Court overturns order, prevents double taxation of interest. Commissioner to issue new order. Petition granted.

The Court set aside the impugned order, ruling that the interest amount cannot be taxed twice. It directed the Commissioner to issue a fresh order, emphasizing the judicial power under Section 264 to correct errors for the interest of justice. The petition was granted, and the pending application was resolved accordingly.

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Issues:
Liability to pay tax on interest received on income tax refund for Assessment Years 2009-10 and 2010-11. Application for revision of assessment for Assessment Year 2014-15 under Section 264 of the Income Tax Act, 1961.

Analysis:

1. Liability to Pay Tax on Interest Received:
The petitioner credited interest on income tax refunds for Assessment Years 2009-10 and 2010-11 in its books for the Financial Year 2013-14. The interest amount was included in the income for the Financial Year 2013-14 and subsequently in the return of income for Assessment Year 2014-15. The assessment order for 2014-15 included this interest amount, leading to tax payment.

2. Reopening of Assessment for 2012-13:
The assessment for the year 2012-13 was reopened to include the interest on tax refunds for 2009-10 and 2010-11 as taxable income for that year. The petitioner contested this inclusion, but the Assessing Officer added the amount as income for 2012-13. However, no order was passed to exclude this amount from the taxable income for 2014-15, resulting in double taxation.

3. Application for Revision under Section 264:
The petitioner applied for revision of the assessment for 2014-15, as the interest amount had been taxed twice. Despite the delay in processing the application, the impugned order rejected the application on the grounds that the interest issue did not form part of the original assessment order under Section 143(3) of the Act.

4. Judicial Interpretation of Section 264:
The High Court emphasized that the power under Section 264 is wide and extends to correcting errors made by authorities or even by the assessee. Referring to precedents, the Court highlighted that the jurisdiction under Section 264 is judicial, and the authority must act judiciously in the interest of justice.

5. Decision and Remand:
The Court set aside the impugned order, stating that the interest amount cannot be taxed twice. It directed the concerned Commissioner to pass a fresh order considering the observations made. The petition was allowed, and the pending application was disposed of accordingly.

This detailed analysis of the judgment highlights the issues related to tax liability on interest income, assessment reopening, application for revision under Section 264, and the judicial interpretation guiding the decision to set aside the impugned order and remand the matter for a fresh assessment.

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