N.K. Saini, A.M. - (1.) THIS is an appeal by the assessee and is directed against the order of the Dy. CIT(A), Jalandhar, dt. 31st March, 1997, relating to asst. yr. 1985-86.
(2.) The assessee has raised following grounds in this appeal: "1. That the Dy. CIT(A) was not justified in holding that no appeal can be filed in respect of matter relating to Section 244. He has failed to appreciate that appeal was filed before him against the order giving effect to the appellate order which is appealable order being part of order under Section 143(3). 2. That the Dy. CIT(A) has travelled beyond his jurisdiction by making his observations about refund due to the assessee. That the Dy. CIT(A) was not justified in not holding that interest under Section 244(1A) could not be withdrawn while giving appeal effect as held by Gujarat High Court in the case of Cibatul Ltd v. IAC (1993) 201 ITR 507 (Guj). He was not competent to either find fault with drafting of Act or dissent from the decision of High Court.
(3.) THAT the order of the Dy. CIT(A) and AO is against law and facts of the case." 3. Ground Nos. 1 & 2 relate to the observation of the Dy. CIT(A) that no appeal under Section 246 had been provided in respect of matters relating to Section 244 of the IT Act. 3.1. We have heard both the parties on this issue. The learned Dy. CIT(A) while passing the impugned order observed at para 3 in the following manner : "3. In the first place, no appeal under Section 246 has been provided in respect of matters relating to Section 244. Therefore, the matter under consideration cannot be agitated in this appeal. On this ground alone, it deserves to be dismissed in limine." However, the learned Dy. CIT(A) had not dismissed the appeal of the assessee in limine. On the contrary, the issue has been decided on merits. Therefore, raising of this issue has made it academic in nature because the learned Dy. CIT(A) although observed that no appeal is maintainable yet he had not dismissed the appeal in limine, on the contrary, decided the appeal of the assessee on merits. 3.2. Before parting, we may add here that a similar issue has been decided recently by the Hon'ble Calcutta High Court in the case of N. Chakravorti and Co. and Anr. v. Union of India and Ors. (2002) 257 ITR 10 (Cal), wherein it has been held that: "Held, dismissing the petition, (i) that in the earlier writ petition the Court did not entertain the writ petition on the question of the merits of the claim for refund or otherwise. Only on limited ground the writ petition was entertained and certain orders were passed. Therefore, the said order could not be brought within the purview of writ jurisdiction. Moreover, the IT Act itself provides for adequate remedy and provisions for dealing with the same, and so the Court could not assume jurisdiction even if the order appeared ex facie bad or had been passed on surmises and conjectures. It was not that no writ petition could be maintained for the purpose of claiming refund. Only if it was shown that the assessee was entitled to get the refund of the specific amount could the writ jurisdiction be invoked that too at the discretion of the Court. (ii) THAT the interest claimed by the petitioner was payable under Sections 243 and 244 of the Act which was a component of the refund to be made under Section 237. The order of refund was made under Section 237. Therefore, the contention of the petitioner to the extent that the order was not an order under Section 237, since interest was also claimed, could not be sustained and the order was appealable under Section 246(l)(k)." From the above ratio laid down by the Hon'ble Calcutta High Court, it would be clear that the learned Dy. CIT(A) has the jurisdiction to dispose pf the appeal, since the interest claimed by the assessee was payable under Sections 243 and 244 of the IT Act which was component of the refund to be made under Section 237 of the IT Act and an order under Section 237 is appealable under Section 246(1)(k) of the IT Act. Therefore, the learned Dy. CIT(A) was not justified in observing that no appeal under Section 246 had been provided in respect of matters relating to Section 244 of the IT Act. These two grounds are disposed of in the manner indicated hereinabove. 4. Vide ground No. 3 the grievance of the assessee is that while the interest under section has been paid to the assessee, that cannot be withdrawn in this case. 4.1. The facts in brief as appearing from the orders of the authorities below are that in this case return was filed by the assessee on 26th Aug., 1985, declaring an income of Rs. 47,200. THAT return was revised to an income of Rs. 49,620 on 28th Oct., 1986. Protective assessment was made on 19th Feb., 1988, at an income of Rs. 1,67,534 resulting in a demand of Rs. 1,13,163. The learned CIT(A) dismissed the appeal of the assessee vide order dt. 26th Sept., 1988. However, the Tribunal vide its order dt. 7th June, 1991 set aside the order of the learned CIT(A) and restored the issue back to his file. The learned Dy. CIT(A) vide his order dt. 24th Nov., 1995, upheld the protective nature of assessment but allowed a relief on quantum by reducing income by Rs. 1,93,780. The AO gave the appeal effect vide order dt. 28th March, 1994, which resulted in refund of Rs. 24,420. On 14th Dec., 1994, the Tribunal directed assessment to be framed in substantive capacity. The AO on 31st March, 1995, gave further appeal effect to the order dt. 28th March, 1994, resulting in refund of Rs. 53,800 which included interest of Rs. 29,380 under Section 244(1A) along with refund of Rs. 24,420 allowed earlier. Further, appeal effect was given by the AO vide order dt. 18th Nov., 1996, resulting in a demand of Rs. 22,570 and, therefore, interest of Rs. 29,380 which was allowed earlier was withdrawn. 4.2. Against the withdrawal of the interest, the assessee preferred an appeal to the Dy, CIT(A). The learned Dy. CIT(A) dismissed the appeal of the assessee and confirmed the view taken by the AO for the reasons stated at paras 5 to 7 of the impugned order. 4.3. Now the assessee is in appeal. The learned counsel for the assessee, Sh, Y.K. Sud, CA, vehemently argued and stated that the provision under which the AO had withdrawn interest allowed to the assessee under Sections 214 and 244 at the time of giving appeal effect was untenable in the eyes of law and was liable to be set aside. It was further stated that no withdrawal of interest paid under Section 244(1A) on refund granted on giving effect to the appellate order was possible in view of the ratio laid down by the Hon'ble Gujarat High Court in the case of CIT v. Ahmedabad New Cotton Mills Co, Ltd. (2002) 253 ITR 762 (Guj). The reliance was also placed on the decision of the Tribunal, Chandigarh 'A' Bench, in the case of H.P. State Forest Corpn. Ltd., Shimla v. Jt CIT, Special Range, Shimla, order dt. 10th March, 2003, in ITA Nos. 19 & 20/Chandi/1998, for the asst. yrs. 1983-84 and 1984-85. 4.4. In his rival submissions, the learned Senior Departmental Representative strongly supported the order of the learned Dy. CIT(A) and submitted that the interest has rightly been withdrawn by the AO in view of the amended provisions of Section 214 of the IT Act, w.e.f. 1st April, 1985. It was further stated that while giving effect to the appellate order, the AO simply has to compute the taxable income and at the same time has no discretion to ignore the appellate order while calculating the interest under Sections 214 and 244(1A). The reliance was placed on the decision of the Hon'ble Supreme Court in the case of Modi Industries Ltd. and Anr. v. CIT and Anr. (1995) 216 ITR 759 (SC). 4.5. We have heard the learned representatives of both the parties at length and also carefully gone through the material available on the record. Provisions of Section 244(1A) of the IT Act, read as under: "244(1A). Where the whole or any part of the refund referred to in Sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in Sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted : Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted : Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding. Provided also that where any interest is payable to an assessee under this subsection, no interest under Sub-section (1) shall be payable to him in respect of the amount so found to be in excess. (2) Where a refund is withheld under the provisions of Section 241, the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of three months from the end of the month in which the order referred to in Section 241 is passed to the date the refund is granted. (3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st April, 1989, or any subsequent assessment years.";