Punjab & Haryana HC : Interest liability would be only for the period the Department was deprived of the amount of tax

High Court Of Punjab And Haryana

CIT Vs. Pioneer Sports Works (P.) Ltd.

Assessment Year 1981-1982

Section : 244A

Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.

IT Appeal No. 88 Of 2003

March  21, 2011

JUDGMENT
 

Adarsh Kumar Goel, J. – This appeal has been preferred by the Revenue under section 260A of the Income-tax Act, 1961, against the order dated December 30, 2002, passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, in I. T. A. No. 584(ASR)1996, for the assessment year 1981-82, claiming following substantial questions of law :

“(i) Whether, on the circumstances of the case, the learned Income-tax Appellate Tribunal is right in law in concurring with the order passed by the learned Commissioner of Income-tax (Appeals) by placing reliance on the case of Deep Chand Jain v. ITO [1984] 145 ITR 676 (Punj. & Har.), when the assessment order annulled by the learned Income-tax Appellate Tribunal was revived by the hon’ble Punjab and Haryana High Court, vide their judgment dated October 1, 1997, passed in I. T. R. No. 121 of 1996 in the assessee’s case ?

(ii) Whether, on the circumstances of the case, the learned Income-tax Appellate Tribunal was right in law in allowing interest under section 214/244(1A) of the Income-tax Act, 1961, when as a result of revival of the assessment order annulled by the learned Income-tax Appellate Tribunal, the assessee was not entitled for any refund ?”

2. The assessee filed its return declaring a loss but the Assessing Officer made additions and made assessment on a net income of the assessee under section 143/144B. The assessment was upheld by the Commissioner of Income-tax (Appeals) except for setting aside part of the addition. The Tribunal initially held that the assessment was barred by limitation but this court on a reference, reversed the said view and held the assessment to be valid. Accordingly, the assessment was restored and the amount refunded in pursuance of the order of the Tribunal was sought to be recovered with interest under section 214 read with section 244(1A) while giving appeal effect to the order passed by this court. In the said proceedings, the Tribunal upheld the objection of the assessee and held the recovery to be illegal. The finding recorded is as under :

“It is also true that the Assessing Officer in compliance with the order of the Income-tax Appellate Tribunal dated October 28, 1994, (supra) refunded the tax paid by the assessee but denied the interest on the aforesaid refund. The hon’ble jurisdictional High Court in the case of Deep Chand Jain v. ITO [1984] 145 ITR 676 (Punj. & Har.), held that the advance tax collected from the petitioner had to be related to a final assessment order and since no final assessment order could be passed, the same having become barred by limitation, the collection of the advance tax itself become illegal and so also its detention. It has been further held that the tax deposited by the petitioner was in the nature of advance tax and, therefore, it would bear simple interest under section 214 of the Act which as then prescribed was 12 per cent. per annum till the date of refund. In our view, the ratio laid down by the hon’ble jurisdictional High Court in the case of Deep Chand Jain [1984] 145 ITR 676 (Punj. & Har.) is squarely applicable to the facts of the present case. In that view of the matter, we do not see any infirmity in the order of the learned Commissioner of Income-tax (Appeals).”

3. We have heard learned counsel for the parties.

4. Learned counsel for the Revenue submits that the judgment of this court in Deep Chand Jain v. ITO [1984] 145 ITR 676 (Punj. & Har.) was distinguishable as therein the demand was set aside on the ground that no assessment had been made. In the present case, the assessment was upheld by this court. Ignoring the order of this court, it has been held that the assessment was barred by limitation. Thus, the Tribunal erred in holding the recovery to be illegal.

5. Learned counsel for the assessee has not been able to support the impugned finding and the applicability of the judgment of this court in Deep Chand Jain [1984] 145 ITR 676 (Punj. & Har.) to the present case. He submits that the Revenue was justified in effecting recovery but was not justified in claiming interest.

6. We are unable to accept the submission made on behalf of the assessee. Once assessment was validly made and the tax was due, there is no reason to exclude the applicability of interest liability under section 214/244(1A). It is, however, clear that interest liability would be only for the period the Department was deprived of the amount of tax which it was entitled to recover, i.e., the period between the refund in pursuance of the order of the Tribunal and recovery as per the order of this court. Accordingly, the questions raised are decided against the assessee and in favour of the Revenue.

7. The appeal is allowed.

[Citation : 335 ITR 435]

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