TaxTMI 
TaxTMI 
1995 (1) TMI 1
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....mmissioner on March 6, 1969. He set aside the assessment and directed the Income-tax Officer to complete the assessment afresh in the light of the directions given by him. In short, the Appellate Assistant Commissioner directed that the income of the respondent-assessee must be determined under section 12B of the Indian Income-tax Act, 1922, and not under section 10(2)(vii) of the said Act. The respondent filed an appeal before the Tribunal questioning the correctness of the Appellate Assistant Commissioner's order but it was dismissed on September 20, 1971. The Income-tax Officer then took up the assessment proceeding and called upon the respondent to furnish certain particulars. The respondent furnished the particulars finally on April 13, 1973, and the Income-tax Officer completed the assessment on August 14, 1973. As a result of this assessment, a sum of Rs. 84,562 was found refundable to the respondent. It was refunded in the same month. The respondent laid a claim for interest under section 244(1) of the Income-tax Act, 1961, for the period commencing on March 6, 1969 (the date of the Appellate Assistant Commissioner's order) to August, 1973 (the month in which the assessment....
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....he amount to the assessee without his having to make any claim in that behalf: Provided that where, by the order aforesaid,- (a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment; (b) the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee." [ The proviso was added by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989.] "244. Interest on refund where no claim is needed.-(1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at fifteen per cent. per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted." [ Prior to April 1, 1971, the period was six m....
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.... tax determined as payable under a fresh assessment is found to be more than the tax paid under the original assessment, is the Revenue entitled to interest on such amount from the date of the appellate order? Certainly not. According to section 220(2), interest is payable by the assessee on the amount due only after the service of the notice of demand pursuant to such fresh assessment. It is true that the language of section 220(2) and section 244(1) is different, but a consideration of both the concepts helps in placing a proper interpretation on section 240 and section 244(1). Be that as it may, the question has yet to be answered, whether refund of any amount has become due to the assessee as a result of the appellate order in this case? One answer given by the Allahabad High Court in Purshottam Dayal Varshney v. CIT [1974] 94 ITR 187 and followed by some other High Courts is that once the assessment is set aside, the entire tax paid becomes refundable (and that on a fresh assessment being made and a demand notice served, it again becomes due to the Revenue). We find this answer inconsistent with the language of section 240, section 237 and the scheme of the enactment. To illus....
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.... a result of the Appellate Assistant Commissioner's order. To repeat, the Appellate Assistant Commissioner's order did not determine the tax payable by the assessee. It merely directed the Income-tax Officer to make a fresh assessment in accordance with its directions. The amount due or the amount refundable to the assessee, as it may be called, was ascertained only on the making of a fresh assessment on August 14, 1973. It may also be noticed that the Appellate Assistant Commissioner's order had the effect of reviving the assessment proceedings which had yet to be completed and which proceedings were in fact completed on August 14, 1973. When the assessment proceedings are still pending, it is idle to talk of any amount or any refund becoming due to the assessee in respect of that assessment year, particularly in the light of section 237. In this sense, clause (a) of the proviso to section 240, added with effect from April 1, 1989, is merely clarificatory. The said clause says that where an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment. In Purshottam ....