Andhra Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that an appeal did not lie to the Commissioner(A) against an order of the ITO passed to give effect to an appellate order made by the AAC in the quantum appeal, on the issue of non-allowance of interest under s. 244 on the refund arising to the assessee as a result of the AAC’s order in the quantum appeal ?

Counsel Appeared

M.J. Swamy & D. Manmohan, for the Assessee : M. Suryanarayana Murthy, for the Revenue

Y.V. ANJANEYULU, J. :

This is a reference made by the Tribunal under s. 256(1) of the IT Act, 1961 (hereinafter referred to as the Act),for the asst. yr. 1971-72, at the instance of the assessee. The question referred is :

“Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that an appeal did not lie to the Commissioner(A) against an order of the ITO passed to give effect to an appellate order made by the AAC in the quantum appeal, on the issue of non-allowance of interest under s. 244 on the refund arising to the assessee as a result of the AAC’s order in the quantum appeal ?”

For the income-tax asst. yr. 1971-72, assessment was initially made and the matter went up to the Tribunal. The Tribunal passed an order granting certain reliefs to the assessee and in giving effect to the Tribunal’s order, the ITO passed what he described as a modification order dt. 19th/22nd Sept., 1978. The ITO granted a refund of Rs. 4,037. The assessee preferred an appeal against the so-called modification order. In the appeal filed, the assessee claimed that the ITO was in error in omitting to grant interest under s. 244 of the Act. It may be pointed out that wherever refund is due and is not granted within the time allowed, the assessee can claim payment of interest on the amount of refund. The Commissioner(A) declined to admit the assessee’s appeal on the ground that no appeal lies against an order giving effect to the appellate order of the Tribunal. In any event, no right of appeal is provided against the ITO’s omission to grant refund under s. 244 of the Act.

The assessee filed an appeal before the Tribunal questioning the correctness of the view taken by the Commissioner(A). The Tribunal upheld the Commissioner’s view and dismissed the appeal. The present reference is the outcome of the Tribunal’s order rejecting the assessee’s contention. Two issues arise for consideration as indicated by the question referred to this Court. The first question is, whether the assessee can appeal against a modification order passed by the ITO giving effect to the order of the appellate authority? In other words, could it be said that the modification order partakes of the nature of an order under s. 143 of the Act so as to subject itself to an appeal under s. 246 of the Act. Now, the Revenue’s contention is that the order/orders passed by the ITO giving effect to the appellate decisions cannot be described as assessment orders in the sense they are understood under s. 143 of the Act. It is, therefore, submitted that no appeal lies. We are afraid, the contention urged by the Revenue is not tenable. An order of assessment is one in which there is computation of income or computation of tax or both. That computation of income and tax can be made by the ITO not only in regular assessment made under s. 143 of the Act but also in orders passed from time to time giving effect to the decisions of the appellate authorities. The order passed by the ITO giving effect to the decision of the appellate authority is as much an assessment order as the one passed by him by way of regular assessment under s. 143 of the Act. We are fortified in this view by the decision of the Calcutta High Court in Kooka Sidhwa & Co. vs. CIT (1964) 54 ITR 54 (Cal) : TC6R.298 and the decision of the Punjab High Court in Gopi Lal vs. CIT (1967) 65 ITR 477 (Punj) : TC6R.310.

We, therefore, hold that an assessee has a right of appeal against a modification order as if it were an assessment order itself and the appellate authority is bound to entertain an appeal and decide it on merits.

The second question involved is whether the omission to grant interest under s. 244 of the Act on the belated refund could be the subject-matter of an appeal ?

It is true that s. 246 of the Act does not specifically refer to the provision of an appeal against an order under s. 244 of the Act. Learned counsel for the assessee, however, invited our attention to the decision of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. vs. CIT (1986) 58 CTR (SC) 112 : (1986) 160 ITR 961 (SC).

The question considered by the Supreme Court in this case is, whether the assessee is entitled to file an appeal against the levy of interest under ss. 215 and 139 of the Act. Sec. 246 of the Act did not, in terms, refer to these two items and provide a right of appeal. The view taken, therefore, was that in the absence of a specific right of appeal conferred by s. 246, no appeal lies to the appellate authority against refusal to grant interest. The Supreme Court held that where there is total denial of the liability to pay interest, the order is liable to be challenged in an appeal although there can be no appeal if the dispute is only regarding the quantum of interest payable. A distinction lay in the fact that, where, on principle of law, there is total denial of the assessee’s claim, it is open to him to show that the claim for interest is well-founded. If, however, on principle, there was no objection to the grant of interest but the dispute relates only to the quantum, then the assessee has no right of appeal against the order on the ground that interest was inadequately granted. In our opinion, this analogy holds goods in the present case also. This is not a case where the assessee is in issue on the quantum of interest payable on belated refund under s. 244. There is total omission on the part of the ITO to grant interest on refund. The ITO insisted that, in terms of s. 244 of the Act, the assessee is not entitled to interest. There is thus total denial of the liability by the Revenue to pay interest on the belated refund to the assessee under s. 244 of the Act. An appeal, therefore, lies against such total denial to the next appellate authority. If, however, the dispute is merely regarding the quantum of interest payable on the belated refund, no appeal would be maintainable. As we find in the present case that there is total denial without granting any interest whatsoever under s. 244, an appeal lies.

7. We accordingly answer the question in favour of the assessee and against the Revenue.

No costs.

[Citation : 171 ITR 344]