COMMISSIONER OF INCOME TAX vs. HIRENBHAI K PATEL

Facts

The assessee filed its return for Assessment Year 1984-85 declaring an income of Rs. 5,27,547/-. The Assessing Officer passed an order under Section 143(3). The assessee appealed to the CIT(A), which dismissed the appeal. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT), which allowed the assessee's appeal by an order dated 13.10.2006. The revenue has filed the present appeal before the High Court challenging the ITAT's order. The High Court admitted the appeal and formulated a substantial question of law regarding the direction to allow interest under Sections 244A and 244(1A) of the Income Tax Act.

Held

The High Court held that the issue involved in the appeal was already concluded by this Court. The Court referred to a previous decision concerning 354 cases of 100 assessees, where a Special Bench of the ITAT had passed a combined order. In that context, the Court discussed the refund of taxes paid on returned income, distinguishing it from cases of annulment of assessment or where the assessment order is void ab initio, citing Supreme Court judgments in Shelly Products and Saurashtra Cement. The Court found that the refund in the present case arose from assessments and further appellate proceedings, not from an annulled assessment. The Court also noted that the CIT's revision order was contrary to a previous decision of the High Court and that the CIT lacked jurisdiction to pass the revision order under Section 263. Regarding the grant of interest on refund, the Tribunal was justified in holding that refund should be granted with interest. The High Court agreed with the Tribunal's order and directed that the appeal be dismissed, answering the question of law in favour of the assessee.

Key Issues

1. Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to allow interest under Section 244A and 244(1A) of the I.T Act in accordance with law, following a Special Bench judgment of the Appellate Tribunal? The revenue argued that the Tribunal erred in allowing the assessee's appeal by following the Special Bench decision and that the material on record was not properly appreciated. The revenue urged the Court to answer the question in its favour. The assessee supported the Tribunal's order, contending that the issue was concluded by this Court in favour of the assessee in Tax Appeal No. 1514 of 2006 and allied matters, and therefore, the appeal should be dismissed.