2019 (6) TMI 1213 - AT - Income Tax

ITAT grants interest on excess self-assessment tax, including interest on delayed refunds.

The ITAT ruled in favor of the assessee, directing the AO to grant interest under Section 244A of the Income Tax Act on the excess self-assessment tax ... Interest u/s 244A on self assessment tax payment - AO has not granted interest on self-assessment tax paid in the order passed u/s 154 - HELD THAT:- Tribunal in assessee’s own case [2018 (9) TMI 1844 - ITAT KOLKATA] a decision-maker who is authorized to decide ex aequo et bono is not bound by legal rules but may take account of what is just and fair. Thus, if we decide the issue before us ex aequo et bono, then it would be decided by the principles of what is fair and just and not necessarily as per strict rule of law. Thus, since the statute itself has already prescribed a particular method of adjustment in explanation to section 140A(1), then justice, fairness, equity and good conscience demands that same method should be followed while making adjustment for refund of taxes, especially when no contrary provision has been provided. We find that the judicial propriety demands that order of the Tribunal of earlier years must be followed and therefore we direct the AO to re-compute the amount of interest u/s. 244A by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. We direct the A.O to allow interest on self assessment tax and also allow interest on such interest. Issues Involved:1. Entitlement to interest under Section 244A of the Income Tax Act, 1961 on self-assessment tax paid.2. Entitlement to interest on such interest under Section 244A of the Income Tax Act, 1961.Detailed Analysis:1. Entitlement to Interest on Self-Assessment Tax:The primary issue in this case was whether the assessee was entitled to interest under Section 244A of the Income Tax Act, 1961 on the excess self-assessment tax paid. The facts reveal that the assessee filed a revised return and paid self-assessment tax, which led to a refund situation after subsequent assessments and appeals. The Assessing Officer (AO) initially failed to grant interest on the excess self-assessment tax, prompting the assessee to file a rectification petition. However, the AO again denied the interest without providing reasons.The Commissioner of Income Tax (Appeal) [CIT(A)] directed the AO to grant interest under Section 244(1A) on the excess self-assessment tax, relying on precedents including the Supreme Court's decision in Modi Industries Ltd. vs. CIT, which underscored the entitlement to interest on excess tax payments.The Revenue appealed this decision, and the ITAT initially set aside the CIT(A)’s order on technical grounds, stating that the issue of granting interest on self-assessment tax was not covered under Section 154 of the Act. The High Court, however, remanded the matter back to the ITAT for a holistic review, emphasizing the need to resolve the substantive issue rather than focusing on technicalities.Upon reconsideration, the ITAT held that the assessee was entitled to interest on the self-assessment tax, referencing its own prior ruling in the assessee’s case and the Supreme Court’s judgment in K. Lakshmanya & Co. v. Commissioner of Income Tax. This judgment clarified that interest on refunds includes interest on self-assessment tax, as it constitutes 'amount to be refunded.'2. Entitlement to Interest on Interest:The second issue was whether the assessee was entitled to interest on the interest that remained unpaid on the excess self-assessment tax. The ITAT referred to multiple judgments, including the Supreme Court’s decision in Sandvik Asia Ltd. and Union of India v. Tata Chemicals Ltd., which established that interest on refunds should include interest on any delayed interest payments.The ITAT concluded that the assessee was entitled to interest on the unpaid interest, rejecting the Revenue’s argument that this constituted compound interest. The Tribunal emphasized that the statutory obligation to refund includes the right to interest on any delayed refunds, and this principle extends to interest on unpaid interest.Conclusion:The ITAT directed the AO to grant interest on the self-assessment tax and interest on such interest, following the principles laid down in the cited judgments. The appeal of the Revenue was dismissed, affirming the assessee’s entitlement to both the interest on the self-assessment tax and the interest on the delayed interest payments. The Tribunal’s decision was pronounced on 19.06.2019.