HINDUSTAN ZINC LTD. vs. A.C.I.T.CIRCLE-2,UDAIPUR

The assessee has challenged an order dated 13.10.2009 passed by the learned Income Tax Appellate Tribunal (ITAT) for Assessment Year (A.Y.) 1993–94. By the impugned order, the ITAT set aside the appellate order dated 18.12.2008 passed by the Commissioner of Income Tax (Appeals) [CIT(A)] and restored the order dated 02.09.2008 passed by the Assessing Officer.

Under the Assessing Officer’s order, the assessee’s determined income for A.Y. 1993–94 of Rs. 42,57,61,140/- was reduced by Rs. 5,53,13,531/- towards brought forward losses of A.Y. 1992–93, and tax was accordingly assessed on the net income of Rs. 37,04,47,609/- instead of Rs. 42,57,61,140/-. (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (2of 12) [ITA-141/2011] However, the assessee’s claim for interest on the amount of tax refund was disallowed.

Brief Backdrop:

Pursuant to the Kar Vivad Samadhan Scheme, 1998 (hereinafter referred as ‘KVSS’), the assessee submitted a declaration dated 29.12.1998 under Section 88 of the Finance (No.2) Act, 1988 qua the Assessment Years 1993-94. In this connection, the CIT, Udaipur issued a certificate dated 02.02.1999 under Section 90(2) read with Section 91 of the Act, ibid.

In the certificate dated 02.02.1999 issued by the CIT, Udaipur it has been stated inter alia as under: “And whereas the Designated Authority by order dated 6.1.99/28.1.99 determined the amount of Rs. 10,15,02,255/- payable by the declarant in accordance with the provisions of the Scheme and granted certificate setting forth therein the particulars of tax arrears and the sum payable after such determination towards full and final settlement of tax arrears as per details given below: A.Y. 1993-94 Outstanding Demand Payable Demand Interest 234 B Rs. 12,17,15,415 Interest 220(2) Rs. 7,52,89,095 Total demand Rs. 20,30,04,511 Rs. 10,15,02,255/- And whereas the declarant has paid Rs. 10,15,02,255/- on 1.2.99 being the sum determined by the designated authority. x-x-x-x Now, therefore, in exercise of the powers conferred by sub Section (2) of Section 90 read with Section 91 of the Finance (No.2) Act, 1988, the designated authority hereby issues this certificate to the said declarant (a) Certifying the receipt of payment from the declarant towards full and final settlement of tax arrears determined in the order dated 4.1.99/ 28.1.99 on the declaration made by the aforesaid declarant, (b) Granting immunity, subject to the provisions contained in the scheme, from instituting any proceeding for prosecution for any offence under Aaykar or from imposition of penalty under the (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (3of 12) [ITA-141/2011] enactment in respect of matters covered in the aforesaid declaration made by the declarant”

The learned ITAT passed order dated 23.01.2008 (Annexure- 4) disposing of assessee’s two appeals, including ITA No. 259/JDPR/2004 (A.Y. 1993-94). It held/directed as under: “As the assessee had not opted for KVSS with reference to payment of tax on the assessed income, the matters connecting therewith are open to the regular proceedings available under the Act. Admittedly, the appeal of the assessee for the preceding A.Y. was decided after filing of KVSS declaration and the AO, on giving effect to the order passed by the Tribunal determined the loss of Rs. 5.53 crores available for set off against the income of the instant year. We are, therefore, of the considered opinion that the right of the assessee for claiming set off cannot be snatched simply for the reason that it had availed the benefit of KVSS for the interest payable under the Act. We, therefore, hold that the amount of tax on the brought forward loss of Rs. 5.53 crores be refunded to the assessee. However, the assessee would not be entitled to interest on the refund to the extent of the amount having been covered under the declaration. The order of the Id. CIT (A) is, therefore, set aside. As the necessary details are not emanating for the calculation of the refund, we direct the AO to decide this matter in consonance with our directions contained hereinabove after allowing hearing opportunity to the assessee.

In the result, the appeal is allowed for statistical purposes.”

Pursuant to the aforesaid direction, the Assessing Officer/Assistant Commissioner of Income Tax, Circle 2, Udaipur passed order dated 02.09.2008 (Annexure-3) holding as under: “I have considered the facts of the case & submissions of the assessee. Respectfully following the directions of Hon'ble ITAT income of the assessee is recalculated as below:- Income determined for the AY 1993-94 as per order u/s 154/143(3)/250

While deciding assessee’s appeal against above said order of the Assessing Officer, an order dated 18.12.2008 (Annexure-2) was passed by the CIT(A) holding/directing as under: “Thus, on going through the above relevant portion of the ITAT's order, it is amply clear that the amount of tax on the brought forward loss of Rs. 5,53,13,531/- should have been refunded to the appellant' which the AO has not done in his appeal effect order dated 2.9.2008. It is to be pointed out here that the AO has not clearly understood the second portion of the concluding para No. 7 of the ITAT's order that the assessee would not be entitled interest on the refund to the extent of amount having been covered under the declaration. In other words, the appellant has opted for KVSS on tax arrears of Rs.20,30,04,511/- i.e. on arrear interest of Rs. 23,17,86,378/- due to be paid by the appellant to the department minus Rs.2,87,81,867/-, already paid before KVSS. The appellant thus paid Rs. 10, 15,02,255/- under KVSS on arrear of interest only. This payment of tax did not inclüde any other regular arrear of tax as a result of ITAT's order for A.Y. 1993-

Although the AO gave effect to the carry forward loss of Rs.5,53,13,531/- but did not allow interest on this amount u/s. 244A which is outside the purview of KVSS. It was not at all covered in this scheme. The tax on this amount has already been paid by the appellant. It is only as a result of ITAT's order for A.Y. 1992-93 after opting for KVSS by the appellant, the question of paying interest u/s. 244A on the amount of Rs. 5,53,13,531/- arose. The AO should have allowed the interest u/s. 244A of the Act on this amount but he has not. In fact he has instead charged interest u/s. 234B, 234C and 234D and has withdrawn interest payable u/s 244A of the Act to the appellant. This order is totally erroneous, misconceived and unjustified. Therefore, the AO is directed to grant refund u/s. 244A of the Act on the amount of Rs. 5,53,13,531/-. 3.In the result, the appeal is allowed.”

Appeal against the said order dated 18.12.2008 filed by the revenue was accepted vide impugned order dated 03.10.2009 passed by the learned ITAT of which the relevant part is as under: “8.We have heard Ld. departmental representative ex parte qua assessee with reference to material on record within the meaning of sub rule (6) of Rule 18 of Appellate Tribunal Rules 1963. The findings reached by Ld. CIT(A) that interest payable u/s 244A of the Act on the amount of Rs. 5,53,13,531/- is not covered in KVSS is found perverse on facts. It is also not correct that interest on this amount u/s 244A is outside the purview of KVSS. In fact the amount of disputed interest aggregating to Rs. 20.30 crores was payable on the assessed income of Rs. 42,57,61,140/-. The same were tax arrears within the meaning of Section 87(m) of KVSS that came to be settled at an amount of Rs.18.15 crores(sic) which was conclusive in terms of Section 90(1) of that Act. The Appellate Tribunal at Jodhpur (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (5of 12) [ITA-141/2011] being of the opinion that income tax chargeable on the assessed income of Rs. 42,57,61,140/- not being disputed tax for settlement under KVSS found no fetters for allowing refund of income tax amount on the amount of Rs. 5,53,13,531/- which was allowed to be set off as brought forward loss against income of the year under consideration. Accordingly it directed the assessing officer to grant refund of the amount of income tax thereon. It also clarified that interest on tax worked out having been settled under KVSS, the same cannot be refunded but as the details were not available on tribunal's record, it remitted the matter to the assessing authority verify and to carry out the directions as such. The assessing authority in this case is found to have acted on the directions of the Appellate Tribunal and granted refund of income tax on the aforesaid amount of income of Rs. 5,53,13,531/-. He did not find any interest that can be said to have been charged u/s 244A of the Act but not settled under K.V.S.S. and thus did not allow any credit or refund of interest. The Ld. CIT(A) however recorded unreasonable findings, contrary to record that interest on the amount of Rs. 5,53,13,531/- is not at all covered by the scheme of K.V.S.S. He in fact had no reasonable basis to say so nor made any reference to the cogent material on record. The amount of Rs. 5, 53,13,531/- on which refund u/s 244A of the Act was directed to be granted is the amount of loss that was allowed to be carried forward for set off against income of the year under consideration. It could not be taken as the amount of tax eligible for any interest to assessee. We, therefore, by setting the findings reached by Ld. CIT(A), also set aside his order and restore the order passed by Ld assessing authority. The ground in appeal raised by revenue stands allowed. 9.As a result, appeal by revenue stands allowed.”

The assessee has filed the instant appeal seeking to set aside/quash the impugned order dated 03.10.2009 passed by the learned ITAT and for affirming the order dated 18.12.2008 passed by the CIT(A).

The appeal was admitted vide order dated 28.04.2011 on following substantial question of law:- (i) Whether the claim of the assessee towards interest in respect of the year under consideration is legally tenable?

We have heard the learned counsel for the parties and with their able assistance have gone through the record. Arguments of the Appellant

Learned counsel for the appellant argued that under Section 244A of the IT Act, the assessee is entitled to interest on the (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (6of 12) [ITA-141/2011] amount of tax refund. It is submitted that it was by virtue of and after the order dated 23.01.2008 (Annexure-4) passed by the learned ITAT that the assessee became entitled to set off on account of the brought forward loss of Rs. 5.53 crores. Entitlement to interest flowed from and was consequential to the entitlement for the tax refund.

Furthermore, only the assessee’s liability for payment of interest under Section 234 B and 220(2) of the IT Act were the subject matter of the declaration. The assessee’s entitlement to interest under Section 244A, which accrued by virtue of order dated 23.01.2008 was not covered by or the subject matter of the assessee’s declaration dated 29.12.1998 under Section 88 and certificate dated 02.02.1999 under Section 90(2) read with Section 91 of the 1988 Act issued by the CIT, Udaipur.

It was urged by learned counsel for the appellant/assessee that in the scheme of things too, assessee’s entitlement to interest under Section 244A which accrued upon and flowed from ITAT’s order dated 23.01.2008 could not have been the subject matter of or covered by the aforesaid antecedent declaration dated 29.12.1998 and certificate dated 02.02.1999. 5. 3. It was contended that the assessee’s entitlement/claim for interest under Section 244A of the IT Act on the amount of tax refund qua the brought forward loss of Rs. 5.53 crores of previous year and set off against the income of AY 1993-94 was not covered by and was outside the scope of the assessee’s declaration and the CIT’s certificate under KVSS. (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (7of 12) [ITA-141/2011]

Hence, the argument is that the assessee was/is entitled to claim interest under Section 244A of the IT Act on the amount of tax refund qua the brought forward loss of Rs.5.53 crores of previous year and set off against the income of AY 1993-94.

Learned counsel for the appellant heavily relied upon the order dated 18.12.2008, Annexure-2, passed by the CIT(A) holding that the assessee was entitled to interest on the amount of tax refund. Arguments on behalf of the Revenue

Learned counsel for the respondent/revenue pointed out that vide order dated 23.01.2008 (Annexure-4) the learned ITAT held that inter alia that the assessee would not be entitled to the interest on the refund to the extent of the amount having been covered under the KVSS declaration.

The assessee did not file any appeal to challenge this finding/ direction. In the appeals (No. DB-ITA-96/2008 and DB-ITA- 161/2008) filed by the Revenue against ITAT’s order dated 23.01.2008, the challenge is confined to the direction given therein that the amount of tax on the brought forward loss of Rs. 5.53 crores be refunded to the assessee.

Thus, the finding recorded and direction give in order dated 23.01.2008 passed by the learned ITAT that the assessee would not be entitled to the interest on the refund to the extent of the amount having been covered under the KVSS declaration, remained unchallenged and has attained finality. [Note:- This factual position is not disputed by the assessee.] (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (8of 12) [ITA-141/2011]

It is contended by the learned counsel for the Revenue that the CIT (A) misconstrued the order dated 23.01.2008 passed by the learned ITAT and wrongly and illegally passed own order dated 18.12.2008 (Annexure-2), for payment of interest on the amount of tax refund, which was contrary to the direction in the order dated 23.01.2008 (Annexure-4) passed by learned ITAT. The said order dated 18.12.2008 was, therefore, rightly set aside vide the impugned order dated 03.10.2009 passed by the learned ITAT.

Having heard the rival contentions and upon perusal of the record, in light of the discussion and the reasons stated hereafter, we are of the opinion, that the claim of the assessee for interest in respect of the year under consideration is not legally tenable. Let us see how.

As per the certificate dated 02.02.1999 issued by the CIT, Udaipur, the outstanding demand against the assessee towards interest for A.Y. 1993–94 was Rs. 20,30,04,511/-. Against this demand, the assessee availed the benefit of the Kar Vivad Samadhan Scheme (KVSS) and paid Rs. 10,15,02,255/- on 01.02.1999, being the amount determined by the designated authority in full and final settlement of the outstanding interest demand. Consequently, the balance liability of Rs. 10,15,02,256/- towards interest stood extinguished.

By order dated 23.01.2008 (Annexure-4) (relevant portion reproduced above), the learned ITAT held that the tax arising from the reduction of brought forward loss amounting to Rs. 5.53 (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (9of 12) [ITA-141/2011] crores was refundable to the assessee. However, the assessee would not be entitled to interest on such refund to the extent the amount was covered under the KVSS declaration.

In other words, if the assessee’s entitlement to interest on the refund, arising from reduction of Rs. 5.53 crores in the previously determined income for A.Y. 1993–94, was less than or did not exceed the interest liability settled under the KVSS declaration, no interest would be payable on the refund. Step by step, the position may be understood as follows: (a). Determine the amount of tax refundable on account of reduction of Rs. 5.53 crores in the previously assessed income for A.Y. 1993–94. (b). Determine the period for which interest under Section 244A of the Income Tax Act would be payable on such refund. (c). Compute the amount of interest admissible under Section 244A on the refund amount determined in clause (a) for the period determined in clause (b). (d). If the interest amount determined in clause (c) does not exceed the interest demand of Rs. 20,30,04,511/- covered under the KVSS declaration, the assessee would not be entitled to any interest on the refund.

This Court has not been furnished with the relevant data or calculations regarding the amount of tax refund arising from the set-off of income of Rs. 5.53 crores, or the interest payable thereon under Section 244A of the Act. Ex facie, the interest payable on the refund relatable to the income of Rs. 5.53 crores (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (10of 12) [ITA-141/2011] could not have exceeded the assessee’s interest liability of Rs. 20,30,04,511/- under the KVSS declaration.

It therefore follows that, in terms of the ITAT’s order dated 23.01.2008, the assessee was not entitled to any interest on the tax refund relatable to the set-off amount of Rs. 5.53 crores.

Aside all above, we are also of the opinion that, while passing the order dated 18.12.2008 (Annexure-2), the learned CIT(A) misconstrued the ITAT’s order dated 23.01.2008, acted contrary to its import, and erroneously held that the Assessing Officer ought to have granted interest under Section 244A of the Act on the tax refund arising from the amount of Rs. 5,53,13,531/- representing brought forward losses of the previous year.

As already observed above, under the ITAT’s order dated 23.01.2008, the assessee was not entitled to interest on the refund relatable to Rs. 5.53 crores.

Qua reliance placed on Section 244 A of the Income Tax Act, no doubt, section, ibid, mandates interest payment where an assessing officer determines that a refund is due. However, instant case is a deviation as is borne out from the order dated 23.01.2008 passed by the learned ITAT, which, to be noted, had attained finality. At this stage, we refrain from commenting on merits thereof. The learned Income Tax Tribunal (ITAT), after careful deliberation held/directed vide it’s order dated 23.01.2008 that the assessee would not be entitled to the interest on the amount of tax refund to the extent of the amount having been covered under the KVSS declaration. Subsequently, based on (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (11of 12) [ITA-141/2011] these findings/directions, the Assessing Officer passed a revised order declining interest under Section 244A. It is in this context that we are of the view that the CIT (A) misconstrued and acted contrary to the order dated 23.01.2008 passed by the learned ITAT.

The finding/direction in the ITAT’s order dated 23.01.2008 that the assessee would not be entitled to the interest on the amount of tax refund to the extent of the amount having been covered under the KVSS declaration remained unchallenged and had attained finality.

Given that the direction concerning assessee’s non- entitlement to interest on the amount of tax refund in the previous order dated 23.01.2008 passed by the learned ITAT, arguendo, was given wrongly, as contended by the learned counsel for the petitioner, the fact is that the same was not challenged and had attained finality. There is no gainsaying that it was open to the appellant/assessee to have assailed the said direction given by the ITAT by taking appropriate steps. Having consciously chosen not to do so, the appellant/assessee must now face the consequences of finality of the said direction and fate accomplish.

It is also pertinent to note that the direction contained in the order dated 18.12.2008 (Annexure-2) was passed by the CIT(A), i.e., a quasi judicial authority lower to the ITAT, requiring payment of interest on the tax refund, in direct contravention to the earlier finding and direction of the order dated 23.01.2008 passed by the superior tribunal i.e. ITAT. In the said order, the learned ITAT had (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM) [2026:RJ-JD:18159-DB] (12of 12) [ITA-141/2011] clearly held that the assessee would not be entitled to interest on the amount of tax refund to the extent such amount was covered under the KVSS declaration.

On that count too, as above, we are of the view that the direction issued by the CIT(A) in the order dated 18.12.2008 was illegal, without jurisdiction, and unwarranted. The same was, therefore, rightly set aside by the ITAT vide the impugned order dated 13.10.2009. 20. To sum up, it is held that the assessee’s claim for interest for the year under consideration is not legally sustainable. The question of law framed in the present case is answered accordingly.

Since the assessee’s claim for interest on the tax refund arising from the amount of Rs. 5,53,13,531/-, representing brought forward loss of the previous year (A.Y. 1992–93) set off against A.Y. 1993–94, has been held to be legally untenable, the appeal stands dismissed.

All pending applications also stand disposed of. (SUNIL BENIWAL),J (ARUN MONGA),J 36-Anshul/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 18/04/2026 at 02:53:18 PM) (Downloaded on 28/10/2026 at 12:40:58 AM)