Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to interest under s. 214 of the IT Act, 1961 ?

Counsel Appeared

R.N. Surolia, for the Applicant : V.K. Singhal, for the Respondent

BY THE COURT :

This reference under s. 256(1) of the IT Act, 1961, at the instance of the Revenue is to answer the following question of law:

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to interest under s. 214 of the IT Act, 1961 ?”

2. The only point involved for decision is, whether the assessee is entitled to interest in accordance with s. 214(1) of the Act on the amount of tax ordered to be refunded as a result of the order made by the AAC in the quantum appeal filed by the assessee against the ITO’s order of assessment. In the present case, a sum of Rs. 4,781 was found to be the excess amount of tax deposited by the assessee as a result of the AAC’s order deciding the assessee’s quantum appeal and the same was directed to be refunded to the assessee together with interest payable in accordance with s. 214(1) of the Act r/w r. 119A of the IT Rules, 1962. The Revenue appealed against the award of interest to the Tribunal, but the Tribunal has upheld the direction given by the AAC. Thereafter, this reference has been made at the instance of the Revenue to answer the above question of law.

3. The contention of the Revenue is that the expression “regular assessment” occurring in s. 214 (1) of the Act means the original order of assessment made by the ITO and not the appellate order made by the AAC in a quantum appeal. There is a basic fallacy in this contention. In the first place, the order of the AAC in the quantum appeal is really a direction to the ITO to correct the earlier order of assessment in the manner directed by the AAC, so that the final assessment order made as a result of the directions given in the appellate order quantifying the amount of tax determined as the assessee’s liability is really by the ITO himself in compliance with the directions given in the appellate order. Accordingly, even the narrow construction suggested by the Revenue presents no difficulty since the actual assessment order quantifying the tax liability is by the ITO in accordance with the decision in the appeal. In fact, the original order of the ITO no longer survives after the modification made in this manner and the only order of regular assessment in existence as a result of the appellate order is that the order of the ITO which is made in compliance with the directions given in the appellate order. This alone is sufficient to indicate that where the assessee is found entitled to a refund of the excess amount of tax deposited by him as a consequence of an order made in appeal, he is also entitled to interest in accordance with sub-s. (1) of s.

214 of the Act on the amount of refund. We find that the Tribunal has really relied on a decision of Sabyasachi Mukharji, J., as he then was, in Chloride India Ltd. vs. CIT (1977) 106 ITR 38 (Cal) : TC4R.471, for reaching the same conclusion. With respect, we are in full agreement with the same. Several decisions of different High Courts were cited at the Bar on this point. We find that a Full Bench of the Gujarat High Court in Bardolia Textile Mills vs. ITO (1985) 45 CTR (Guj) 274 (FB) : (1985) 151 ITR 389 (Guj)(FB) : TC4R.494, has taken the same view and it has considered earlier decisions on the point. With respect, we concur with this view. We regret that the reasoning in some of the decisions taking the contrary view does not appeal to us and, therefore, we are unable to subscribe to the contrary view.

Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the Tribunal was justified in its conclusion that the assessee is entitled to interest under s. 214 of the IT Act, 1961, on the amount of refund of tax due to it.

No costs.

[Citation : 170 ITR 670]