PRAKASH KRISHNA, J. - (1.) THE petitioner is a company duly incorporated under the Companies Act, 1956. It has been pleaded that for previous years relevant to the assessment years 1992 -93, 1993 -94 and 1994 -1995, the petitioner deposited the income tax in pursuance of the assessment orders passed by the Assessing Officer, under the provisions of Income Tax Act, 1961. The assessment orders were subject matter of challenge by the petitioner first before First Appellate Authority and thereafter before the Income Tax Appellate Tribunal. The petitioner was granted marginal relief by the First Appellate Authority and in the second appeals by the Tribunal as well. The petitioner's case is that the income tax deposited by it, in pursuance of the demand notices issued under section 156 of the Act by the Assessing Officer, the petitioner is entitled to get refund of the excess tax deposited for all these three assessment years. The orders of the Tribunal for the assessment years 1992 -93, 1993 -1994 and 1994 -95 all have become final and the following amounts of refund have become due: - JUDGEMENT_866_TLALL0_2012 .jpg The petitioner has been pursuing its refund claim for the last five to six years but without any success. In the petition the following reliefs have been claimed: - (I) A writ, order or direction in the nature of Mandamus directing the respondent No.2 and 3 to grant refund of Rs.15,90,694/ - of excess deposit of tax for AY 1992 -93, 1993 -94 and 1994 -95 together with exemplary interest for delay of 5 -6 years in making refund. (II) Issue any other Writ, Order or Direction, as this Hon'ble Court may deem fit and proper under the facts and circumstances of the case. (iii) Award cost of the petition to the petitioner. The above writ petition was filed on 12.1.2012 after giving its notice to the learned standing counsel for the respondent department. It appears that after the receipt of the notice of the writ petition good sense prevailed upon the department and the department on 27.2.2012 and 16th April, 2012 issued refund vouchers for all the three years. True copies of the communication received by the petitioner in this regard have been filed as Annexure -SA 1 to the supplementary affidavit dated 30th April, 2012. Sri S.D Singh, learned counsel for the petitioner stated before us, that the grievance of the petitioner with regard to the refund stands fully redressed and the petitioner has now no claim for refund of any further amount towards all these three assessment years. But he submitted that in view of the statutory provision as contained in the Income Tax Act, the petitioner is entitled for interest on the delayed refund. He, therefore, confined the writ petition for the grant of interest amount on the delayed refund, i.e on the refund amount refunded with delay. Contesting the case of the petitioner a counter affidavit sworn by Sri Girish Chand Shukla, Income Tax Inspector on behalf of the respondents has been filed. It is a short document and the most of the allegations of the petitioners have not been disputed. The relevant paragraph is paragraph 3 which was referred by Sri R.K. Upadhyay, learned standing counsel for the department wherein it has been stated that there has been some delay in grant of refund due to the petitioner for several reasons including frequent changes of Assessing Officers and inaction on the part of the petitioner in bringing the facts relating to the delay in grant of refund to the notice of the Assessing Officer. It has been further stated that the Department tentatively decided to grant refund along with statutory interest on refund amount as per calculation in ITNS 150 dated 1st of February, 2012 of Rs.29,83,056/ - has been worked out. The refund order shall be issued shortly after seeking the approval of the competent authority. The respondents have also filed a reply to the first supplementary affidavit of the petitioner with regard to the grant of interest on the sum so refunded by disputing the claim of the petitioner for interest. They have come out with the case that no interest is payable as per section 244A of the Income Tax Act. The stand of the department is that in view of the Explanation attached to section 244A, interest will be calculated from the date of payment of "tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand." Emphasis has been laid on the words "paid in excess of such demand." According to them, in view of Explanation to section 244A, the petitioner having not paid any amount in excess of demand notices issued by the Assessing Officer under section 156, the petitioner is not entitled for any interest. Sri S.D. Singh, learned counsel for the petitioner, submits that on a true and correct interpretation of section 244A , the petitioner is entitled for interest on the delayed payment of refund amount. Submission is that the interest is payable from the date of actual deposit till the date of actual payment of refund amount at the rate specified in section 244A (1) (b). Reliance has been placed on a departmental circular No.549 dated 1st of October, 1999 explaining the scope and effect of newly inserted section 244A as amended by the Direct Tax Laws (Amendment) Act, 1989. Further reliance has been placed upon an Apex Court judgment Sandvick Asia Ltd. Vs. CIT (2006) 2 SCC 508 in support of the claim that the interest upon interest is payable to the petitioner. Sri R.K. Upadhyay, learned standing counsel for the department, on the other hand, submits that on true and correct interpretation of the Explanation to Section 244A, the department is not liable to pay any interest. His further submission is that the department is also not liable to pay interest as the refund was delayed for reasons attributable to the assessee/petitioner as per Section 244A (2). Considered the respective submissions of the learned counsel for the parties and perused the record. The only point mooted in the present writ petition is about the entitlement of the petitioner to receive the interest on the refund amount in view of Explanation to Section 244A and also interest upon interest.
(2.) DURING the course of the argument, the learned counsel for the petitioner handed over a calculation chart which is reproduced below: - JUDGEMENT_866_TLALL0_20121 .jpg At the outset, we may add that the dispute in the present writ petition relates to the period subsequent to 31st of March, 1989. Section 244A is operative with regard to the payment of interest on refund for the assessment year 1989 -90 and thereafter. The provisions relating to refund and interest of the Income Tax Act, were drastically amended by the Direct Tax Laws Amendment Act, 1989 w.e.f. 1st of April, 1989. Provisions relating to refund and interest are contained in Chapter XIX of the Income Tax Act. Section 237 provides that if the Assessing Officer is satisfied with the liability of tax paid by any persons or by any other person on behalf of the assessee for any Assessment Year exceeds the amount with which he is properly chargeable under the Act for that year, the said person shall be entitled to a refund of the excess amount. Section 240 deals with the refund of the tax as result of an appellate order. Sections 243 and 244 deals with interest on delayed refund and interest on refund were no claim application needed. But these provisions shall not apply in respect of any assessment for the assessment year commencing on the 1st April, 1989 or any subsequent assessment years. The material section for the present purposes is Section 244A. It is common case of the learned counsel for the parties that clause (a) of section 244A (1) is not at all attracted. The case of the petitioner is that his case falls in clause (b) of section 244A (1). For the sake of convenience the aforesaid Section is reproduced below: "244A.(1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely : - - (a) where the refund is out of any tax 1 [paid under section 115WJ or ] 2 [collected at source under section 206C or ] paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 3[one -half per cent] for every month or part of a month comprised in the period from the 1 st day of April of the assessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined 4[under 5[sub -section (1) of section 115WE or ] sub -section (1) of section 143 or] on regular assessment. 1 Inserted by the Finance Act, 2005. w.e.f. 1 -4 -2006. 2 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1 -4 -1989. 3 Substituted for "two -third per cent" by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8.9.2003. Earlier "two -third per cent" was substituted for "three -fourth per cent" by the Finance Act, 2002, w.e.f. 1 -6 -2002, " three -fourth per cent" was substituted for "one per cent" by the Finance Act, 2001, w.e.f. 1 -6 -2001 and "one per cent" was substituted for "one and one -half per cent" by the Finance (No.2) Act, 1991, w.e.f. 1 -10 -1991. 4 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1 -4 -1989. 5 Inserted by the Finance Act, 2005, w.e.f. 1 -4 -2006. (b)in any other case, such interest shall be calculated at the rate of one 6[* *] percent, for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted. Explanation. - -For the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. (2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final. (3) Where, as a result of an order under sub -section (3) of section 115WE or section 11SWF or section 115WG or sub - section (3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub -section (4) of section 245D, the amount on which interest was payable under sub -section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly" (4) ............................................... The case of the department for denying the claim of petitioner with regard to the interest is that in view of the Explanation quoted above, as no amount was paid in excess of the demand notice issued under section 156, interest is not payable. We are unable to accept it, for various reasons, given hereinafter. Firstly, we may notice the interpretation as put on section 156 of the Act and subsequent amendment in the Act, from time to time, to understand its scope. I Section 156 reads as follows: "When any tax, interest, penalty, fine or any other sum 7[...] is payable in consequence of any order passed under this Act, the 8 [Assessing] Officer 6 The words "and one -half" have been omitted by the Finance (No.2) Act, 1991 (49 of 1991), s.64 (w.e.f 1.10.1991). (including annuity deposit referred to in Chapter XXII -A) omitted by the Finance Act, 1966, w.e.f 1.4.1967. Originally, the said expression was inserted by the Finance Act, 1964, w.e.f 1.4.1964. 8 Substituted for 'Income tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f 1.4.1988. shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable: [Provided that where any sum is determined to be payable by the assessee under sub -section (1) of section 143, the intimation under that sub -section shall be deemed to be anotice of demand for the purposes of this section] Its corresponding section 29, under the old Income Tax Act, was interpretated by the Apex Court in the case of Income Tax Officer versus Segu Bechiah Setty (1964) 52 ITR 538 wherein the Apex Court has held that if the assessment order is modified and demand is reduced in appeal, fresh service of notice of demand is necesssary and the assessee cannot be treated as assessee in default. The recovery proceedings initiated against him on the basis of original demand, therefore, rightly quashed, by the High Court.
(3.) TO overcome the difficulty faced by the revenue, a Validation Act 1964 was passed with restrospective effect. Section 3, without the proviso, may be read as a whole: "Continuation and validation of certain proceedings. - (1) Where any notice of demand in respect of any Government dues is served upon an assessee by a Taxing Authority under any scheduled Act, and any appeal or other proceeding is filed or taken in respect such Government dues, then, - (a) where such Government dues are enhanced in such appeal or proceeding, the Taxing Authority shall serve upon the assessee another notice of demand only in respect of the amount by which such Government dues are enhanced and any proceedings in relation to such Government dues as are covered by the notice or notices of demand served upon him before the disposal of such appeal or proceeding may, without the service of any fresh notice of demand, be continued from the stage at which such proceedings stood immediately before such disposal; (b) where such Government dues are reduced in such appeal or proceeding - (i) it shall not be necessary for the Taxing Authority to serve upon the assessee a fresh notice of demand; (ii) the Taxing Authority shall give intimation of the fact of such reduction to the assessee, and where a certificate has been issued to the Tax Recovery Officer for the recovery of such amount, also to that officer; (iii) any proceedings initiated on the basis of the notice or notices of demand served upon the assessee before the disposal of such appeal or proceeding may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal; (c) no proceedings in relation to such Government dues (including the imposition of penalty or charging of interest) shall be invalid by reason only that no fresh notice of demand was served upon the assessee after the disposal of such appeal or proceeding or that such Government dues have been enhanced or reduced in such appeal or proceeding :" ;