B.P. Jeevan Reddy, C.J. - (1.) THE petitioner is claiming interest for two periods in this writ petition, namely, June 28, 1967, to September 8, 1972 and again from April 25, 1974 to October 6, 1978. A few facts may be stated to appreciate the aforesaid claim.
(2.) THE petitioner was a partner in a partnership firm. Assessments were made for the assessment years 1957-58 and 1958-59. Certain penalties were also levied for those assessment years. THE petitioner paid a major portion of the penalties imposed and questioned the levy of penalties. By an order dated March 28, 1967, the Tribunal set aside the penalties with the result that the penalties paid become refundable. It, however, appears that the Department was not satisfied with the orders of the Tribunal dated March 28, 1967, and they sought for a reference. Ultimately, the reference was rejected on September 8, 1972. On April 25, 1974, two refund vouchers were issued in favour of the petitioner for the amount paid by him plus interest for the period September 8, 1972 to April 25, 1974. But, before the petitioner could encash those vouchers, the encashment thereof was stopped by orders of the Department inasmuch as an ex-partner of the said firm laid a claim to the said amount. The claim preferred by such third party (ex-partner) was investigated and his claim was rejected. Thereafter, fresh refund vouchers were issued on October 6, 1978 for the same amount for which refund vouchers were earlier issued on April 25, 1974. In other words, no interest was included in the refunded amount for the period April 25, 1974 to October 6, 1978. It is in the above circumstances that the petitioner is claiming interest under Section 244(1) for the first period (June 28, 1967 to September 8, 1972) and under Section 244(2) for the second period (April 25, 1974 to October 6, 1978). So far as the first period is concerned, Section 244(1) clearly supports the petitioner's claim. It says : "(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 asses-see 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."
(3.) ACCORDING to this provision, the petitioner is clearly entitled to interest with effect from July 1, 1967. Admittedly, interest has been paid to him from September 8, 1972, to April 25, 1974. Therefore, the petitioner shall be paid interest at the aforesaid rate on the amount refundable to him for the period July 1, 1967 to September 7, 1972. Now, coming to the second period, the question is whether the proceedings which were taken on the basis of the objection/claim filed by the third party (ex-partner) are proceedings under the Act within the meaning of Section 241 as it then stood. For the sake of convenience we may read Section 241 at this stage : "241. Power to withhold refund in certain cases.--Where an order giving rise to a refund is the subject-matter of an appeal or further proceeding or where any other proceeding under this Act is pending, and the Assessing Officer is of the opinion that the grant of the refund is likely to adversely affect the Revenue, the Assessing Officer may, with the previous approval of the Chief Commissioner or Commissioner, withhold the refund till such time as the Chief Commissioner or Commissioner may determine." ;