2023 (12) TMI 709 - AT - Income Tax

Tribunal Rules Amended Tax Refund Interest Provision Inapplicable for 2013-14; Case Remanded for Re-computation.

The Appellate Tribunal determined that the delay in issuing the refund was due to the deductor of the assessee, and under section 244A(2) of the Income ... Order u/s 154 whereby interest granted u/s 244A reduced - reasons attributable to the assessee or not? - HELD THAT:- It is not in dispute that originally the return was processed by CPC and refund of Rs. 6,01,280/- including interest of Rs. 1,00,195/- was generated. The rectification order has been passed u/s 154 of the Act by the AO/CPC by reducing the interest amount to Rs. 47,595/-. It is the case of the Revenue that the delay of issuing of refund is due to the reason attributable to the deductor of the assessee, therefore, as per section 244A(2) assessee is not entitled for such period of 19 months. The amendment to the provisions of section 244A(2) of the Act has been carried out by inserting the word “or the deductor, as the case may be” on 01/04/2017 vide Finance Act, 2017, therefore, the said provisions of section 244A(2) of the Act is not applicable in the present case being A.Y 2013-14 and the ld. CIT(A) committed an error in observing that the Section 244A(2) of the Act is applicable to the case of the assessee. We deem it fit to restore the issue to the file of the AO to re-compute and grant interest in accordance with law by keeping in the mind that the amendment to the Section 244A (2) of the Act is not applicable for the year under consideration. Appeal filed by the assessee is partly allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether the Assessing Officer/CPC validly reduced interest on refund by invoking section 244A(2) through a rectification order under section 154 for the assessment year in question. 2. Whether the amendment to section 244A(2) inserting the words 'or the deductor, as the case may be' w.e.f. 01/04/2017 applies to the assessment year under consideration. 3. Whether the rectification order passed under section 154 was legally infirm for want of opportunity of hearing as required by section 154(3). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reduction of interest on refund by AO/CPC under section 154 invoking section 244A(2) Legal framework: Interest on refunds is governed by section 244A. Rectification of mistakes apparent from record is governed by section 154. Section 244A(2) provides that if delay in refund is attributable to the assessee, the period so attributable is excluded from interest computation. Precedent Treatment: No judicial precedents were cited or applied in the judgment; treatment is confined to statutory construction and facts of the record. Interpretation and reasoning: The AO/CPC issued a rectification under section 154 reducing interest. The Revenue's rationale was that the delay was attributable to the deductor/assessee and therefore section 244A(2) justified exclusion of 19 months from interest. The Tribunal examined whether the statutory basis relied on by the AO/CPC (i.e., section 244A(2) as amended) was applicable to the assessment year concerned and whether the rectification could validly invoke those provisions. Ratio vs. Obiter: Ratio - the rectification cannot validly rely on a statutory provision (or its amended language) that was not in force for the assessment year under consideration; if the basis for reduction is an inapplicable statutory amendment, the rectification is erroneous to that extent. Conclusions: The Court held that the reduction of interest under the rectification could not be sustained to the extent it relied on amended section 244A(2) language that was not in force for the assessment year. Consequently, the order of the lower authorities upholding the reduction was set aside to the extent it applied the post-2017 amendment; the matter is remitted to the Assessing Officer to recompute and grant interest in accordance with law applicable to that assessment year. Issue 2 - Applicability of Finance Act, 2017 amendment to section 244A(2) (insertion of 'or the deductor, as the case may be') to the assessment year under consideration Legal framework: Statutory provisions apply prospectively or retrospectively only as provided. The amendment inserting reference to the deductor took effect from 01/04/2017 by Finance Act, 2017. Precedent Treatment: No precedent was applied; the analysis is statutory temporal application. Interpretation and reasoning: The Tribunal examined the temporal operation of the amendment. Since the assessment year relates to a period prior to 01/04/2017, the amended wording could not be invoked to attribute delay to the deductor for that year. The CIT(A) and AO had relied on the post-amendment provision to deny interest for 19 months; the Tribunal found that reliance misplaced because the amendment was not operative for the year under consideration. Ratio vs. Obiter: Ratio - a statutory amendment effective from a later date cannot be applied to deny entitlement under the law as it stood in the earlier assessment year; relying on such amendment in a rectification is impermissible. Conclusions: The Tribunal concluded that the amendment to section 244A(2) inserting 'or the deductor, as the case may be' (effective 01/04/2017) is not applicable to the assessment year under consideration (AY 2013-14). Therefore, reduction of interest by treating delay as attributable to the deductor under the amended provision was incorrect; the matter is remitted to the AO for recomputation of interest under the law as it stood for that assessment year. Issue 3 - Whether rectification under section 154 was passed without providing opportunity as required by section 154(3) Legal framework: Section 154(3) contemplates providing opportunity of being heard where rectification affects the rights of the assessee (as understood in practice and jurisprudence). Precedent Treatment: The judgment does not cite or apply authority on the procedural safeguards under section 154(3). Interpretation and reasoning: The assessee challenged the rectification on the ground that the AO/CPC passed the section 154 order without hearing as required by section 154(3). The Tribunal's order records the ground and the contention but proceeds on the primary statutory-point analysis (applicability of amended section 244A(2)). The Tribunal does not undertake a detailed independent finding on whether an opportunity was in fact afforded under section 154(3) or whether failure to provide hearing would independently vitiate the rectification. Ratio vs. Obiter: Obiter - the issue was raised and noted, but the Tribunal's dispositive reasoning and remedial direction are founded on the inapplicability of the post-2017 amendment; the question of compliance with section 154(3) was not conclusively adjudicated. Conclusions: The Tribunal did not decide the section 154(3) hearing-compliance issue on the merits; instead, it restored the matter to the file of the AO for recomputation of interest in accordance with law applicable to the assessment year, implicitly leaving procedural objections to be addressed as may be appropriate on remand. Remedial Disposition Because the amended wording of section 244A(2) was not in force for the assessment year, the Tribunal set aside the reduction of interest to the extent premised on that amendment and remitted the matter to the Assessing Officer to recompute and grant interest in accordance with the law applicable to the assessment year; appeal was partly allowed for statistical purposes.