Court allows assessee's appeal for interest on refund amount, citing I.T. Act.

The court held in Income-tax Reference No. 194 of 1975 that the assessee had the right to appeal before the AAC against the ITO's decision not to grant interest on the refund amount. The court determined that interest under section 244 of the I.T. Act was due for the delay period after six months from November 9, 1964. The court concluded in favor of the assessee on both issues, ordering the applicant to pay the costs of the references to each of the respondents.

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Issues Involved:

1. Whether the revenue could contend before the Tribunal that the assessee's appeal before the AAC was not tenable.
2. Whether the assessee had a right of appeal before the AAC against not granting of interest for the period of delay in granting refund.
3. Whether the assessee was entitled to interest u/s 244 of the I.T. Act on the amount of refund due for the period of delay after the expiry of six months from 10th November, 1964.
4. Whether the order dated July 17, 1967, could be appealed against to the AAC u/s 246 of the Act.

Summary:

Issue 1: Revenue's Contention on Appeal Tenability
The revenue argued that the assessee's appeal before the AAC was not tenable as the assessee had no right of appeal. The court found it unnecessary to answer this question since it held that the appeal to the AAC was competent. The court referenced the Madras High Court's observation that an appellate authority's order, even if it lacked jurisdiction, would still be appealable to a higher authority.

Issue 2: Right of Appeal Before the AAC
The court held that the assessee had a right of appeal before the AAC against the ITO's order not granting interest on the refund amount. The court noted that u/s 246(1)(f) of the I.T. Act, an order under s. 154 or s. 155 that reduces a refund or refuses a claim is appealable. The ITO's order dated 17th July, 1967, which did not grant interest, was construed as reducing the refund amount, making it appealable.

Issue 3: Entitlement to Interest u/s 244
The main question was whether the assessee was entitled to interest u/s 244 on the refund amount for the delay period after six months from 10th November, 1964. The court held that the relevant date for interest calculation was the AAC's order dated 9th November, 1964, which set aside the ex parte assessment against the firm. The court rejected the revenue's contention that the relevant date was the Tribunal's order dated 13th March, 1967, or the AAC's order dated 18th October, 1966. The court concluded that the assessee's right to a refund arose from the AAC's order dated 9th November, 1964, and interest was due for the delay beyond six months from this date.

Issue 4: Appeal Against the Order Dated July 17, 1967
The court affirmed that the order dated 17th July, 1967, could be appealed against to the AAC u/s 246 of the Act. The ITO's order, which rectified the assessment but did not grant interest, was appealable as it effectively reduced the refund amount.

Conclusion:
1. It was unnecessary to answer whether the revenue could contend before the Tribunal that the assessee's appeal before the AAC was not tenable.
2. The assessee had a right of appeal to the AAC against the ITO's order not granting interest on the refund amount.
3. The assessee was entitled to interest on the refund amount for the delay period after six months from 9th November, 1964.
4. Both questions in Income-tax Reference No. 194 of 1975 were answered in the affirmative, in favor of the assessee and against the revenue.

The applicant was ordered to pay the costs of the references to each of the respondents.

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