Refund interest follows rectification order, not original assessment, where section 154 modifies the assessed income.

Interest on refund under section 243 was held to run from the rectification order under section 154, because a rectification modifying the assessment is part of the assessment proceedings and determines income afresh to the extent of the correction. Refund arising from such rectification becomes due only on the rectification order, so delay in granting refund cannot be counted from the original assessment once the assessment has been amended. The claim for interest on the basis of delay from the original assessment was therefore rejected.

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Issues: Whether interest on refund under section 243 of the Income-tax Act, 1961 was payable with reference to the original assessment order or only with reference to the rectification order under section 154.

Analysis: An order under section 154 modifying an assessment is itself part of the assessment proceedings and determines the total income afresh to the extent of the rectification. The refund arising from such rectification becomes due only from the rectification order and not from the original assessment order. Accordingly, the period for computing delay in granting refund cannot be counted from the date of the original assessment once the assessment has been rectified.

Conclusion: Interest on refund was not payable on the footing of delay from the original assessment order. The claim was rightly rejected.

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