- (1.) ON an application filed under Section 256(1) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal, Jaipur, has referred the following question for our opinion : "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the Assessing Officer erred in law in withdrawing the interest allowed under Section 244(1A) and in cancelling the order dated May 21, 1991, withdrawing the interest under Section 244(1A) of the Income-tax Act, 1961 ?"
(2.) THE assessee-Hindu undivided family was allowed refund of Rs. 54,364 as per order under Section 154 of the Income-tax Act, 1961, dated October 15, 1990, on account of interest under Section 244(1A) of the Act, in respect of the assessment years 1958-59 and 1959-60, However, a demand for Rs. 28,163 was created against the assessee-Hindu undivided family vide ITNS-150, dated January 22, 1990, and the refund was adjusted against such demand and such order of adjustment was passed prior to April 1, 1975. By a subsequent order dated May 21, 1991, the Income-tax Officer withdrew the interest allowed by him under Section 244(1A) of the Act and in appeal his action was upheld by the learned Deputy Commissioner (Appeals). In an appeal before the Income-tax Appellate Tribunal, Jaipur, it was argued that when the interest was allowed to the assessee under Section 244(1A) of the Income-tax Act, 1961, the interest could not have been withdrawn in an order under Section 154 of the Income-tax Act, 1961. This issue has been considered by the Delhi High Court in the cases of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928, and C1T v. Dalmia Cement (Bharat) ltd. [1982] 137 ITR 681. While considering the issue, the Tribunal has decided the issue as under : "In the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928, the Delhi High Court has held that the advance tax paid earlier will get converted into a payment on the date of the initial assessment of the tax due for the assessment year concerned. Carrying that sentence to its logical extent, the assessee must be held entitled to interest on the amount of advance tax also to the extent it is found refundable from the date of the excess payment right up to the date of actual refund. Reiterating the same legal position in the case of CIT v. Dalmia Cement (Bharat) Ltd. [1982] 137 ITR 681 (Delhi), it was held that the Income-tax Officer had no jurisdiction to revise his earlier order to withdraw the interest by resort to the provisions of Section 154 of the Act on the ground that there was a mistake which was required to be rectified, because the question whether the orders passed by the Income-tax Officer to give effect to the appellate orders were 'regular assessments' was of great difficulty and complexity and one of doubt and debate. This view of the Delhi High Court was affirmed by the Supreme Court by dismissing the special leave petition of the Department vide ([1984] 148 ITR (St.) 65). The contention of learned counsel for the assessee, therefore, gets good support from the decision of the High Court. I, therefore, hold that the Income-tax Officer erred in law in withdrawing the interest allowed to the assessee under Section 244(1A) of the Act vide his order dated October 15, 1990. His subsequent order dated May 21, 1991, withdrawing the interest under Section 244(1A) of the Act is accordingly cancelled." Mr. Singhi, learned counsel for the Revenue, submits that the language of Section 244(1A) of the Act, is plain and simple. When the language requires that the interest under Section 244(1A) is payable only on the amount paid after April 1, 1975, then only the simple interest on the refunded amount can be allowed. If the amount has been paid earlier to April 1, 1975, no interest on refund can be allowed. It is an apparent mistake on the record and the interest which had wrongly been paid on refund, the Income-tax Officer had rightly withdrawn that interest. Mr. Kasliwal, learned counsel for the assessee, submits that the assessee is entitled to interest for the entire year on the amount of pre-assessment tax paid and found it to be excessive of the required demand after giving effect to the appellate order for the assessment year 1976-77. He placed reliance on the decision of the Punjab and Haryana High Court, in the case of CIT v. Hansa Agencies P. Ltd. [1998] 234 ITR 271 and the decision of the apex court, in the case of Modi Industries Ltd. v. CIT [1995]. 216 ITR 759. The relevant provisions of Section 244(1A) of the Income-tax Act, 1961, 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 day of 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 sub-section, no interest under Sub-section (1) shall be payable to him in respect of the amount so found to be in excess."
(3.) SUB-section (1A) of Section 244 of the Income-tax Act, 1961, has been inserted with effect from October 1, 1975. Before we go into the facts of the case in hand, we would like to refer to some observations of various High Courts. In the case of Sag Construction Associates v. Union of India [1998] 234 ITR 501, the High Court of Delhi, at page 502, observed as under : "It is, therefore, clear that with the passing of the order of assessment dated February 22, 1983, without regard to the fact that the assessment order was set aside by the Assistant Commissioner of Income-tax the amount of TDS lost its such character and the same was deemed to have been paid in pursuance of the order of assessment. Hence, Section 244(1A) would be clearly attracted." In National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928, at page 953, the Delhi High Court observed as under : "The second provision to which we would like to refer is the provision contained in Section 244(1A) which has also been extracted earlier. This is a new provision introduced by the Finance Act of 1975. It provides that where payments of tax are made by an assessee after March 31, 1975, he would be entitled to interest in respect of such payments to the extent they are refunded on being found to be in excess of the amount of tax ultimately found due as a result of an appeal, revision, reference or rectification. Such interest is payable from the date of the payment of the excess amounts right up to the date of refund." The assessee is entitled for interest under Section 244(1A) from the date of excess payment to the date of refund. ;