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The Commissioner Of Income Tax v. Shre R M D Prasad - INCOME TAX REFERENCE No. 32 of 1989  RD-AH 1746 (17 December 2004)
Income Tax Reference No.32 of 1989
Commissioner of Income Tax, Kanpur v.
M/s Shree Ram Maha Deo Prasad, Kanpur
Hon'ble R.K.Agrawal, J.
Hon'ble K.N.Ojha, J.
(Delivered by R.K.Agrawal, J.)
The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"1. Whether on the facts and the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in stating that the claim of the assessee for interest under Section 244(1A) was on the income tax refund and not on the interest waived?
2. Whether on the facts and the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in directing the Income Tax Officer to allow the interest on the refund accrued to the assessee due to waiver of interest?"
The reference relates to the Assessment Year 1974-75.
Briefly stated, the facts giving rise to the present reference are as follows:-
The assessment for the assessment year 1974-75 was made under Section 143(3) of the Act on 31.8.1977 on a total income of Rs.1,36,620/-. Subsequently, the assessment was reopened under Section 147(b) of the Act and the reassessment was made on 28.2.1983 on a total income of Rs.2,06,260/-. Interest under Section 139(8) of the Act for late filing of the return and interest under Section 215 for non-payment of advance tax were charged as under :-
(i) Interest under Section 139(8) ... Rs.1,877/-
(ii) Interest under Section 215 ... Rs.6,273/-.
The respondent moved an application for waiver of interest before the Inspecting Assistant Commissioner of Income Tax. As a result of the direction given by him for waiver of interest, the respondent became entitled to received refund of Rs.5,782/-.
Thereafter, the respondent moved an application under Section 154 of the Act before the Income Tax Officer on 29.9.1984 in which it was stated that the order dated 13.7.1984 which has been passed by the Income Tax Officer under Rules 40 and 170A of the Income Tax Rules, 1962, waiving interest chargeable under Sections 149(8) and 215 of the Act a refund of Rs.5,782/- has been worked out as payable to him but no interest has been allowed under Section 244(1A) of the Act. The respondent sought rectification of the order which was rejected by the Income Tax Officer on the ground that the interest under Section 244(1A) of the Act is payable on the refund as a result of it having been found in excess pursuant to an order in appeal or other proceeding and not on account of the order waiving interest which order was appealed by the Commissioner of Income Tax (Appeals).
Feeling aggrieved, the respondent preferred an appeal before the Tribunal which has accepted the claim made by the respondent.
We have heard Sri Shambhoo Chopra, learned Standing Counsel for the applicant. No body has appeared on behalf of the assessee.
The learned Standing Counsel submitted that as in the present case the Income Tax Officer has waived the levy of interest on the direction of the Inspecting Assistant Commissioner, the amount did not become refundable on account of any order passed in pursuance of an appeal or in other proceeding and, therefore, no interest is payable under Section 244(1A) of the Act.
Having heard the learned counsel for the Revenue, we are of the considered opinion that under Section 244(1A) of the Act interest is payable on any part of the refund which is due to an assessee as a result of any amount paid by him and is found to be in excess in pursuance of an order in appeal or other proceeding under the Act. The word "other proceeding" are wide enough to cover a proceeding for waiver or reduction of the liability to pay interest.
In the case of Raj Kishore Prasad v. Income Tax Officer, (1991) 188 ITR 765 (Alld.) this Court has held that other proceeding under the Act in Section 240 are wide enough to include proceedings or orders passed under section 263 of the Act giving rise to a claim of an assessee and this Court has negatived the contention of the Revenue for restricting the meaning and scope of the phrase "other procededings" only to references made under the Act.
In the case of Atmaram J. Hathiwala v. Smt. S. Saraup, ITO, (1994) 209 ITR 456, the Gujarat High Court has held that the phrase "other proceedings" used under section 240 is of wide amplitude and would cover any order passed in proceedings other than an appeal under the Income-tax Act. Therefore, the phrase "orders passed in other proceedings under the Income-tax Act" would include orders passed under section 154 (rectification proceedings), orders passed by the High Court or the Supreme Court under section 260 (in reference) and orders passed by the Commissioner of Income-tax in revision applications under section 263 or 264 or on an application under section 273A of the Act. In this view of the matter, in our view, there is no reason to restrict the meaning of the phrase "other proceedings" under the Income-tax Act used in section 240 to only some orders by which refund of excess tax or penalty is granted and not to cover orders passed under section 273A of the Act. Sub-section (1A) of section 244 also, inter alia, provides that where the whole or any part of the refund referred to in sub-section (1) is due to the assessee in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in other proceedings under this Act to be in excess of the amount which such assessee is liable to pay as penalty, then the Government is required to pay to such assessee simple interest as specified therein. In this view of the matter, there is no reason to hold that in case where penalty is waived or reduced under section 273A of the Act, the assessee is not entitled to have the said amount with interest as provided under section 244(1A) of the Act.
In the case of Commissioner of Income Tax v. Needle Industries Pvt. Ltd., (1998) 233 ITR 370, the Madras High Court has held that the expression "amount" in Section 244(1A) of the Act would include the amount of interest levied and paid under Sections 139(8) and 215 of the Act and collected in pursuance of an order of assessment which was refunded and, therefore, the assessee would be entitled to interest under Section 244(1A) of the Act in respect of the interest paid under Sections 139(8) and 215 of the Act.
In the case of Commissioner of Income Tax v. Ashok Leyland Ltd., (1999) 240 ITR 899, the Madras High Court has held that Section 244(1A) of the Income-tax Act provides for grant of interest in case of refund of amount paid which was later on found to be not due not only in the appeal proceedings but also in the proceedings under the Act. The term "any other proceedings under Act" is a wide expression and it would comprehend in its scope the proceedings initiated pursuant to an appellate order and it will include the proceedings under section 14 of the Surtax Act, as the assessment under the Surtax Act is dependent on the result of the proceedings under the Income-tax Act.
Applying the principle laid down in the aforesaid cases to the facts of the present case, we find that the proceedings for waiver of interest would be a proceeding covered under the phrase "other proceedings under this Act" as mentioned in Section 244(1A) of the Act and, therefore, the respondent would be entitled to interest on the amount of refund pursuant to the order of waiver also. We are in respectful agreement with the view taken by the Gujarat High Court in the case of Atmaram J. Hathiwala (supra).
In view of the foregoing discussions, we answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. There shall be no order as to costs.
Dec. 17, 2004
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