HHC:The assessee contended that the Assessing Officer (AO) erred in reducing the deduction under Section 80HHC from Rs. 30,32,43,522/- to Rs. 30,19,20,104/- without providing any reasons or calculations. This reduction was challenged as it left the appellant unable to make appropriate submissions.2. Denial of Interest under Section 244A on Tax Refund:The AO denied interest under Section 244A on the tax refund of Rs. 663.12 lacs for the period from 1/4/1995 to 23/8/2007. The assessee argued that there was no delay attributable to them and that the refund arose due to the ITAT's order giving effect to the BIFR's order. The CIT(A) upheld the AO's decision, which was contested by the assessee on the grounds that the delay was not attributable to them.3. Calculation of Interest under Section 244A:The AO's calculation of interest under Section 244A was challenged on multiple grounds:- Denying interest for March 1998 on the payment of Rs. 7,75,50,260/- made on 25/03/1998.- Allowing interest on Rs. 74,357,749 after appropriating Rs. 3192511 towards the refund attributable to BIFR.- Not allowing interest for the months of November 1998, August 1999, and March 2006 on Rs. 54,700,000.- Calculating interest for September 1999 to May 2000 at NIL by wrongly taking the principal amount as (minus) Rs. 43,56,651/-.4. Withdrawal of Interest Allowed on Self-Assessment Tax:The AO withdrew Rs. 19,46,200/- being the interest allowed on the refund of self-assessment tax under Section 143(1). The assessee argued that the ITNS-150 accompanying the impugned order starts with post-section 143(1) orders only, thereby reducing the refund admissible to them.5. Non-Compliance with Section 245 Provisions:The AO did not comply with the mandatory provisions of Section 245 by not intimating the appellant in writing before setting off the refund against the amount payable for different years. The assessee argued that this adjustment was illegal and deserved to be reversed.6. Non-Issuance of Balance Refund:The AO erred in not issuing the balance refund of Rs. 49,21,194/- to the appellant as worked out in the ITNS-150 accompanying the impugned order.Judgment Analysis:Reduction of Deduction under Section 80HHC:The Tribunal did not specifically address this issue in detail within the judgment text provided.Denial of Interest under Section 244A on Tax Refund:The Tribunal noted that the main issue revolved around Section 244A and the delay not being attributable to the assessee. It was contended that the CIT(A) ignored facts and wrongly reversed his own order denying relief under Section 72A, which led to the denial of interest under Section 244A.Calculation of Interest under Section 244A:The Tribunal observed that the AO excluded periods at his own discretion while processing the refund claim, which was outside his jurisdiction. As per Section 244A(2), any question regarding the exclusion of periods for interest calculation should be decided by the Chief Commissioner or Commissioner of Income Tax. The Tribunal held that neither the AO nor the CIT(A) had the authority to exclude any period for computation of interest on refund under Section 244A(1).Withdrawal of Interest Allowed on Self-Assessment Tax:The Tribunal did not specifically address this issue in detail within the judgment text provided.Non-Compliance with Section 245 Provisions:The Tribunal did not specifically address this issue in detail within the judgment text provided.Non-Issuance of Balance Refund:The Tribunal did not specifically address this issue in detail within the judgment text provided.Conclusion:The Tribunal restored the matter to the AO with a direction to refer the issue regarding the exclusion of periods for interest calculation under Section 244A(2) to the Chief Commissioner or Commissioner of Income Tax. The Tribunal emphasized that the decision of the Chief Commissioner or Commissioner would be final on this issue. The appeal was deemed allowed for statistical purposes, and the decision was pronounced on 2nd March 2015.