H.U.F. OF HIS LATE HIGHNESS SIR J.M. SCINDIA,MUMBAI vs. ACIT RANGE -18(2)(4), MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M):

This appeal in ITA No.5536/Mum/2019 for A.Y.1997-98 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No.CIT(A)-48/IT-202/AC-21(2)/2018-19 dated 28/06/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.154 of the Income Tax Act, 1961 (hereinafter referred to as Act)

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dated 26/06/2008 by the ld. Asst. Commissioner of Income Tax Cir-18(2), Mumbai (hereinafter referred to as ld. AO).

a) Assessee filed return of income for the Asst Year 1997-98 on 27.6.1997 declaring total income of Rs 7,98,51,710/- including interest income and capital gains . b) Subsequently, revised return of income was filed on 17.12.1997 declaring total income of Rs 7,90,70,840/- offering some interest income on bank fixed deposits. c) Assessee declared Long Term Capital Gains of Rs 7,64,67,960/- in original and revised returns. The capital gains adopted by the assessee related to sale of land at Shri Shringanda & Limper Gaon at Aundh. The ld. AO made changes in computation of capital gains on account of different value of cost of acquisition as on 1.4.1981 for this property. The sale value of the property was not altered and was taken at Rs 10,77,00,000/- as was adopted by the assessee.

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d) The assessee made a fresh claim before the ld. AO on 28.2.2000 stating that the cost of acquisition of land should be taken at NIL, in view of the specific facts of its acquisition and therefore , the transaction will fall outside the ambit of capital gains. In fact, the above submission was made before the ld. AO for the firstg time on 28.2.2000, the date on which the assessment order was passed. e) The ld. CIT(A) has duly considered this new stand of the assessee and had mentioned in para 4 of his order that ld. AO was not impressed with the contentions raised by assessee. The ld. CIT(A) after an elaborate deliberation of issue of facts and position of law, finally rejected the plea of the assessee that no capital gains is to be computed on this transfer of land. The ld. CIT(A) rejected the claim of assessee that cost of land was NIL. However, admitting the claim of assessee that fair market value as on 1.4.1981 has been wrongly accepted by the ld. AO, the ld. CIT(A) directed the ld. AO to adopt fair market value of Rs 99 lakhs and recompute the capital gains. f) Finally, this tribunal vide its order dated 22.8.2007, while disposing of cross appeals arising out of order of ld. CIT(A), decided the issue in assessee’s favour and held that no capital gains were to be charged on the transfer of this land as the cost of acquisition was NIL. Therefore, a finality was arrived on this aspect of taxability of capital gains on transfer of land. f) While giving appeal effect to the order of tribunal, the entire capital gains were deleted from the computation of revised income and refund of Rs 1,88,55,229/- was computed by the ld. AO in view of excess taxes paid (including self assessment tax paid). In this computation, interest u/s 244A of the Act of Rs 16,17,422/- was granted. g) Subsequently, the assessee filed rectification applications dated 6.2.2008, 6.6.2018 and 20.6.2018 , wherein, rectification was requested

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to the order dated 21.1.2008 giving effect to tribunal’s order. In these applications, the assessee claimed payment of interest u/s 244A of the Act on excess self assessment tax paid by him. The ld. AO in the impugned order u/s 154 of the Act granted some interest u/s 244A of the Act. However, interest u/s 244A of the Act was not granted on self assessment tax paid.

4.1. The ld. DR before us vehemently relied on the order of the ld. CIT(A). We hold that even if a particular claim of exemption from capital gains is made by the assessee for the first time during the course of assessment proceedings, it relates back to the date of filing of return pursuant to the well accepted principle of ‘Doctrine of Relation Back’. Merely because the claim of exemption from capital gains was made by the assessee on 28.2.2000 before the ld. AO, it cannot be said that the delay is attributable to the assessee. In the instant case, the lower authorities had merely alleged that delay was attributable to the

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assessee, forgetting the fact that they ought to have framed the assessment and appellate orders in accordance with law. The assessing officer is not entitled to even take advantage of ignorance of the assessee. It is the duty of the assessing officer to properly guide the assessee of his/her legitimate rights and assess correct income of the assessee as per law. Article 265 of the Constitution of India also fortifies the same. We have no hesitation in holding that the orders of the lower authorities clearly suffer from gross infirmities in not following the CBDT Circular No. 14(XL-35) of 1955 dated 11.4.1955 which is binding on the tax authorities. Accordingly, we hold that there is no delay that could be held attributable to the assessee in the instant case in making a claim of exemption from capital gains. Infact this claim of the assessee had been subsequently upheld by this tribunal and the order of tribunal had attained finality by department not preferring further appeal thereon to Hon’ble High Court.

4.2. We find that the issue under dispute is no longer res integra in view of the decision of Hon’ble Jurisdictional High Court in the case of CIT vs Melstar Information Technologies Ltd reported in 106 taxmann.com 142 (Bombay). The relevant portion of the judgement is reproduced below:- 4. The facts on record would show that the assessee had not claimed certain expenditure before the Assessing Officer but eventually raised such a claim before the Tribunal. Upon which, the Tribunal remanded the proceedings to the CIT(A). As such stage, the additional benefit claimed by the assessee was granted. This resulted in refund and the question of payment of interest on such refund. 5. As is well known, in case of refunds payable to the assessee, interest in terms of sub-section (1) of Section 244A would be payable. Sub-section (2) of Section 244A, however, provides that if the proceedings resulting in the refund are delayed for reasons attributable to the assessee whether wholly or in part, the period of delay so attributable, would be excluded from the period for which interest is payable under sub-section (1) of Section 244A of the Act. 6. The Tribunal in the present case came to the conclusion that the delay cannot be attributed to the assessee and therefore, directed payment of interest. 7. Sub-section (2) of Section 244A of the Act refers to the proceedings resulting in the refund which are delayed for the reasons attributable to the assessee.

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There is no allegation or material on record to suggest that any of the proceedings hit the assessee's appeal before the Tribunal or remanded the proceedings before the CIT(A) whether in any manner delayed on accounts of the reasons attributable to the assessee. The Tribunal, was, therefore correct in allowing the interest to the assessee. 8. We may notice that in the case of Ajanta Manufacturing Ltd. v. Dy. CIT [2016] 72 taxmann.com 148/391 ITR 33 (Guj.) the Division Bench of Gujarat High Court had occasion to consider a similar issue. The assessee had made a belated claim during assessment of filing revised return. According to the Revenue, this would entitle the assessee for claim of interest to the extent of delay. Provisions of sub-rule (2) of Section 244A of the Act were sought to be pressed in service. The Court made following observations: '16. We would also examine the order of the Commissioner on merits. As noted, according to the Commissioner the assessee had raised a belated claim during the course of the assessment proceedings which resulted into delay in granting of refund and therefore, the assessee was not entitled to interest for the entire period from the first date of assessment year till the order giving effect to the appellate order was passed. We cannot uphold the view of the Commissioner. First and foremost requirement of sub-section (2) of Section 244A is that the proceedings resulting into refund should have been delayed for the reasons attributable to the assessee, whether wholly or in part. If such requirement is satisfied, to the extent of the period of delay so attributable to the assessee, he would be disentitled to claim interest on refund. The act of revising a return or raising a claim during the course of the assessment proceedings cannot be said to be the reasons for delaying the proceedings which can be attributable to the assessee. Mere fact that 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, was allowable by the Assessing Officer. In other words, by passing order in appeal, he merely recognized a legal position whereby, the assessee was entitled to claim certain benefits of reduced tax. Surely, the fact that the assessee had filed the appeal which ultimately came to be allowed by the Commissioner, cannot be a reason for delaying the proceedings which can be attributed to the assessee. 17. The Department does not contend that the assessee had needlessly or frivolously delayed the assessment proceedings at the original or appellate stage. In absence of any such foundation, mere fact that the assessee made a claim during the course of the assessment proceedings which was allowed at the appellate stage would not ipso facto imply that the assessee was responsible for causing the delay in the proceedings resulting into refund. We may refer the decision of the Kerala High Court in case of CIT v. South Indian Bank Ltd. [2012] 340 ITR 574 in which the assessee had raised a belated claim for deduction which was allowed by the Commissioner (Appeals). The Revenue, therefore, contended that for such delay, interest should be declined under Section 244A of the Act. In the said case also, the assessee had not made any claim for deduction of provision of bad debts in the original return. But before completion of the assessment, the assessee had made such a claim which was rejected by

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the Assessing Officer. The Commissioner allowed the claim and remanded the matter to the Assessing Officer. Pursuant to which, the assessee became entitled to refund. Revenue argued that the assessee would not be entitled to interest in view of Section 244A(2). In this context, the Court held in Para. 6 as under (page 578 of 340 ITR): "6. Sub-section (2) of section 244A provides that the assessee shall not be entitled to interest for the period of delay in issuing the proceedings leading to the refund that is attributable to the assessee. In other words, if the issue of the refund order is delayed for any period attributable to the assessee, then the assessee shall not be entitled to interest for such period. This is of course an exception to clauses (a) and (b) of section 244A(1) of the Act. In other words, if the issue of the proceedings, that is, refund order, is delayed for any period attributable to the assessee, then the assessee is not entitled to interest of such period. Further, what is clear from sub-section (2) is that, if the officer feels that delay in refund for any period is attributable to the assessee, the matter should be referred to the Commissioner or Chief Commissioner or any other notified person for deciding the issue and ordering exclusion of such periods for the purpose of granting interest to the assessee under section 244A(1) of the Act. In this case, there was no decision by the Commissioner or Chief Commissioner on this issue and so much so, we do not think the Assessing Officer made out the case of delay in refund for any period attributable to the assessee disentitling for interest. So much so, in our view, the officer has no escape from granting 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 is dismissed. 4.3. The ld. AR made a statement from the Bar that in the case of the assessee before us also, there was no reference that was made to the Learned Administrative CIT or CCIT for attributing delay on the assessee. 4.4. In view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, the Ground No.1 raised by the assessee is allowed. 5. We find that the assessee vide Ground No.2 raised before us is seeking interest u/s 244A of the Act for the period 1.2.2008 till the date of remittance of refund. In this regard, we find that the ld. CIT(A) in para 5.2.9. of the order had held that the ld. AO has to compute and grant interest u/s 244A of the Act on the excess of self assessment tax paid only after 28.2.2000 (i.e the date of passing order u/s 143(3) of the Act) upto January 2008 (i.e. the month in which the AO has passed an order

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giving effect to Tribunal order). The ld.AR submitted that interest u/s 244A of the Act is to be granted upto the actual date of payment of refund to the assessee as per the provisions of the Act. The ld. AR further submitted that any sum refunded in part has to be first adjusted against the interest u/s 244A of the Act and the balance, if any, left should be adjusted against the tax component and on that component, interest is to be calculated for further period. We find that the assessee had given the interest workings before the ld. CIT(A) which is reproduced in para 4.1. of the order of ld. CIT(A). Despite these workings, we find that the ld. CIT(A) had directed the ld. AO to grant interest only upto January 2008.

5.1. In our considered opinion, as per the provisions of section 244A of the Act, interest is to be granted to the assessee upto the actual date of payment of refund. Moreover, the law is also very well settled that in case of part refund granted by the department to the assessee, the same should be first adjusted against the interest u/s 244A of the Act and the balance, if any, remaining should be adjusted against the tax component and the said tax component becomes ‘any amount due’ on which further interest is to be calculated. This is the clear mandate of provisions of section 244A of the Act. This issue is also addressed in detail by this tribunal in the case of Grasim Industries Ltd vs DCIT reported in 186 ITD 675 (wherein Accountant Member herein was the author). Similar views were also expressed in the following decisions:- a) Decision of Hon’ble Delhi High Court in the case of India Trade Promotion Organisation vs CIT reported in 361 ITR 646 (Del) b) Decision of Mumbai Tribunal in the case of Union Bank of India vs ACIT reported in 52 ITR(T) 221 c) Decision of Mumbai Tribunal in the case of Bank of Baroda vs DCIT in ITA No. 1646/Mum/2017 d) Decision of Mumbai Tribunal in the case of ACIT vs State Bank of India in ITA Nos. 5908 & 5909/Mum/2017

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e) Decision of Mumbai Tribunal in the case of ACIT vs State Bank of India in ITA No. 5910/Mum/2017

5.2. In view of the above observations and respectfully following the judicial precedents relied upon hereinabove, we hold that the action of the ld. CIT(A) of directing the ld. AO to grant interest u/s 244A of the Act only upto January 2008 is contrary to the provisions of the Act and the decided judicial precedents. Accordingly, we direct the ld. AO to grant interest u/s 244A of the Act upto the date of actual payment of refund to the assessee. However, since the workings given by the assessee has not been verified by the lower authorities, we deem it fit and appropriate to direct the ld. AO to verify the veracity of the said workings and grant interest u/s 244A of the Act accordingly subject to aforesaid directions by us. Hence the Ground No. 2 raised by the assessee is allowed for statistical purposes.

6.1. We find that section 244A(1A) of the Act contemplates eligibility of assessee to receive additional interest over and above the regular interest

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eligible u/s 244A(1) of the Act. For the sake of convenience, the said provisions are reproduced below:- (1A) In a case where a refund arises as a result of giving effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264, wholly or partly, otherwise than by making a fresh assessment or reassessment, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1), an additional interest on such amount of refund calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted.] 6.2. We find that this provision was introduced in the statute only from 1.6.2016. The ld. CIT(A) had observed that since this provision was introduced only from 1.6.2016, the assessee would not be eligible for interest under this sub-section. This issue has been addressed in favour of the assessee by the decision of Hon’ble Gujarat High Court in the case of Mima Specific Family Trust vs ACIT reported in 100 taxmann.com 262 vide order dated 3.10.2018, wherein it was held that section 244A(1A) of the Act would apply only prospectively from 1.6.2016 and accordingly petitioner would be entitled to such additional interest from 1.6.2016 till the date of actual payment of refund. Hence respectfully following the aforesaid decision, we hold that the assessee would be eligible for interest under this provision only from 1.6.2016 till the date of actual payment of refund. The ld. AO is directed accordingly. The Ground No. 3 raised by the assessee is allowed.

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Order pronounced on 11/08/2022 by way of proper mentioning in the notice board.

Sd/- Sd/- (PAVAN KUMAR GADALE) (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 11/08/2022 KARUNA, sr.ps

Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. 6. Guard file. //True Copy//

BY ORDER,

(Sr. Private Secretary / Asstt. Registrar) ITAT, Mumbai