- (1.) THIS is an application under S. 256(2) of the IT Act, 1961 ('the Act') praying that the Tribunal, Delhi Bench 'B', New Delhi, be directed to state a case and refer the following question stated to be of law and to arise out of its order dt. 27th July, 1994 passed in IT Appeal No. 3236 (Delhi) of 1991 for the asst. yr. 1987-88 for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the interest of Rs. 1,23,004 charged by the AO under S. 220(2) of the IT Act, 1961?"
(2.) WE have heard Shri Bharat Ji Agarwal, senior standing counsel for the applicant and Shri Shambhu Chopra, the learned counsel for the opposite party. The facts of the case are that the assessee had filed return of income and claimed that since the tax already paid was more than the tax leviable on the return of income, a provisional assessment under S. 141A of the Act be made and assessment was, accordingly, made vide order dt. 13th July, 1988 and a refund of Rs. 4,39,352 was granted. Subsequently, a regular assessment was made by the AO determining the income at Rs. 5,99,44,449 and a demand was raised for which a notice of demand was served. In the assessment order, the AO levied interest under S. 220(2) of the Act on the aforesaid amount of Rs. 4,39,352. The question is whether the said interest levied in a sum of Rs. 1,23,004 was rightly charged. The Tribunal to whom the matter was carried, deleted the said interest following its order for the asst. yr. 1986-87. The Tribunal has taken the view that no interest could be levied on the amount of refund granted under S. 141A. The CIT moved an application under S. 256(1), which has been rejected by the Tribunal with the following observations : "We have carefully considered the arguments of both the sides. The facts of the case are that the income of the assessee was assessed under provisional assessment under S. 141A at Rs. 2,73,46,558. According the assessee was allowed refund of Rs. 39,352. As per the regular assessment under S. 143(3), the income of the assessee was determined at Rs. 5,99,44,449 and in such assessment no refund was found to be payable to the assessee. Accordingly, the AO charged interest under S. 220 by invoking the provisions of S. 154 amounting to Rs. 1,23,004. The AO's action was confirmed by the CIT(A). However, the Tribunal following its earlier order in IT Appeal No. 2165/Del/1991 directed that no interest under S. 220 was chargeable. Against such direction of the Tribunal, the revenue is seeking a reference to the Hon'ble High Court. However, the income of the assessee as finally determined after giving effect to the orders of the appellate authorities was Rs. 2,58,94,320. Thus, as the income is finally determined at less than the income determined under S. 141A, the refund granted as per provisional assessment is not payable by the assessee, so the question whether any interest was payable on such refund originally granted to the assessee is purely academic. Hence, we deem it unnecessary to refer this question to the High Court." The facts mentioned in the Tribunal's order under S. 256(1) have not been controverted and the fact remains that the assessment as concluded after the appellate proceeding resulted in determination of the income that was even less than the income determined under S. 141A. Thus, the figures, mentioned in the Tribunal's order are Rs. 2,58,94,320 and Rs. 2,73,46,558 meaning thereby that a further refund would have been granted after the assessment became final. The AO has charged interest under S. 220(2) on the amount of refund that was granted on the basis of the provisional assessment. Sec. 220(2) does not apply because no notice of demand was served in respect of the amount of refund. Under this provision, the assessee is liable to pay interest only if there amount specified in the notice of demand under S. 156 was not paid. Sum of Rs. 4,39,353 was not such amount. The learned standing counsel referred to sub-s. (4) of S. 141A which deals with the amount refunded on provisional assessment. Clause (a) states that where the sum refundable on regular assessment is equal to or exceed the amount refunded under sub-s. (1), the amount so refunded shall be deemed to have refunded towards the regular assessment. The present case is governed by cl. (a) of sub-s. (4) of S. 141A and, therefore, the amount would be deemed to have been refunded on a regular assessment.
(3.) THE learned standing counsel contended that the amount became refundable only after the appellate proceeding and not on the regular assessment as made by the AO. This contention is against the settled law, which is that the assessment merges in the appellate order and, therefore, after the decision of appeal it is the assessment as made by the appellate authority that would become the regular assessment.;