M/S VIPAN KUMAR SUDESH KUMAR vs. INCOME TAX OFFICER,

Facts

The assessee, M/s Vipan Kumar Sudesh Kumar, HUF, filed a return for AY 1985-86. A protective assessment was made, leading to a demand. Appeals followed, and the CIT(A) reduced the income. The ITAT directed a substantive assessment. The Assessing Officer (AO) gave effect to the CIT(A)'s order, resulting in a refund. Subsequently, the AO withdrew interest of Rs. 29,380/- previously allowed to the assessee, citing the ITAT's order for substantive assessment. Appeals against this withdrawal were dismissed by the Deputy Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT). The assessee is now challenging the ITAT's order dated 01.08.2013.

Held

The High Court held that the interest paid to the assessee can be withdrawn under Section 244(1A) of the Income Tax Act, 1961, when giving effect to an appellate order that leads to a variation in the assessed tax liability. The Tribunal's decision to uphold the withdrawal of interest was based on the ratio laid down by the Hon'ble Supreme Court in Modi Industries Ltd. and another vs. CIT and another, the Calcutta High Court in ANZ Grindlays Bank Plc. vs. CIT, and the jurisdictional High Court in CIT vs. Hansa Agencies Pvt. Ltd. The Court noted that the Gujarat High Court's judgment in CIT vs. Ahmedabad New Cotton Mills Co. Ltd. was contrary, but the ITAT had declined to follow it as the outcome of the Supreme Court appeal against it was not known. The High Court itself was unable to ascertain the fate of that Supreme Court appeal despite efforts. Therefore, the High Court was not inclined to accept the assessee's appeal, finding no substantial question of law arising, particularly in light of the Supreme Court's decision in Modi Industries Ltd.

Key Issues

1. Whether interest allowed under Section 244(1A) of the Income Tax Act, 1961, can subsequently be withdrawn in view of the creation or restoration of a demand in a subsequent appeal? (Question of law) Assessee's contentions: The assessee argued that interest, once paid after giving effect to an appellate order, cannot be withdrawn under Section 244(1A) by giving effect to a subsequent order. They relied on the Gujarat High Court's judgment in CIT vs. Ahmedabad New Cotton Mills Co. Ltd. (1993) 201 ITR 507, which they claimed was affirmed by the Supreme Court, and a Rajasthan High Court judgment in CIT vs. Udaipur Distillery Co. Ltd. (2004). Revenue's contentions: The revenue contended that the Supreme Court's judgment in Modi Industries Ltd. vs. CIT (1995) 216 ITR 559 applies directly to the present case, and the Gujarat High Court's judgment is not applicable. The ITAT had relied on Modi Industries Ltd. and Calcutta High Court's judgment in ANZ Grindlays Bank Plc. vs. CIT (1999) 157 CTR (Cal.) 161.