2003 (4) TMI 238 - AT - Income Tax

Tribunal overturns AO's decision to withdraw interest, citing lack of jurisdiction.

The Tribunal held that the AO lacked jurisdiction to exclude the delay period without CIT/Chief CIT's decision. As the tax was deducted and paid, interest ... Power of assessing officer to rectify order under section 154 - exclusion of period of delay attributable to the assessee under section 244A(2) - requirement to refer dispute on exclusion of delay to CIT/Chief CIT - entitlement to interest on refund where tax was deducted and deposited - mistake apparent on record - scope of section 154Requirement to refer dispute on exclusion of delay to CIT/Chief CIT - power of assessing officer to rectify order under section 154 - Whether the AO could, under his own authority in proceedings under section 154, exclude the period of delay attributable to the assessee without referring the matter to the CIT/Chief CIT as contemplated by section 244A(2). - HELD THAT: - The Tribunal held that sub-section (2) of section 244A contemplates that where the AO considers that part or whole of the delay in grant of refund is attributable to the assessee, the question of excluding that period must be referred to the Chief CIT/CIT and the AO himself has no jurisdiction to determine and exclude the alleged delayed period. The AO in the present case did not refer the matter to the CIT/Chief CIT but withdrew interest by exercising powers under section 154. Following its earlier decision in Alfa Drugs (Chandigarh Bench) the Tribunal concluded that the AO acted without jurisdiction in excluding the period of delay and therefore the withdrawal of interest on that ground could not be sustained. [Paras 6]AO had no jurisdiction to exclude the period of delay attributable to the assessee without referring the matter to the CIT/Chief CIT; withdrawal of interest on that ground is invalid.Entitlement to interest on refund where tax was deducted and deposited - mistake apparent on record - scope of section 154 - Whether the withdrawal of interest constituted a valid rectification under section 154 because interest rightly accrued only from the date proper TDS certificates were filed, or whether allowance of interest from 1st April of the assessment year was tenable. - HELD THAT: - The Tribunal noted that tax had in fact been deducted at source and deposited into Government account in the relevant financial year. Interest under the Act is compensatory and, where tax is deposited, one view supports granting interest from 1st April of the assessment year until the refund is granted. The question whether interest should be computed from 1st April or from the date proper certificates were filed was identified as debatable, admitting two possible views. A debatable question of law is not a 'mistake apparent from the record' that can be corrected under section 154. Relying on authority that a mistake apparent must be obvious and patent, the Tribunal held that withdrawal of interest on the ground now urged did not amount to correction of a mistake apparent on record and thus could not be sustained under section 154. [Paras 6]Withdrawal of interest was not justified as a rectification of a mistake apparent on record; on the facts (tax deducted and deposited) the assessee was entitled to interest and the alternative view excluding the period is a debatable point not amenable to correction under section 154.Final Conclusion: The Tribunal set aside the CIT(A)'s order upholding the AO's withdrawal of interest, quashed the AO's rectification, and allowed the assessee's appeal, holding that the AO lacked jurisdiction to exclude the delay without referring the matter to the CIT/Chief CIT and that the withdrawal did not amount to correction of a mistake apparent on the record. Issues:Withdrawal of interest under section 154 of the IT Act.Analysis:The appeal concerns the withdrawal of interest amounting to Rs. 44,645 under section 154 of the IT Act. The assessee had initially claimed a refund of Rs. 13,28,889, but the AO allowed a refund of Rs. 8,78,440 and credited TDS of Rs. 8,05,910. Subsequently, the AO noticed incomplete TDS certificates and proposed to withdraw the interest granted under section 244(1A). The CIT(A) upheld the AO's decision, stating that the delay in filing proper TDS certificates was attributable to the assessee, thus justifying the withdrawal of interest.The assessee argued that interest should be paid from the assessment year's start till the refund, and the delay in TDS certificates issuance should not penalize the assessee. The Departmental Representative supported the authorities' decisions, emphasizing that the delay was due to incomplete TDS certificates by the assessee. The Tribunal noted that the AO withdrew interest without referring the matter to the CIT/Chief CIT, as required by law. Additionally, as tax was deducted and deposited, the assessee should be entitled to interest from the assessment year's beginning till the refund.The Tribunal held that the AO lacked jurisdiction to exclude the delay period without CIT/Chief CIT's decision. As the tax was deducted and paid, interest should be granted from the assessment year's start till the refund. The Tribunal concluded that the AO's withdrawal of interest was not in line with the law, setting aside the CIT(A)'s order and reinstating the interest. The appeal of the assessee was allowed, overturning the withdrawal of interest under section 154 of the IT Act.