Ita v. Income Tax Officer, Jalandnar A

ITA No.25 of 2004 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARRITA No.25 of 2004Pronounced on:2ndMay, 2014M/s Vipan Kumar Sudesh Kumar,HUF, Jalandharwi: Appellant VERSUS Income Tax Officer, Jalandnar a: RESpondent CORAM:HON3BLE MR. JUSTICE RAJIVE BHALLAHON3BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOONPresent"Mr.Alok Mittal, Advocate, for the appellant.Mr.Vivek Sethi, Advocate, for the respondent. AK AR OK AK AR OK AK] RAJIVE BHALLA, J. Tne assessee impugns order dated 01.08.2013, passed bytne Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, on thefollowing substantial question of law: - ~Whetner interest allowed u/s 244(1) can subsequently bewithdrawn in view of creation/restoration of demand in|subsequent appeal.” Tne facts, in brief, that have !ed to the filing of the appealare that the assessee filed a return of income tax on 26.08.1985,declaring an income of Rs.4/7,200/-. Tne return was revised to anincome of Rs.49,620/- on 28.10.1986 but a protective assessment wasmade on 19.02.1988 treating the income as Rs.1,6/7, 534/-. Ademand was consequently raised for Rs.1,13,163/-. An appeal filed bythe assessee was dismissed by the Commissioner of Income Tax(Appeals), on 26.09.1988. The Income Tax Appellate Tribunal, videorder dated OQ/7.09.1991, set aside the order passed py tCommissioner of Income Tax (Appeals) and restored the appeal to the ITA No.25 of 2004 Commissioner of Income Tax (Appeals). — The Commissioner of Income Tax (Appeals) upheld theprotective assessment but reduced tne quantum of income byRs.1,93,780/-. During pendency of tne appeal before the Income TaxAppellate Tribunal, tne Assessing Officer gave effect to the orderpassed by the the Commissioner of Income Tax (Appeals) whichresulted in a refund of Rs.24,423/-, to the assessee. The Income TaxAppellate Tribunal, vide order dated 14.12.1994, directed thatassessment be framed in substantive capacity. The Assessing Officergave effect to this order which ted to withdrawal of interest ofRs.29,380/- already allowed to the assessee. The assessee filed anappeal before the Deputy Commissioner of Income Tax which wasdismissed. The appeal filed by the assesee before the Income TaxAppellate Tribunal against withdrawal of interest was dismissed byrelying upon a judgment of the Honble Supreme Court in —ModaIndustries Ltd. and anotner Versus Commissioner of Income Tax andanotner~ (1995) 216 ITR 559 (SC), by holding as follows: - “Here, we are concerned with the third conclusionwas arrived at by their lordship. As per this conclusion,w.e.f. April 1, 1985, interest payable under section 214 willincrease or decrease In accordance witn the variation Inthe quantum of the excess payment of tax brougnt aboutby orders passed subsequent to the reguiar assessment asmentioned in sub-section (1A). In the aforesaid case ofModi Industries Ltd., Vs. CIT, their lordship has observedat page 807 as under: - “Interest under subsection (1A) of section 244is payable when the tax or penalty paid py an ITA No.25 of 2004 =-3 assessee pursuant to an order of assessmenthas been reduced in appeal or any otherproceeding. In such a case, an excess amountof tax or penalty paid by the assessee will haveto be refunded and tne Central Governmenthas to pay interest on the excess amount fromthe date on which such amount was paid to thedate on which the refund was granted. Ofcourse, there can be no question of payinginterest botn under section 214(IA) andsection 244(IA) simultaneously. The rate ofinterest being the same under both theprovisions, there would be no difference in theactual amount of interest payable whicheverprovision is applied.” “Interest under subsection (1A) of section 244is payable when the tax or penalty paid py an ITA No.25 of 2004 =-3 assessee pursuant to an order of assessmenthas been reduced in appeal or any otherproceeding. In such a case, an excess amountof tax or penalty paid by the assessee will haveto be refunded and tne Central Governmenthas to pay interest on the excess amount fromthe date on which such amount was paid to thedate on which the refund was granted. Ofcourse, there can be no question of payinginterest botn under section 214(IA) andsection 244(IA) simultaneously. The rate ofinterest being the same under both theprovisions, there would be no difference in theactual amount of interest payable whicheverprovision is applied.” 5.1.From the above, it would be clear that the interestunder section 244(IA) would be payable by taking intoconsideration the result of any appellate order. Therefore,in the instant case, the A.O. rightly withdrew the interestwhich was not payable after giving the appeal effect. Onasimilar issue, the Hon bile Calcutta High Court in the case oANZ Grindlays Bank Pl. Vs. C.I.T. (1999) 157 CTR (Cal.)161, 169 held (Head Note) tnat: - “With regard to the question that whether theinterest paid under sec. 214 to the assesseecan be withdrawn or can be recovered or canbe adjusted, sub-section (IA) of section 214provides that where on completion of the ITA No.25 of 2004 regular assessment the amount on which theinterest so paid under sub-sec.(1) has beenreduced, the interest snall be reducedaccordingly, and tne excess, if any paid, snallbe deemed to be tax payable by assessee andthe provisions of this Act’ shall apply.Admittedly, the net result after regularassessment as well after giving effect to theorders of the Tribunal for the asstt. years1978-79 is that the assessee nas not paid thetax deducted at source or advance tax morethan the tax assessed. Therefore, in any case,if the interest has been paid, which is notpayable under sec. 214, that can be recovered. It nas been furtner neld that the interestunder section 214 & 244 (IA) wnicn was notdue at all, or payable by the Revenue to theassessee, has rightly been adjusted.” From the above, it would be clear that wherethe tax deducted at source and advance tax paid by theassessee did not exceed tne tax assessed eitner on regularassessment or after giving effect to the orders or theTribunal, interest under section 214 & 244 (IA) granted tothe assessee was not due at all and had to be recoveredfrom the assessee. In the instant case also, there was no interestdue after the final appeal effect given by the A.O,Therefore, the A.O. was justified in withdrawing interest ITA No.25 of 2004 and to recover the same from the assessee. A similar issue has also been decided by theHon bie jurisdictional High Court in the case of C.I.T. Vs.M/s Hansa Agencies Pvt. Ltd. (1998) 234 ITR 2/71, byfollowing the judgment of the Honble Supreme Court inthe case of Modi Industries Ltd. Vs. CIT (1995) 216 ITR759 (SCO (Supra). The Hon'ble High Court of Punjab &Haryana held that the assessee was entitled to interest onentire amount or pre-assessment tax paid and found inexcess of regular demand after giving effect to appellateorder for the assessment year 1976-77 under section 244(IA) of the Income Tax Act. From the above, it would alsobe clear that the interest, if any, is required to be paid tothe assessee after giving effect to the appellate order. ITA No.25 of 2004 and to recover the same from the assessee. A similar issue has also been decided by theHon bie jurisdictional High Court in the case of C.I.T. Vs.M/s Hansa Agencies Pvt. Ltd. (1998) 234 ITR 2/71, byfollowing the judgment of the Honble Supreme Court inthe case of Modi Industries Ltd. Vs. CIT (1995) 216 ITR759 (SCO (Supra). The Hon'ble High Court of Punjab &Haryana held that the assessee was entitled to interest onentire amount or pre-assessment tax paid and found inexcess of regular demand after giving effect to appellateorder for the assessment year 1976-77 under section 244(IA) of the Income Tax Act. From the above, it would alsobe clear that the interest, if any, is required to be paid tothe assessee after giving effect to the appellate order. 5.2.As regards the decision of the ChandigarnBencn of the I.T.A.T., as relied upon by the learnedcounsel for the assessee is concerned, the assessmentyears involved in that case were 1983-84 & 84-85 l.e.before the amendment which came into effect from April 1,1985. It is pertinent to mention here that the Hon'bleGujarat High Court in the case of CIT Vs. Anemdabad NewCotton Mills Co. Ltd. (1993) 201 ITR 50/7 (Guj.) held tha“the interest cannot be withdrawn under sec. 244 (IA) ofthe I.T. Act, even when the order as a result of whichrefund became _ payable, is subsequently reversedHowever, the Hon'ble Supreme Court has granted SpecialLeave to the Department to appeal against the aforesaidjudgment of the Hon'ble Gujarat High Court vide order dated 23.7.1993 in S.L.P. No.10954 of 1993. Before us,neither of the representatives of both the parties couldtnrow any light as regards to the outcome of the judgmentof the Honble Supreme Court in the regular appeal.Tnerefore, we are unable to follow the judgment of theHon'ble Gujarat High Court. In view of the aforesaid discussion and keepingin view the ratio laid down by the Hon'ble Supreme Courtin the case of Modi Industries Ltd. and anotner Vs. CIT andanother (Supra), by the Hon ble Calcutta Hign Court in thecase of ANZ Grindlays Bank Pic. Vs. CIT” (1999) 157 CTR161, 169 (Supra) and by the jurisdictional High Court inthe case of CIT Vs. Hansa Agencies Pvt. Ltd. (1998) 234ITR 271 (supra), we are of the opinion that the learnedDCIT (A) had rightly confirmed the action of the A.O. inwithdrawing the interest while giving effect to tne appellateorder. In that view of the matter, we do not see any validground to interfere with the findings of the learned DCIT(A) on this issue.” Counsel for the assessee submits tnat as interest has beenpaid by giving effect to an order passed in appeal, it cannot bewithdrawn under Section 244(1A) of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) by giving effect to a subsequentorder passed in another appeal. The Income Tax Appellate Tribunalhas while upholding the withdrawal of interest failed to consider thejudgment of the Gujarat High Court in ~CIT Versus Anmedabad NewCotton Mills Co. Ltd. (1993) 201 ITR 50/7, wherein it has been clearly ITA No.25 of 2004 held that interest cannot be withdrawn under Section 244(1A) of theAct even when the order as a result of which the refund becamepayable, is subsequently reversed. It is further submitted that Section244 of the Act does not apply to the facts of the present case. It isfurther submitted tnat as judgment of the Gujarat High Court inCITVersus Ahemdabad New Cotton Mills Co. Ltd.(Supra) has been affirmedby the Hon'ble Supreme Court, the impugned order may be set aside.It is further submitted that the Rajasthan High Court has taken aSimilar view In |Commissioner of Income Tax Versus Udaipur DistilleryCo. Ltd.~, 2004 (Raj.) 667. Counsel for the revenue submits that the judgment of theHon'ble Supreme Court inModi Industries Ltd. and another VersusCommissioner of Income Tax and anothercase (supra) applies on allfours to the controversy in hand whereas the judgment of the GujaratHign Court inCIT Versus Anmedabad New Cotton Mills Co. Ltd. (supra)does not apply to the present controversy. Counsel for the revenue submits that the judgment of theHon'ble Supreme Court inModi Industries Ltd. and another VersusCommissioner of Income Tax and anothercase (supra) applies on allfours to the controversy in hand whereas the judgment of the GujaratHign Court inCIT Versus Anmedabad New Cotton Mills Co. Ltd. (supra)does not apply to the present controversy. We have heard counsel for the parties, perused thestatutory provisions and the judgments referred to by counsel for theparties. The controversy, in the present appeal succinctly put, iswhether the amount paid to the assessee as interest can be withdrawnunder Section 244 of the Act, wnile giving effect to an appellate orderwhicn nas led to variation of the amount? Tne Income Tax AppellateTribunal has answered the question against the assessee after placingreliance upon a judgment of the Hon'ble Supreme Court inModiIndustries Ltd. and another Versus Commissioner of Income Tax andanotnercase (supra), a judgment of the Calcutta High Court in “ANZGrindlays Bank Pl. Vs. C.LT.,~ (1999) 157 CTR (Cal.) 161, 169, a ITA No.25 of 2004 judgment of this High Court in *CIT Vs. Hansa Agencies Pvt. Ltd-(1998) 234 TTR 271, which hold that interest can be withdrawn. Weare inclined to agree with this view. As regards judgment of theGujarat Hign Court inCIT Versus Anmedabad New Cotton Millis Co. Ltd.(supra), whicn is to the contrary, the ITAT nas refused to consider thesaid judgment as counsel for the parties could not inform the IncomeTax Appellate Tribunal about the fate of the appeal pending before theHon'ble Supreme Court. We have repeatedly asked counsel for theparties to inform us about the fate of the appeal! pending before thHon bie Supreme Court and even Kept the judgment reserved for a fewmontns put neither counsel nas come forward to inform us about tnefate of the appeal. An attempt was also made to search for thisjudgment on the internet but to no avail. In this view of the matter, we are not inclined to accept theappeal or to hold that any substantial question of law arises foradjudication particularly in view of judgment of the Hon ble SupremeCourt InModi Industries Ltd. and anotner Versus Commissioner ofIncome Tax and anothercase (supra). The appeal is consequentlydismissed but with no order as to costs. { RAJIVE BHALLA |JUDGE 2[nd]May, 2014i DR. BHARAT BHUSHAN PARSOON |ShamsherJUDGE