STATE BANK OF INDIA FINANCIAL REPORTING & TAXATION DEPT.,MUMBAI vs. ACIT CIRCLE 2 (2)(1), MUMBAI

The learned CIT(A) erred in not appreciating that the order dated 14 March 2017 under section 154 modifies order dated 27 February 2015 under section 143(3) r.w.s 144C(13). Therefore, order dated 27 February 2015 under section 143(3) r.w.s 144C(13) merges with order dated 14 March 2017 under section 154. Accordingly, the issues in ground 3 and 4 above arise out of the said order.

The first issue to be decided in present appeal is pertaining to validity of rectification order passed by the Assessing Officer under section 154 of the Act.

The brief facts of the case pertaining to this issue, as emanating from the record are: Assessment order under section 143(3) read with section 144C(13) of the Act was passed, in the case of the assessee, on 27/02/2015 determining total income at Rs. 17454,87,39,709. During the audit, it was observed that the assessee was granted refund of Rs. 3

During the course of hearing, learned Authorised Representative (“learned AR”) submitted that the issue, whether interest under section 234D of the Act shall be computed from the date of order determining the refund or from the actual date of grant of refund, is a contentious issue. Learned AR submitted that the Co-ordinate Bench of Tribunal in DDIT v/s Development Bank of Singapore, [2013] 33 Taxmann.com 300 (Mumbai- Trib) held that interest under section 234D is chargeable from the date of grant of refund and not from date of actual receipt of said excess amount. Thus, learned AR submitted that as the issue is a debatable one, therefore, same is outside the scope of section 154 of the Act.

On the other hand, learned Departmental Representative vehemently relied upon the impugned order passed by the learned CIT(A).

We have considered the rival submissions and perused the material available on record. The proceedings resulting in the present appeal is pursuant to the order passed by the Assessing Officer under section 154 of the Act. After passing of the assessment order under section 143(3) read with section 144C(13) of the Act, Assessing Officer found that interest under section 234D in respect of the excess refund granted to the assessee was levied only for 11 months instead of 12 months i.e. from March, 2014

This section talks of interest on excess refund. The dates from and up to which such interest is to be charged have been set out at the end of the 6 State Bank of India ITA No.807/Mum./2019 provision being "from the date of grant of refund to the date of such regular assessment". The dispute before us rotates only around the date from which interest should be charged. The learned AR contended that such date should be considered as the date on which the refund was actually received u/s 244A. On the other hand, the case of the Revenue is that the relevant date is the date on which the refund is issued by the department.

At this stage it is relevant to note that interest on refunds is granted under section 244A. Sub-section (1) of this section provides that where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the prescribed manner. Clause (a) stipulates that where the refund is out of any tax paid, inter alia paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the prescribed rate for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the 'date on which the refund is granted'. Similarly, clause (b) providing for interest in any other case, states that such interest shall be calculated at the specified rate for every month or part of a month comprised in the period or periods from the date of payment of the tax or penalty 'to the date on which the refund is granted'. Thus it is manifest that the terminating point for the calculation of interest u/s 244A is the date on which the refund is granted. It is axiomatic that invariably the actual date of receipt by the assessee will succeed the date of granting or issuance of refund. A cheque for refund with interest having been prepared is signed by the competent authority. After making due entries in the record, it goes for dispatch and only thereafter it is actually received by the assessee. On receipt, the assessee deposits such cheque in his bank account which further takes a few days in realization. So, there is bound to be some time gap between the date of granting of refund and the date of receipt of such refund. In such a situation, the assessee cannot come out with a claim that interest u/s 244A should be allowed up to the date of receipt of refund instead of date of grant of refund as provided for in the Act. If the contention of the ld. AR is accepted that the word 'grant' should be read as 'receipt', then in all cases of awarding interest, the Department will have to issue refund vouchers twice, viz., firstly up to the date of issuance of refund voucher and secondly, from such date to the date on which the assessee came in seisin of the money. This is clearly neither the intention nor the prescription of the provision.

It is of paramount importance to note that interest on refund is only a statutory right, which can be regulated strictly as per the prescribed provisions. There can be no question of granting any interest on refund de hors the relevant provisions in the Act. We want to accentuate on the proviso to section 244A(1)(a) which states that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined, inter alia under sub-section (1) of section 143 or on regular assessment. Thus, if the amount of refund falls short of such percentage, the assessee cannot claim interest as a matter of right. This lead us to the logical conclusion that the question of grant of refund u/s 244A and the ex consequenti charging of interest on refund u/s 234D can be determined strictly as per the statutory provisions. There can be no question of a claim of equity or fairness in this connection, at least before the tribunal, which is 7 State Bank of India ITA No.807/Mum./2019 bound to decipher the provisions of the Act as they exist. When the payment of interest u/s 244A is contemplated w.r.t the date of grant of refund, there can be no question of substituting similar expression - 'date of grant of refund' - employed u/s 234D with the 'date of receipt of refund' as has been argued on behalf of the assessee. It is axiomatic that one word cannot be understood differently in two related sections. When the word 'grant' cannot be read as 'receipt' in section 244A, the same cannot have a different meaning in section 234D.

The legislature cannot be considered as oblivious of the fine distinction between "the date of grant of refund" and "the date of receipt of refund". These two expressions have different connotations. Whereas the first refers to the date on which refund is issued, the second refers to the date on which it is actually received by the assessee. The legislature in its wisdom has employed the expression "date of receipt" in several sections, such as section 155(8A) before its omission and certain sections providing exemption under the head 'Capital gains'. To claim that the date of receipt of refund should be reckoned as a starting point instead of the date of grant of refund, in our considered opinion, would amount to doing violence to the unambiguous language of the provision. As it is the expression 'date of grant of refund' which has been employed u/s 234D, which in the present case is 29.10.2004, we hold that the interest has been rightly charged from this date. This ground is, therefore, not allowed.”

Thus, while holding that interest under section 234D shall be charged from the date of grant of refund, the Co-ordinate Bench of Tribunal in the aforesaid decision, inter-alia, referred to the similar expression used in section 244A of the Act.

We further find that another Co-ordinate Bench of the Tribunal in M/s Small Industries Development Bank of India v/s DCIT, in vide order dated 15/09/2017, while holding that interest under section 244A shall be granted up to actual date of receipt of the refund by the assessee, observed as under:

Thus, we are of the considered view that the very fact that assessee objected to the levy of interest under section 234D of the Act from the date of grant of refund instead of date of receipt of cheque of refund, renders the issue to be debatable issue. Further, without commenting upon the merit of the issue, the fact that in Development Bank of Singapore (supra), the Co-ordinate Bench of Tribunal held that interest under section 234D of the Act shall be chargeable from the date of grant of refund and while interpreting similar expression in section 244A, another Co-ordinate Bench of the Tribunal in M/s Small Industries Development Bank of India (supra) held that interest under section 244A shall be granted up to actual date of receipt of the refund by the assessee, also renders this issue to be a contentious issue, which requires long-drawn process of reasoning and arguments from both the sides. The Hon‟ble Supreme Court in T.S. Balaram, Income Tax Officer v/s Volkart Brothers, [1971] 82 ITR 50, held that for initiating proceedings under section 154 of the Act, the mistake apparent from record must be an obvious and patent mistake and not something which can be established by long drawn process of reasoning on points on which there may conceivably be two opinions. In view of the State Bank of India ITA No.807/Mum./2019 above and as is evident from the facts available on record, the point on which rectification under section 154 of the Act was done by the Assessing Officer in the present case is capable of divergent views and since, this issue is not alleged to have been settled by any decision of Hon‟ble Supreme Court, therefore, we are of the considered view that the present case clearly falls beyond the ambit of the expression „mistake apparent from the record‟, and thus, the rectification order dated 14/03/2017 passed under section 154 of the Act is set aside. As a result, ground Nos. 1.1 and 1.2 raised in assessee‟s appeal are allowed.

In view of the aforesaid findings, ground nos. 2.1 to 2.5 raised in assessee‟s appeal are rendered academic in nature and are accordingly dismissed.

As the scope of the present appeal is limited to the rectification order passed under section 154 on the aspect of short levy of interest under section 234D of the Act, therefore, issues raised in ground Nos. 3.1, 3.2 and 4.1 to 4.3 are not arising from the said order, which was upheld by the learned CIT(A) vide impugned order. However, the assessee shall have the liberty to raise these issues in the proceedings, which are submitted to be pending against assessment order dated 27/02/2015 passed under section 143(3) r.w.s. 144C(13) of the Act. As a result, ground Nos. 3.1, 3.2, 4.1 to 4.3 and 5 are dismissed as infructuous.

In the result, appeal by the assessee is partly allowed. Order pronounced in the open court on 26/05/2022