Op/14238/2002 Of Joseph Korah v. The Income Tax Officer

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR TUESDAY, THE 28TH DAY OF OCTOBER 2014/6TH KARTHIKA, 1936 PETITIONER(S): -------------------------- OP.No. 14238 of 2002 (T) ------------------------- JOSEPH KORAH, IRUMPANATH HOUSE, PARAMPUZHA, KOTTAYAM. ADDL.PETITIONERS:2.MR.S.K.JOSEPH, AGED 45,S/O.LATE MR.JOSEPH KORAH,IRUMPANATH, PARAMPUZHA KARA, PERUMBAIKADU VILLAGE, KOTTAYAM TALUK,KOTTAYAM DISTRICT. 3.SMT.ROSAMMA KORAH, AGED 68, W/O.LATE MR.JOSEPH KORAH,IRUMPANATH, PARAMPUZHA KARA, PERUMBAIKADU VILLAGE, KOTTAYAM TALUK,KOTTAYAM DISTRICT. 4.MR.E.K.CYRIC, AGED 37,S/O.LATE MR.JOSEPH KORAH,IRUMPANATH, PARAMPUZHA KARA, PERUMBAIKADU VILLAGE, KOTTAYAM TALUK,KOTTAYAM DISTRICT. 5.MR.BOBBY KORAH, AGED 33,S/O.LATE MR.JOSEPH KORAH,IRUMPANATH, PARAMPUZHA KARA, PERUMBAIKADU VILLAGE, KOTTAYAM TALUK,KOTTAYAM DISTRICT. ADDL.P2 TO P5 ARE IMPLEADED AS PER ORDER DATED 11.12.2007 IN I.A.NO.16112/2007. BY ADV. SRI.JOHN RAMESH K.I.JOHN RESPONDENT(S): ---------------------------- THE INCOME TAX OFFICER,WARD-1, KOTTAYAM. R, BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) R, BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 28-10-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: O.P.NO.14238/02 APPENDIX PETITIONERS EXHIBITS: EXT.P1: COPY OF THE JUDGMENT DATED 6.11.2000. EXT.P2: COPY OF THE ORDER DATED 31.3.2001. EXT.P3: COPY OF THE REPRESENTATION TOGETHER WITH COMPUTATIONSTATEMENT DATED 10.2.2001. EXT.P4: COPY OF THE JUDGMENT DATED 6.6.2001. EXT.P5: COPY OF THE ORDER DATED 19.9.2001. EXT.P6: COPY OF NOTIFICATION. RESPONDENTS EXHIBITS: NIL //TRUE COPY// P.S. TO JUDGE A.K.JAYASANKARAN NAMBIAR, J.------------------------------- O.P.NO.14238 OF 2002 ----------------------------------- Dated this the 28[th] day of October, 2014 J U D G M E N T The original petition was filed by the petitioner, an agriculturistresiding at Kottayam, who was an assessee on the files of therespondent. The prayer in the original petition is for a direction to therespondent to grant interest on interest, on the amounts that weredue to the assessee by way of refund pursuant to appellate orders thatset aside the demand made on the assessee in the assessment andpenalty orders for the assessment year 1976-77. During the pendencyof the original petition, the petitioner expired and accordingly hislegal heirs were impleaded as additional petitioners 2 to 5 as perorder dated 11.12.2007 in I.A.No.16112/2007. 2. The brief facts relevant for a disposal of the original petitionare as follows: The income tax assessment of the petitioner for the assessmentyear 1976-77 was completed by an order dated 17.5.1979. Theassessment was consequent to a search carried on in the premises of the petitioner, and an amount of Rs.1,12,700/- had been seized fromthe petitioner on 20.9.1975 during the course of the search conductedby the authorities under the Central Excise Act. The said amount wassubsequently transferred to the Income Tax authorities, whocompleted the assessment, under the Income Tax Act, on thepetitioner. While completing the income tax assessment for the year1976-77, the respondent adjusted the tax amount of Rs.62,935/- fromout of the amount seized from the petitioner at the time of search. Afurther amount of Rs.46,800/- was also adjusted towards penalty thatwas imposed on the petitioner. The balance amounts that remainedwere refunded to the petitioner in May, 1984. The facts would revealthat, in the interregnum, the appeals preferred by the petitioner,against the orders of assessment and penalty, were allowed by theFirst Appellate Authority and thereafter confirmed by the AppellateTribunal. As a result, the petitioner became entitled to a refund of theamounts that were confirmed against him in the assessment andpenalty orders. 3. The respondent initially, while granting the refund that wasdue to the petitioner consequent to the appellate orders passed in hisfavour, chose to grant interest under Section 132B (4) of the Income Tax Act alone. The interest contemplated under Section 244(1A) ofthe Income Tax Act, on the refund amounts that were due to thepetitioner, were not computed and granted to the petitioner. This ledthe petitioner to prefer a representation before the respondent. Whenthe representation did not yield any response, the petitionerapproached this Court, which, by Ext.P4 judgment, directed therespondent to consider the matter and pass orders thereon. By Ext.P5order dated 19.9.2001, the respondent found the petitioner entitled tointerest under Section 244(1A) for the period from 1.6.1979 to31.1.2001. The grant of interest under Section 132B(1)(4) from1.7.1976 to 17.5.1979 was also affirmed by the respondent in the saidorder. The respondent did not, however, find merit in the claim of thepetitioner for the grant of interest on interest on the amount of refundthat was due to him. It was under these circumstances that thepetitioner approached this Court challenging the action of therespondent in not granting interest on interest on the amounts due tohim by way of refund. 4. In response to the claim of the petitioner in the writ petition,the respondent has filed statements before this Court in 2006 and2008. In the statement filed in 2008, through I.A.No.11465/2008, a computation is provided as Ext.R1(A) which would show that as perthe records of the respondent, after granting interest in accordancewith Ext.P5 order, an amount of Rs.1,91,066/- remained to be paid tothe petitioner, as on 30[th] August, 2008, the date of the statement. Thestand of the respondent, with regard to the claim of the petitioner inthe original petition, is that the petitioner is not entitled to anyamount by way of interest on interest on the amounts due to him byway of refund. 5. I have heard Sri.John Ramesh, the learned counsel appearingon behalf of the petitioner as also Sri.P.K.R.Menon, the learned SeniorStanding counsel appearing on behalf of the respondent Income TaxDepartment. 6. On a consideration of the facts and circumstances of the caseas also the submissions made across the Bar, I am of the view that theoriginal petition, insofar as it claims interest on interest on theamounts that were due to the petitioner by way of refund, mustnecessarily fail. The issue of whether an assessee under the IncomeTax Act would be entitled to receive any amount by way of interest oninterest under the Income Tax Act has been considered by the O.P.No.14238/2002 Supreme Court in a number of cases. While, in the decision inSandvik Asia Ltd. v. Commissioner of Income-Tax and Others-[(2006) 280 ITR 643 (SC)], the Supreme Court had, on the facts ofthe case before it, found that although the assessee was not entitledto interest on interest under the Income Tax Act, he was neverthelessentitled to a reasonable amount by way of compensation for thedelayed payment of amounts that were due to him by way of refund oftax and interest thereon, the Supreme Court on the facts of that case,proceeded to grant the assessee an additional amount towardscompensation for the period during which the Department haddelayed the payment of refund, and interest thereon, to the assessee.The aforesaid decision of the Supreme Court came up forconsideration before a larger Bench of the Supreme Court inCommissioner of Income-Tax v. Gujarat Fluoro Chemicals-[(2013) 358 ITR 291 (SC)]. In the said decision, while noting thejudgment of the Supreme Court in Sandvik Asia Ltd.'s case [supra],and observing that in the said case, what the Supreme Court had donewas to grant a compensation by way of interest to the assessee in thatcase, the Supreme Court went on to find in paragraph 8 as follows: “8. Further, it is brought to our notice that the Legislature by the Act No.4 of 1988 (with effect fromApril 1, 1989) has inserted section 244A to the Actwhich provides for interest on refunds under variouscontingencies. We clarify that it is only that interestprovided for under the statute which may be claimed byan assessee from the Revenue and no other interest onsuch statutory interest.” In the light of the clarification given by the Supreme Court as above,the matters before the Supreme Court were then remitted back to thetwo Judges Bench to consider each of the cases independently andtake appropriate decisions in the matter. The aforesaid clarificationof the Supreme Court has been taken note of by the Madras HighCourt in the decision reported inCommissioner of Income-Tax v. Brakes India Ltd.- [(2014) 361 ITR 424 (Mad)]wherein, thecourt found that as per the provisions of the Income Tax Act, therewas no right in an assessee to claim interest on interest on amountsdue to him by way of refund. In the light of the authoritativepronouncements of the Supreme Court on the subject, I find that theprayer in the original petition with regard to interest on interestcannot be granted. While the petitioner would point out that, even ifinterest on interest was not granted, it was open to this Court toconsider the issue of grant of appropriate compensation in lieu ofinterest on interest, I am of the view that insofar as the computation shown by the respondent in Ext.R1(A) reveals that the respondent hascomputed interest in accordance with the provisions of the Act for theentire period for which they had withheld the amounts due to thepetitioner by way of refund, there is no scope for the issuance of adirection to grant a compensation over and above the statutoryinterest that has already been reckoned for the purposes ofcomputation of the amounts due to the petitioner. Thus, the originalpetition fails and is accordingly dismissed. The learned counsel for the petitioner would submit that there issome ambiguity with regard to whether the amounts found due andpayable to the petitioner, as shown in Ext.R1(A) statement of therespondent, has in fact been paid to the petitioner or his legalrepresentatives. Taking note of this submission, I direct therespondent to ascertain from its records as to whether the balanceamounts, shown as due and payable to the petitioner as per Ext.R1(A)statement, has in fact been paid to him. If, on verification by therespondent, it is found that the amounts have not been paid, therespondent shall take steps to pay the amount within a period of threemonths from the date of receipt of a copy of this judgment. In orderto avoid any confusion, it will be open to the petitioner to produce such records, as are available with him, to show what amounts he hasactually received from the respondent. The petitioner shall produceany such document that he has, before the respondent, within aperiod of one month from the date of receipt of a copy of thisjudgment. A.K.JAYASANKARAN NAMBIAR JUDGE prp A.K.JAYASANKARAN NAMBIAR, J. -------------------------------O.P.NO.14238 OF 2002 ----------------------------------- J U D G M E N T 28[th] day of October, 2014