The Commissioner Of Income Tax -8 v. M/S. Melstar Information Technologies Ltd

R.M. AMBERKAR (Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J.INCOME TAX APPEAL NO. 444 OF 2017 The Commissioner of Income Tax -8 Versus ..Appellant M/s. Melstar Information Technologies Ltd ..Respondent ................... Mr. Arvind Pinto a/w Mr. N.C. Raugauayakalu for the AppellantMr. Arvind Pinto a/w Mr. N.C. Raugauayakalu for the AppellantMs. A. Vissanji a/w Mr. S.J. Mehta for the RespondentMs. A. Vissanji a/w Mr. S.J. Mehta for the Respondent ................... CORAM : AKIL KURESHI & S.J. KATHAWALLA, JJ. DATE : JUNE 10, 2019. P.C.: 1.This appeal is filed by the Revenue to challenge thejudgment of the Income Tax Appellate Tribunal, Mumbai(“the Tribunal” for short) dated 15.1.2014. 2.Following question is presented for our consideration:- "Whether on the facts and circumstances of the case and in law, theITAT has erred in law in assuming jurisdiction to hear the appealwhen no such appeal lies before ITAT or before CIT(A) because asper the provisions of Section 244A(2) of the Income Tax Act,decision of CIT is final as held by Kerala High Court in the case ofKerala Civil Supplies 185 taxman 1.?" 3.The issue pertains to interest payable to therespondent – assessee under Section 244A of the Income TaxAct, 1961 (“the Act” for short). The Revenue does notdispute either the assessee’s claim of refund or thatordinarily under sub-section (1) of Section 244A of the Act,such refund would carry interest at statutorily prescribedrate. However, according to the Revenue, by virtue of sub-section (2) of Section 244A of the Act, since the delay in theproceedings resulting in the refund was attributable to theassessee, the assessee would not be entitled to suchinterest. 4.The facts on record would show that the assessee hadnot claimed certain expenditure before the Assessing Officerbut eventually raised such a claim before the Tribunal. Uponwhich, the Tribunal remanded the proceedings to the CIT(A).As such stage, the additional benefit claimed by theassessee was granted. This resulted in refund and thequestion of payment of interest on such refund. 5.As is well known, in case of refunds payable to theassessee, interest in terms of sub-section (1) of Section 244Awould be payable. Sub-section (2) of Section 244A, however,provides that if the proceedings resulting in the refund aredelayed for reasons attributable to the assessee whetherwholly or in part, the period of delay so attributable, wouldbe excluded from the period for which interest is payableunder sub-section (1) of Section 244A of the Act. 6.The Tribunal in the present case came to the conclusionthat the delay cannot be attributed to the assessee andtherefore, directed payment of interest. 7.Sub-section (2) of Section 244A of the Act refers to theproceedings resulting in the refund which are delayed for thereasons attributable to the assessee. There is no allegationor material on record to suggest that any of the proceedingshit the assessee’s appeal before the Tribunal or remandedthe proceedings before the CIT(A) whether in any mannerdelayed on accounts of the reasons attributable to theassessee. The Tribunal, was, therefore correct in allowing the interest to the assessee. 8.We may notice that in the case ofAjantaManufacturing Ltd Vs. Deputy CIT (Guj)[1], the DivisionBench of Gujarat High Court had occasion to consider asimilar issue. The assessee had made a belated claim duringassessment of filing revised return. According to theRevenue, this would entitle the assessee for claim of interestto the extent of delay. Provisions of sub-rule (2) of Section244A of the Act were sought to be pressed in service. TheCourt made following observations: interest to the assessee. 8.We may notice that in the case ofAjantaManufacturing Ltd Vs. Deputy CIT (Guj)[1], the DivisionBench of Gujarat High Court had occasion to consider asimilar issue. The assessee had made a belated claim duringassessment of filing revised return. According to theRevenue, this would entitle the assessee for claim of interestto the extent of delay. Provisions of sub-rule (2) of Section244A of the Act were sought to be pressed in service. TheCourt made following observations: "16. We would also examine the order of the Commissioner onmerits. As noted, according to the Commissioner the assessee hadraised a belated claim during the course of the assessmentproceedings which resulted into delay in granting of refund andtherefore, the assessee was not entitled to interest for the entireperiod from the first date of assessment year till the order givingeffect to the appellate order was passed. We cannot uphold the viewof the Commissioner. First and foremost requirement of sub-section(2) of Section 244A is that the proceedings resulting into refundshould have been delayed for the reasons attributable to theassessee, whether wholly or in part. If such requirement is satisfied,to the extent of the period of delay so attributable to the assessee, hewould be disentitled to claim interest on refund. The act of revising areturn or raising a claim during the course of the assessmentproceedings cannot be said to be the reasons for delaying the1[2017] 391 ITR 33 (Guj) proceedings which can be attributable to the assessee. Mere factthat the claim came to be granted by the Appellate Commissioner,would not change this position. In essence, what the Commissioner(Appeals) did was to allow a claim which in law, in his opinion, wasallowable by the Assessing Officer. In other words, by passing orderin appeal, he merely recognized a legal position whereby, theassessee was entitled to claim certain benefits of reduced tax.Surely, the fact that the assessee had filed the appeal whichultimately came to be allowed by the Commissioner, cannot be areason for delaying the proceedings which can be attributed to theassessee. 17. The Department does not contend that the assessee hadneedlessly or frivolously delayed the assessment proceedings at theoriginal or appellate stage. In absence of any such foundation, merefact that the assessee made a claim during the course of theassessment proceedings which was allowed at the appellate stagewould not ipso facto imply that the assessee was responsible forcausing the delay in the proceedings resulting into refund. We mayrefer the decision of the Kerala High Court in case of CIT Vs. SouthIndian Bank Ltd., reported in (2012) 340 ITR 574 (Ker) in which theassessee had raised a belated claim for deduction which wasallowed by the Commissioner (Appeals). The Revenue, therefore,contended that for such delay, interest should be declined underSection 244A of the Act. In the said case also, the assessee had notmade any claim for deduction of provision of bad debts in the originalreturn. But before completion of the assessment, the assessee hadmade such a claim which was rejected by the Assessing Officer. TheCommissioner allowed the claim and remanded the matter to theAssessing Officer. Pursuant to which, the assessee became entitledto refund. Revenue argued that the assessee would not be entitled tointerest in view of Section 244A(2). In this context, the Court held in Para. 6 as under (page 578 of 340 ITR): Para. 6 as under (page 578 of 340 ITR): "6. Sub-section (2) of section 244A provides that the assesseeshall not be entitled to interest for the period of delay in issuingthe proceedings leading to the refund that is attributable to theassessee. In other words, if the issue of the refund order isdelayed for any period attributable to the assessee, then theassessee shall not be entitled to interest for such period. Thisis of course an exception to clauses (a) and (b) of section244A(1) of the Act. In other words, if the issue of theproceedings, that is, refund order, is delayed for any periodattributable to the assessee, then the assessee is not entitledto interest of such period. Further, what is clear from sub-section (2) is that, if the officer feels that delay in refund forany period is attributable to the assessee, the matter shouldbe referred to the Commissioner or Chief Commissioner orany other notified person for deciding the issue and orderingexclusion of such periods for the purpose of granting interestto the assessee under section 244A(1) of the Act. In this case,there was no decision by the Commissioner or ChiefCommissioner on this issue and so much so, we do not thinkthe Assessing Officer made out the case of delay in refund forany period attributable to the assessee disentitling for interest.So much so, in our view, the officer has no escape fromgranting interest to the assessee in terms of section 244A(1)(a) of the Act." 9.In the result, no question of law arises. The appeal isdismissed. [ S.J. KATHAWALLA, J. ] [ AKIL KURESHI, J ]