- (1.) The assessee impugns order dated 01.08.2013, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, on the following substantial question of law: - "Whether interest allowed u/s 244(1) can subsequently be withdrawn in view of creation/restoration of demand in subsequent appeal."
(2.) The facts, in brief, that have led to the filing of the appeal are that the assessee filed a return of income tax on 26.08.1985, declaring an income of Rs.47,200/-. The return was revised to an income of Rs.49,620/- on 28.10.1986 but a protective assessment was made on 19.02.1988 treating the income as Rs.1,67, 534/-. A demand was consequently raised for Rs.1,13,163/-. An appeal filed by the assessee was dismissed by the Commissioner of Income Tax (Appeals), on 26.09.1988. The Income Tax Appellate Tribunal, vide order dated 07.09.1991, set aside the order passed by the Commissioner of Income Tax (Appeals) and restored the appeal to the Commissioner of Income Tax (Appeals).
(3.) The Commissioner of Income Tax (Appeals) upheld the protective assessment but reduced the quantum of income by Rs.1,93,780/-. During pendency of the appeal before the Income Tax Appellate Tribunal, the Assessing Officer gave effect to the order passed by the the Commissioner of Income Tax (Appeals) which resulted in a refund of Rs.24,423/-, to the assessee. The Income Tax Appellate Tribunal, vide order dated 14.12.1994, directed that assessment be framed in substantive capacity. The Assessing Officer gave effect to this order which led to withdrawal of interest of Rs.29,380/- already allowed to the assessee. The assessee filed an appeal before the Deputy Commissioner of Income Tax which was dismissed. The appeal filed by the assesee before the Income Tax Appellate Tribunal against withdrawal of interest was dismissed by relying upon a judgment of the Hon'ble Supreme Court in "Modi Industries Ltd. and another Versus Commissioner of Income Tax and another", 1995 216 ITR 759, by holding as follows: - "Here, we are concerned with the third conclusion was arrived at by their lordship. As per this conclusion, w.e.f. April 1, 1985, interest payable under section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by orders passed subsequent to the regular assessment as mentioned in sub-section (1A). In the aforesaid case of Modi Industries Ltd., Vs. CIT, their lordship has observed at page 807 as under: - "Interest under subsection (1A) of section 244 is payable when the tax or penalty paid by an assessee pursuant to an order of assessment has been reduced in appeal or any other proceeding. In such a case, an excess amount of tax or penalty paid by the assessee will have to be refunded and the Central Government has to pay interest on the excess amount from the date on which such amount was paid to the date on which the refund was granted. Of course, there can be no question of paying interest both under section 214(IA) and section 244(IA) simultaneously. The rate of interest being the same under both the provisions, there would be no difference in the actual amount of interest payable whichever provision is applied." 5.1. From the above, it would be clear that the interest under section 244(IA) would be payable by taking into consideration the result of any appellate order. Therefore, in the instant case, the A.O. rightly withdrew the interest which was not payable after giving the appeal effect. On a similar issue, the Hon'ble Calcutta High Court in the case of ANZ Grindlays Bank Pl. Vs. C.I.T., 1999 157 CTR(Cal) 161, 169 held (Head Note) that: - "With regard to the question that whether the interest paid under sec. 214 to the assessee can be withdrawn or can be recovered or can be adjusted, sub-section (IA) of section 214 provides that where on completion of the regular assessment the amount on which the interest so paid under sub-sec.(1) has been reduced, the interest shall be reduced accordingly, and the excess, if any paid, shall be deemed to be tax payable by assessee and the provisions of this Act shall apply. Admittedly, the net result after regular assessment as well after giving effect to the orders of the Tribunal for the asstt. years 1978-79 is that the assessee has not paid the tax deducted at source or advance tax more than the tax assessed. Therefore, in any case, if the interest has been paid, which is not payable under sec. 214, that can be recovered. It has been further held that the interest under section 214 & 244 (IA) which was not due at all, or payable by the Revenue to the assessee, has rightly been adjusted.";