High Court Of Karnataka
Dinakar Ullal vs. CIT
Section 119(2)(a), 119(2)(b), 237, 239, 244A
Asst. Year 1995-96
Ram Mohan Reddy, J.
Writ Petn. No. 13797 of 2009
24th February, 2010
Counsel Appeared :
A. Shankar & M. Lava, for the Petitioner : M.V. Seshachala, for the Respondent
ORDER
Ram Mohan Reddy, J. :
The petitioner, a civil contractor assessed to income-tax, filed a belated return of income on 8th Sept., 1997 for asst. yr. 1995-96 declaring income of Rs. 50,240 and claiming refund of Rs. 2,41,505 being TDS, though 31st March, 1997 was the last date for filing the belated return under s. 139(4) of the IT Act, 1961 (for short ‘Act’). The delay of five months and seven days in filing the belated return was sought to be condoned by an application filed on 21st Sept., 1998 invoking s. 119(2)(b) of the Act. In the first instance, the rejection of the petitioner’s application to condone the delay, by order dt. 8th Jan., 2007 of the CBDT for short ‘Board’, when called in question in Writ Petn. No. 15441 of 2007, a learned Single Judge by order dt. 28th Jan., 2008 Annex. “D”, quashed the order and remitted the proceeding for consideration afresh. On remand, the respondent, exercising a jurisdiction invested in him under Instruction No. 13 of 2006 dt. 22nd Dec., 2006 [(2007) 207 CTR (St) 3] in respect of claims upto Rs. 10,00,000, coupled with the direction contained in the letter dt. 28th March, 2008 of the ‘Board’, accepted the cause shown for the delay in filing the belated return, but denied interest on the refund amount, in view of the condition set out in Circular No. 670 dt. 26th Oct., 1993 [(1993) 115 CTR (St) 13] r/w Instruction No. 13 of 2006 dt. 22nd Dec., 2006, by order dt. 15th May, 2008 Annex. “A”. Hence, this writ petition.
The petition is not opposed by filing statement of objections. Learned counsel for the petitioner submits that the ‘Board’ exercising a jurisdiction under s. 119 (2)(b) of the Act issued Circular No. 670 dt. 26th Oct., 1993 authorising the AO to consider application to condone the delay in filing a belated return subject to limitation on the amount of refund, while Instruction No. 13 of 2006 dt. 22nd Dec., 2006 authorised the Chief CIT to consider applications for refund upto Rs. 10,00,000 subject to the ‘condition that no interest is admissible on the belated refund claim’. Learned counsel contends that such a condition denying interest on the belated refund claim is inconsistent with s. 244A of the Act providing for payment of interest on refunds. In other words, the instruction cannot override the provisions of the Act. It is next contended that the petitioner is entitled to interest on refund amount of Rs. 2,41,505 from 1st April, 1996 upto 1st July, 2008 whence the said sum was adjusted against income-tax dues of the petitioner for the asst. yr. 1994-95 onwards by the ITO Ward-I(3). Per contra, learned counsel for the respondent, while seeking to support the order impugned as being well-merited, fully justified and not calling for interference, contends that the circular/instruction being an external aid, imposing a condition denying interest on refund of belated claim while admitting an application to condone the delay, is for ‘proper administration of the Act’, and hence neither destructive of the known principles of law nor overrides the provisions of the Act. It is next contended that sub-s. (2) of s. 244A applies to the facts of the case, disentitling payment of interest on refund since the proceedings relating to refund were delayed for reasons attributable to the petitioner. Having heard the learned counsel for the parties, perused the pleading and examined the order impugned, the following two questions arise for decision making :
“(i) Whether the condition to deny interest on refund amount due to an assessee under the Act, while admitting an application to condone the delay in making a claim for belated refund under s. 237 of the Act, as contained in the Instruction Nos. 12 of 2003 dt. 30th Oct.,2003 [(2003) 185 CTR (St) 83] and 13 of 2006 dt. 22nd Jan., 2006, of the ‘Board’, is inconsistent with sub-s. (2) of s. 244A of the Act ?
(ii) Whether in the facts and circumstances, the respondent was justified in denying interest on belated refund claimed for the asst. yr. 1995-96 by the order impugned ?”
Sec. 237 of the Act provides for claim of refund of excess amount of tax paid by the assessee or on his behalf for any assessment year. The forms of claim for refund and limitation are prescribed by s. 239 of the Act while delay in filing a belated return for refund claim in cases of genuine hardship could be condoned by the ‘Board’ under s. 119 of the Act. Interest on refund is admissible under sub-s. (1) of s. 244A of the Act, while sub-s. (2) vests in the Chief CIT or CIT, a jurisdiction to deny interest for the period of delay in refund, for reasons attributable to the assessee.
The limitation to file a claim for refund in respect of the asst. yr. 1995-96, as in the case of the petitioner, was 31st March, 1997 in accordance with s. 239(2)(c), as existing in the statute book, prior to amendment by Act No. 18 of 2005. The petitioner’s claim when filed on 8th Sept., 1997, was delayed by five months and seven days which was sought to be condoned by filing the application on 21st Sept., 1998 invoking s. 119(2)(b) of the Act, showing sufficient cause. Sec. 119, as existing prior to the amendment by Act 23 of 2004, reads thus : “119. Instructions to subordinate authorities.—(1) The Board may, from time to time, issue such orders, instructions and directions to other IT authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board : Provided that no such orders, instructions or directions shall be issued— (a) ………….. (b ………….. (2) Without prejudice to the generality of the foregoing power,— (a) ………….. (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any IT authority, not being a (***) CIT(A) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law; (c)
…………..”
A plain reading of the aforestated statutory provision, it is beyond cavil of doubt that, the Board is empowered from time to time to issue orders/directions/instructions to IT authorities, as it may deem fit for proper administration of the Act, and more particularly under cl. (b) of sub-s. (2) of s. 119, for avoiding, genuine hardship in any case, authorising any IT authority to admit an application or claim for any exemption, deduction, refund or any other relief under the Act after the expiry of the period specified by or under the Act for making such application or claim and deal with the same on merits, in accordance with law. The statute does not indicate vesting a jurisdiction in the Board to issue instructions in excess of what is stated in s. 119(2)(b). It is well-settled that instructions/circulars/guidelines are binding to the extent they are not inconsistent with the provisions of the Act. It is elsewhere said that the power of the Board is enlarged where the provisions of the Act bar the IT authorities from entertaining any application for claim of any exemption, deduction, refund or any other reliefs due under the Act for the reason that the time-limit specified for the making of such application or claim has expired. Thus, the Board is empowered to authorise the CIT or ITO to admit such application or claim even after the time-limit and to deal with it, in accordance with law. In State of Madhya Pradesh vs. G.S. Dall & Flour Mills AIR 1991 SC 772, the apex Court held that executive instructions can supplement a statute or cover areas to which the statute does not extend but they cannot run contrary to statutory provisions or whittle down their effect. In Kerala Financial Corporation vs. CIT (1994) 119 CTR (SC) 164 : AIR 1994 SC 2416, following the opinion of Mukharji, J., at para 42 in State Bank of Travancore vs. CIT AIR (1986) 50 CTR (SC) 290 : 1986 SC 757, that circulars ‘cannot detract from the Act’, the apex Court held that a circular of the Board under s. 119 cannot override or detract from the Act in as much as, what s. 119 has empowered is to issue orders, instructions or directions for the ‘proper administration of the Act’ or for such other purpose, specified in sub-s. (2) of that section and that such an order, instruction or direction cannot override the provisions of the Act which would be destructive of all the known principles of law as the same would really amount to giving powers to a delegated authority to even amend the provisions of the law enacted by the Parliament. Thus viewed, s. 119 authorises the Board to issue orders, instructions and directions to the IT authorities ‘for proper administration of the Act’. A circular is admittedly executive in character and has to be issued in aid of functioning of the Act and with the objective that the provisions of the Act are properly administered. The Board may, in issuing a circular, clarify a point of ambiguity in any provision of law. Such clarification is not binding upon the Courts. It cannot also run counter to the legislative provisions and create rights or obligations which are contrary to the statute. Instructions really supplant the law and not supplement the law. It is settled law that circulars cannot impose any burden on the taxpayer but can deviate from the provisions of the Act if it is beneficial to the assessee and has mitigated or relaxed the rigor of the law. Sec. 244A of the Act provides for payment of interest on refunds and reads thus : “(Prior to amendment by Act 54 of 2003) 244A. Interest on refunds.—(1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely : (a) …………….. (b) …………….. (2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief CIT or CIT whose decision thereon shall be final. (3) ……………. (4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years.”
It is thus clear that, interest on refunds payable when an amount is due to the assessee under the Act is subject to exclusion of the period of delay occasioned and attributable to the assessee as may be decided by the Chief CIT or CIT whose decision is final. The statute compels the denial of interest on refund if the proceedings resulting in the refund are delayed for reasons attributable to the assessee. The provision is made applicable to assessments for the year commencing from 1st April, 1989. Having noticed the statutory provisions, indisputedly the ‘Board’ in exercise of its jurisdiction under s. 119 of the Act, issued Circular No. 670 dt. 26th Oct., 1993, authorising the AO to admit application to condone the delay in making a belated refund claim, arising as a result of tax deducted/collected at source and advance tax where such refund does not exceed Rs. ten thousand upto Rs. one lakh with prior approval of Chief CIT, for any assessment year. Admittedly, there was no condition to deny interest on refund arising out of a belated claim. The belated refund claim of the petitioner being Rs. 2,41,505 made on 8th Sept., 1997 and an application dt. 21st Sept., 1998 to condone the delay of five months and seven days, were required to be considered and orders passed thereon by the Board within a reasonable time. However, the Board passed an order dt. 8th Jan., 2007 rejecting the application, which was rightly set aside in Writ Petn. No. 15441 of 2007, and remitted for fresh consideration by order dt. 28th Jan., 2008.
18. Undoubtedly, the Board issued Instruction No. 12 of 2003. dt. 30th Oct., 2003, relating to procedure for dealing with application to condone delay in claiming refund, authorising the Chief CIT in respect of refund claim from Rs. one lakh to five lakhs, subject to denial of interest on the belated refund and that, however, the instructions would not cover cases prior to asst. yr. 199697. Yet again the Board issued another set of instruction bearing No. 13 of 2006 dt. 22nd Dec., 2006, enhancing the consideration of refund limits upto Rs. 50 lakhs by Chief CIT. Therefore, in a proceeding to claim refund under s. 237, filed in time as prescribed by s. 239 of the Act, resulting in refund if delayed for reasons attributable to the assessee, whether wholly or in part, the period of delay is to be excluded from the period for which interest is payable, as decided by the Chief CIT, as provided under sub-s. (2) of s. 244A of the Act. So also in a proceeding to claim refund under s. 237 filed beyond the time prescribed by s. 239 of the Act, on the filing of an application invoking s. 119(2)(b) to condone the delay, and resulting in refund, is delayed for reasons attributable to the assessee, whether wholly or in part, the period of delay is to be excluded from the period for which interest is payable under sub-s. (2) of s. 244A of the Act. Sub-s. (4) of s. 244A makes the section applicable to assessments for the assessment year commencing from 1st April, 1989. The substantive law relating to denial of interest on refunds in respect of belated claim, being fully covered by sub-s. (2) of s. 244A of the Act, it cannot but be concluded that the ‘Board’, exercising a jurisdiction under s. 119 of the Act could not have issued instructions/orders/directions/circulars, imposing a condition denying interest on refund, so as to supplement the law. Such a condition in derogation of the statute, is not “for a proper administration of the Act”. That condition by way of instruction contained in Nos. 12 of 2003 and 13 of 2006 overrides sub-s. (2) of s. 244A of the Act and is in exercise of a power not vested in the Board, and hence inconsistent. The first question is answered in the affirmative. There is no dispute over the fact, the petitioner’s belated claim for refund made on 8th Sept., 1997 along with an application to condone the delay filed on 21st Sept., 1998, was required to be considered by the ‘Board’ under s. 119(2)(b) of the Act. In fact the Instruction No. 12 of 2003, dt. 30th Oct., 2003 makes the instruction inapplicable to the belated claim for refund prior to asst. yr. 1996-97. In other words, the condition denying interest on the claim for refund made belatedly, was not applicable to the petitioner’s application to condone the delay. The petitioner’s claim for refund of Rs. 2,41,505 was required to be considered by the Board on the basis of the law as it then existed and not on instructions subsequently issued authorising the Chief CIT—respondent based on enhanced limits of refund claim. There is no material forthcoming from the order impugned that the proceedings resulting in refund were delayed for reasons attributable to the assessee so as to exclude the period from 21st Sept., 1998, the date of filing the application to condone the delay in filing the belated return, upto 1st July, 2008 whence the refund was adjusted against the petitioner’s income-tax dues for the asst. yr. 1994-95. Reliance placed upon the decision in Gujarat Electric Co. Ltd. vs. CIT (2002) 172 CTR (Guj) 220 : (2002) 255 ITR 396 (Guj) by the assessing authority to deny the petitioner interest on the refund claim by the order impugned, in my considered opinion, is without application of mind. I say so because, their Lordships of the Gujarat High Court, having regard to the facts of the case, held that the Board was not justified in rejecting the claim for refund on the ground that a case of genuine hardship was not made out by the petitioner and delay in claiming the relief was not satisfactorily explained, more particularly when the returns could not be filed in time due to the ill-health of the officer who was looking after the taxation matters of the petitioner therein.
Their Lordships further held that the phrase ‘genuine hardship’ in s. 119(2)(b) of the Act should have been construed liberally. That decision is not in relation to denying interest on belated refund but a case of refusal to condone the delay in filing the belated claim for refund. The order impugned insofar as it relates to denying interest on the amount of refund by merely following the conditions imposed in the Circular No. 670 dt. 26th Oct., 1993 r/w Instruction Nos. 12 of 2003 dt. 30th Oct., 2003 and 13 of 2006 dt. 22nd Dec., 2006 is contrary to law, arbitrary and unsustainable. The 2nd question is answered in the negative. In the result, the petition is allowed in part. The order dt. 15th May, 2008 Annex. “A” insofar as it relates to denying interest on Rs. 2,41,505 being the belated refund claim is quashed. The respondent is directed to calculate interest at the rate applicable during the period from 21st Sept., 1998 upto 1st July, 2008, after adjusting the same against dues payable by the petitioner under the Act, pay the balance, if any, to the petitioner, in any event, within two months from the date of receipt of a certified copy of this order.
[Citation : 323 ITR 452]
