Wp/21963/2005 Of Andhra Pradesh State Financial Corporation v. Commissioner Of Income Tax (Hyderabad -1)

THE HON’BLE SRI JUSTICE BILAL NAZKIANDTHE HON’BLE SRI JUSTICE G.CHANDRAIAH WRIT PETITION No. 21963 OF 2005 10-04-2006 Between: Andhra Pradesh State Financial Corporation, Hyderabad,rep. by its Managing Director. ……Petitioner And Commissioner of Income Tax, Hyderabad-1 and another.…..Respondents THE HON’BLE SRI JUSTICE BILAL NAZKIANDTHE HON’BLE SRI JUSTICE G.CHANDRAIAH WRIT PETITION No. 21963 OF 2005 ORDER: (Per Hon’ble Sri Bilal Nazki, J) Petitioner is The Andhra Pradesh State FinancialCorporation and challenge in this writ petition is withrespect to computation of interest on refund. Petitioneralso prays for a direction to respondents that interest onrefund of tax should be calculated from 01.4.1995 till21.12.2004. The facts as narrated in the writ petition are that forthe assessment year 1995-96, the Corporation filed itsreturn of income admitting a total income ofRs.4,02,33,374/-. On such admitted income, theCorporation paid advance tax of Rs.1,32,62,000/- asrequired by law. On a portion of income, there was alsodeduction at source during the relevant accounting yearand the amount so deducted was Rs.23,200/-. On theadmitted income, the Corporation also paid self- assessment tax of Rs.64,39,518/- on 20[th] of November1995. The Deputy Commissioner of Income-tax, who wasthe Assessing Officer, scrutinized the return, heard theassessee and passed an order of assessment underSection 143 (3) of the Income-tax Act (for short ‘the Act’), 1961 on 27.3.1998determining the total income as Rs.8,97,04,920/-. Against that assessment order, the Corporation filedan appeal before the Commissioner of Income-tax. Theappeal was disposed of on 20[th] of November 1998. Theappellate authority reduced the total income fromRs.8,97,04,920/- to Rs.4,23,89,550/-. Against theappellate authority’s order, both the assessee and theIncome-tax Department went for further appeal to theIncome-tax Appellate Tribunal (for short ‘the Tribunal’). The Tribunal dismissed the Department’s appeal vide its appellate order dated 30[th] of January 2003 for theassessment year 1995-96. It disposed of the assessee’sappeal on 31[st] of March 2004. The Assessing Officergave effect to the appellate order of the Tribunal vide hermodification order dated 21.12.2004. The Tribunaldetermined the total income of the petitioner-Corporationfor the assessment year 1995-96 as nil. The case of thepetitioner is that since the taxable income for theassessment year 1995-96 was nil, various taxes paid by the Corporation for that assessment year had to berefunded to it. The Assessing Officer, by an order dated21[st] December 2004, determined the refund payable tothe assessee. She also determined the interest payableon such refund in terms of Section 244-A of the Act asunder: “ Rs. Total income nilTax on above nilTax already paid by the assessee: Rs. TDS 23,200 Advance tax 1,32,62,000 Self assessment tax 64,39,518 Regular tax and adjustments of other refunds 40,30,029 ---------------- Total : 2,37,54,747 Refundable 2,37,54,747 Less: Interest U/s.234-C 4,58,738 --------------- Refundable 2,32,96,009 Less : Refund of regular tax already issued in January 1999 16,56,361 Refund of regular tax already issued on 27.10.2003 33,83,346 ------------- 27.10.2003 33,83,346 Rs. TDS 23,200 Advance tax 1,32,62,000 Self assessment tax 64,39,518 Regular tax and adjustments of other refunds 40,30,029 ---------------- Total : 2,37,54,747 Refundable 2,37,54,747 Less: Interest U/s.234-C 4,58,738 --------------- Refundable 2,32,96,009 Less : Refund of regular tax already issued in January 1999 16,56,361 Refund of regular tax already issued on 27.10.2003 33,83,346 ------------- 27.10.2003 33,83,346 50,39,707-----------------Principal amount of refunddue to assessee 1,82,56,302Add: Interest u/s.244-A from1.4.2004 to 31.12.2004 (as theassessee has not made the above claimeitherin the return of income fortheassessment year 1994-95(typing mistake for 1995-96) or during the course ofassessment proceedings(therefore) the delay inclaiming of the deduction isattributable to theassessee and therefore,the assessee has beenallowedinterest u/s.244-A from the date oforder of the ITAT) 5,31,754-------------------Net Refundable : 1,87,88,056-------------------” Facts are not in dispute. The controversy raised bythe petitioner-Corporation is that the calculation of intereston refund made by the 2[nd] respondent was not inaccordance with the statutory provision contained inSection 244-A of the Act. According to the learnedCounsel appearing for the petitioner-Corporation, interestunder Section 244-A of the Act on refund ofRs.1,82,56,302/- ought to have been calculated forperiods of 9 years to 9 ½ years, but the 2[nd] respondent granted such interest for a small period ofonly 8 months. Counter is filed, in which the facts are not disputed. However, it is stated that aggrieved by the order of theCommissioner of Income-tax (Appeals), the petitionerpreferred an appeal to the Tribunal and in the course ofthe appellate proceedings, the petitioner raised anadditional ground stating that they have added backRs.2,54,88,756/- as income representing the unclaimedbalance of Credit Guarantee Commission amounts andsince the petitioner had filed declarations under ‘Kar VivadSamadhan Scheme of 1998’ offering to tax all amountsreceived towards Credit Guarantee Commission asincome for the year of receipt itself, it was contended thatthe inclusion of Rs.2,54,88,756/- again as income for theyear 1995-96 would amount to double assessment of the same amount. The Tribunal set aside the assessmentand remanded the matter back to the Assessing Officerwith a direction to verify the claim of the assessee andallow the same. After verification as to whether theamount included was offered in ‘Kar Vivad SamadhanScheme’, the assessee’s claim was found to be correct. Subsequently, the amount of refund was quantified andhaving noted that the assessee has raised the additionalground for the first time before the Tribunal and it was not claimed either in the returns or during the courseof assessment proceedings, therefore, the interest wasallowed under Section 244-A of the Act from the date ofthe order of the Tribunal, as the delay in claiming thededuction as a result of its admission under ‘Kar VivadSamadhan Scheme’, was attributable to the assessee. We have heard learned counsel for the parties indetail. The petitioner moved an application in terms ofSection 244-A (2) of the Act before the Commissioner of Income-tax, seeking interest from 1[st] April 1995 to 31[st] December2004. He passed an order on 19[th] August 2005, rejectingthe claim of the petitioner. The reasons given for rejectionof the claim of the petitioner, by the Commissioner, are contained in para 7 of the order as under – We have heard learned counsel for the parties indetail. The petitioner moved an application in terms ofSection 244-A (2) of the Act before the Commissioner of Income-tax, seeking interest from 1[st] April 1995 to 31[st] December2004. He passed an order on 19[th] August 2005, rejectingthe claim of the petitioner. The reasons given for rejectionof the claim of the petitioner, by the Commissioner, are contained in para 7 of the order as under – “The assessee paid advance tax, self-assessmenttax, etc. on its own volition after returning its totalincome at Rs.4,02,33,374. If the assessee’s incomehas been changed to ‘nil’ in view of its assessmentsfor the other years and at the instance and pursuantto the decision of the ITAT, it cannot be held that theI.T.Department withheld the refund so as tocompensate for the delay by issue of interest. Theassessee chose to admit income of Rs.4,02,33,374and paid tax commensurate to it. The assesseechanged its stand much later and that stand has thesupport of the ITAT. That, however, does not renderthe IT Department responsible for the delay. Thedelay has to be attributable to the assessee. In thecircumstances, the question of granting interest to theassessee u/s 244A prior to the decision of the ITATdoes not arise.” By going through the order of the Commissioner, it ismanifest that the claim of the petitioner to interest hasbeen rejected mainly on the ground that the delay inrefund was attributable to the assessee. Therefore,granting of interest to the assessee under Section 244-Aof the Act prior to the decision of the Tribunal was notpermissible. The learned counsel appearing for thepetitioner, however, submits that whatever the return isfiled by an assessee, it is the job of the officials of the I.T.Department to see whether the income returned is corrector not. The scheme of the Income-tax Act is such thatultimately everything depends upon the assessments and not on the returns. Even if a person declares a higherincome, he cannot be deprived of refund and interest onthe ground that he committed a mistake by declaring hisincome higher than the actual income. He further submitsthat Section 244-A was introduced in the Act with effectfrom the assessment year 1989-90 and under Section244-A (1)(a), interest on refund which arises out of TDS oradvance tax, has to be calculated from the 1[st] day of Aprilof the relevant assessment year up to the date on whichthe refund is granted. Therefore, the interest should havebeen calculated from 1[st] of April 1995, as the assessmentpertain to 1995-96. He claims that he is entitled to intereston Rs.23,200/- and Rs.1,32,62,000/- from 1.4.1995 to21.12.2004. He also claims that he is entitled to intereston refund of Rs.49,71,102/- for the period from 20[th]November 1995 to 21[st] December 2004 under Section 244-A (1)(b) of the Act. Section 244-A of the Act is reproduced hereunder – “244 A : Interest on refunds:- (1) Where refund of any amount becomesdue to the assessee under this Act, heshall, subject to the provisions of thissection, be entitled to receive, in additionto the said amount, simple interestthereon calculated in the followingmanner, namely :- (a) where the refund is out of any taxcollected at source under section 206Cor paid by way of advance tax or treatedas paid under section 199, during thefinancial year immediately preceding theassessment year, such interest shall becalculated at the rate of one-half per centfor every month or part of a monthcomprised in the period from the 1[st] dayof April of the assessment year to thedate on which the refund is granted:collected at source under section 206Cor paid by way of advance tax or treatedas paid under section 199, during thefinancial year immediately preceding theassessment year, such interest shall becalculated at the rate of one-half per centfor every month or part of a monthcomprised in the period from the 1[st] dayof April of the assessment year to thedate on which the refund is granted: Provided that no interest shall be payable ifthe amount of refund is less than ten per centof the tax as determined under sub-section (1)of section 143 or on regular assessment; (b) in any other case, such interest shall becalculated at the rate of one-half per centfor every month or part of a monthcomprised in the period or periods fromthe date or, as the case may be, dates ofpayment of the tax or penalty to the dateon which the refund is granted.calculated at the rate of one-half per centfor every month or part of a monthcomprised in the period or periods fromthe date or, as the case may be, dates ofpayment of the tax or penalty to the dateon which the refund is granted. Explanation : -- For the purposes of thisclause, “date of payment of tax or penalty”means the date on and from which the amountof tax or penalty specified in the notice ofdemand issued under section 156 is paid inexcess of such demand. (2) If the proceedings resulting in therefund are delayed for reasonsattributable to the assessee, whetherwholly or in part, the period of the delayso attributable to him shall be excludedfrom the period for which interest is payable, and where any question arisesas to the period to be excluded, it shallbe decided by the Chief Commissioneror Commissioner whose decisionthereon shall be final. (3) Where, as a result of an order undersub-section (3) of section 143 or section144 or section 147 or section 154 orsection 155 or section 250 or section254 or section 260 or section 262 orsection 263 or section 264 or an order ofthe Settlement Commission under sub-section (4) of section 245D, the amounton which interest was payable undersub-section (1) has been increased orreduced, as the case may be, theinterest shall be increased or reducedaccordingly, and in a case where theinterest is reduced, the AssessingOfficer shall serve on the assessee anotice of demand in the prescribed formspecifying the amount of the excessinterest paid and requiring him to paysuch amount; and such notice of demandshall be deemed to be a notice undersection 156 and the provisions of thisAct shall apply accordingly.sub-section (3) of section 143 or section144 or section 147 or section 154 orsection 155 or section 250 or section254 or section 260 or section 262 orsection 263 or section 264 or an order ofthe Settlement Commission under sub-section (4) of section 245D, the amounton which interest was payable undersub-section (1) has been increased orreduced, as the case may be, theinterest shall be increased or reducedaccordingly, and in a case where theinterest is reduced, the AssessingOfficer shall serve on the assessee anotice of demand in the prescribed formspecifying the amount of the excessinterest paid and requiring him to paysuch amount; and such notice of demandshall be deemed to be a notice undersection 156 and the provisions of thisAct shall apply accordingly. (4) The provisions of this section shallapply in respect of assessments for theassessment year commencing on the 1[st]day of April, 1989, and subsequentassessment years.”apply in respect of assessments for theassessment year commencing on the 1[st]day of April, 1989, and subsequentassessment years.” The provision lays down that interest is payable from 1[st] day of April of the relevant assessment year to the date on which the refund is granted. But Section 244-A(2) lays down that if the proceedings resulting in therefund are delayed for the reasons attributable to theassessee, the period for the delay so attributable shall beexcluded from the period for which the interest waspayable. It is not disputed that the petitioner was entitledto refund in terms of the order of the Tribunal only, andTribunal allowed his plea only on the ground which wasraised as additional ground in the appeal. This ground was not even agitated during the appeal and theadditional ground raised was – The provision lays down that interest is payable from 1[st] day of April of the relevant assessment year to the date on which the refund is granted. But Section 244-A(2) lays down that if the proceedings resulting in therefund are delayed for the reasons attributable to theassessee, the period for the delay so attributable shall beexcluded from the period for which the interest waspayable. It is not disputed that the petitioner was entitledto refund in terms of the order of the Tribunal only, andTribunal allowed his plea only on the ground which wasraised as additional ground in the appeal. This ground was not even agitated during the appeal and theadditional ground raised was – “1. The appellant contends that in the facts andcircumstances of the case, it is entitled toclaim deduction of Rs.10,47,33,454 whilecomputing the taxable income for theassessment year 1994-95 being the amountsrefunded to the loanees out of DICGC amountscollected from them in the past years.circumstances of the case, it is entitled toclaim deduction of Rs.10,47,33,454 whilecomputing the taxable income for theassessment year 1994-95 being the amountsrefunded to the loanees out of DICGC amountscollected from them in the past years. 2. It is contended that since the appellantfollows cash system of accounting and sincethe refunds have been made in the year ended31-3-1994, the refunds should be allowed asdeduction in the year of refund just as thepayments were taxed as income in the year ofreceipt.”the refunds have been made in the year ended31-3-1994, the refunds should be allowed asdeduction in the year of refund just as thepayments were taxed as income in the year ofreceipt.” While considering this contention, the Tribunal, onfacts, was not even sure whether the petitioner was entitled toany refund, as still certain questions of fact relating to expenditure had to be decided. Therefore, the matter wasremanded back to the assessing officer. The refund wasclaimed on the ground that a deduction ofRs.10,47,33,454/- should be treated as expenditure as itwas the amount that had been refunded to the loaneesout of DICGC amounts collected from them in the pastyears. The Tribunal was of the view,“Under these circumstances, the expenditure i.e.payments made by the assessee to DICGC or theamounts returned to the loanees consequent to theresolutions passed by the Board at its Meeting on16.3.1994 consequent to a letter from SmallIndustries Development Bank of India dt.15.4.1993delinking of refinance from credit guaranteecommission should entitle the assessee to claimexpenditure on this count.” Basically these were facts, which the Departmentwas not supposed to know unless they were brought to itsnotice. Certain facts were not brought to the notice of theIncome-tax authorities and for the first time those factswere brought to the notice of the Tribunal when Tribunalwas hearing the appeal, therefore, the delay in refundcould not be attributable to the Department. In thesecircumstances, the delay was attributable to the petitionerand therefore, in our view, the Commissioner’s ordercannot be faulted. For these reasons, we do not find merit in this petition and it is accordingly dismissed. No costs. 10[th] April 2006 ajr ________________(BILAL NAZKI, J)__________________(G.CHANDRAIAH, J)