DCIT 2(2)(1), MUMBAI vs. STATE BANK OF INDIA, MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated

18/12/2015 of the Ld. First Appellate Authority, Mumbai,

directing the Assessing Officer to grant interest u/s 244A of

the Income Tax Act, 1961 (hereinafter the Act) from 1st April

itself, whereas, the amount of refund became due for the first

time because of the appellate order and was delayed for

reasons attributable to the assessee.

Swamy, contended that this appeal is barred by limitation by

24 days, therefore, the delay may be condoned. On the other

hand, the Ld. counsel for the assessee, Shri C. Naresh,

opposed the condonation of delay by contending that the

Revenue is expected to explain the delay of each day.

2.1. We have considered the rival submissions and

perused the material available on record. In view of the

assertions made by the ld. respective counsel, so far as,

condonation of delay is concerned, no doubt filing of an

appeal/cross objection, is a right granted under the statute to

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the assessee/department and is not an automatic privilege,

therefore, the assessee is expected to be vigilant in adhering to

the manner and mode in which the appeals/cross objections

are to be filed in terms of the relevant provisions of the Act.

Nevertheless, a liberal approach has to be adopted by the

appellate authorities, where delay has occurred for bona-fide

reasons on the part of the assessee or the Revenue in filing the

appeals. In matters concerning the filing of appeals, in

exercise of the statutory right, a refusal to condoned the delay

can result in a meritorious matter being thrown out at the

threshold, which may lead to miscarriage of justice. The

judiciary is respected not on account of its power to legalize in

justice on technical grounds but because it is capable of

removing injustice and is expected to do so.

2.2. The Hon’ble Apex Court in a celebrated decision in

Collector, Land Acquisition vs Mst. Katiji & Ors. 167 ITR 471

opined that when technical consideration and substantial

justice are pitted against each other, the courts are expected

to further the cause of substantial justice. This is for the

reason that an opposing party, in a dispute, cannot have a

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vested right in injustice being done because of a non-

deliberate delay. Therefore, it follows that while considering

matters relating to the condonation of delay, judicious and

liberal approach is to be adopted. If sufficient cause is found

to exist, which is bona-fide one, and not due to negligence of

the assessee, the delay needs to condoned in such cases. The

expression ‘sufficient cause’ is adequately elastic to enable the

courts to apply law in a meaningful manner, which sub-serves

the end of justice- that being the life purpose of the existence

of the institution of the courts. When substantial justice and

technical consideration are pitted against each other, the

cause of substantial justice deserves to be preferred. The

Hon’ble Apex Court in Vedabhai vs Santaram 253 ITR 798

observed that inordinate delay calls of cautious approach.

This means that there should be no malafide or dilatory

tactics. Sufficient cause should receive liberal construction to

advance substantial justice. The Hon’ble Apex Court in 167

ITR 471 observed as under:-

“3. The legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to

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enable the courts to do substantial justice to parties by disposing of matters on de merits. The expression “sufficient cause” employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the others courts in the hierarchy.”

2.3. Furthermore, the Hon'ble Supreme Court in the

case of Vedabai Alia Vaijayanatabai Baburao Patil vs.

Shantaram Baburao Patil 253 ITR 798 held that the court has

to exercise the discretion on the facts of each case keeping in

mind that in construing the expression ‘sufficient cause’, the

principle of advancing substantial justice is of prime

importance. The court held that the expression “sufficient

cause” should receive liberal construction.

2.4. The decision of the Tribunal in People Infocom

Private Ltd. v/s CIT (ITA No.210/Mum/2013) order dated

19/05/2016, M/s Neutron Services Centre Pvt. Ltd vs ITO (ITA

No.1180/Mum/2012) order dated 18/02/2016, Shri Saidatta

Coop-. Credit Society Ltd. v/s ITO (ITA No.2379/Mum/2015)

6 M/s State Bank of India ITA No.1360/Mum/2016

order dated 15/01/2016 and Mr. Nikunj Barot (Prop. Enigma)

vs ITO (ITA No.4887/Mum/2015) order dated 06/01/2016,

wherein, substantial delay was condoned, supports the case of

the present assessee. Having made the aforesaid observation

and various decisions discussed hereinabove, including from

Hon’ble Apex Court, the circumstances narrated by the ld.

CIT-DR, wherein, he has stated the reasons which caused the

delay, therefore, the delay is condoned.

Act, the ld. counsel for the assessee, contended that this issue

is covered by the decision of the Tribunal in assessee’s own

case for the Assessment Year 2001-02 & 2002-03, vide order

dated 31/08/2015 in ITA Nos.6817, 6818, 6823 & 6824/Mum

/2012. The Ld. CIT-DR is fairly agreed with the assertion of

the Ld. counsel for the assessee that the issue in hand is

covered by the aforesaid decision.

3.1. We have considered the rival submissions and

perused the material available on record. In view of the above,

factual matrix, we are reproducing hereunder the aforesaid

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order of the Tribunal dated 31/08/2015 for ready reference

and analysis:-

“Challenging the orders dated of the CIT- Mumbai,the assessee had raised following grounds of appeal for the above mentioned two Assessment Years(AY.s.): ITA No.6817 & 6823/M/12 (2001-02): 1. The Ld CIT(A) erred in confirming the order of the AO disentitling interest u/s. 244A and thereby confirming the action of the AO in granting the same at Rs.1 09.32 crore as against Rs.384.69 crore contrary to law and facts and circumstances of the case. The difference in interest had arisen on account of AO not granting the same on the refund arising for interest accrued but not due from 01/04/2001 on the contention that the claim in respect of the same was only made in the notes forming part of the return of income. 2. The Ld CIT(A) failed to appreciate that a sum of Rs 878.63 crore had become refundable to the assessee vide order u/s. 143(3) rws 250 dated 06/06/2011 and said refund is entitled to interest u/s. 244A(1). 3. The Ld CIT(A) ought to have appreciated that a refund arising on account of order of CIT(A) is also squarely covered by the expression "Where refund of any amount becomes due to the assessee under this Act", as appearing in sec 244A(1) and hence entailed interest under said provision. The distinction sought to be made by Ld CIT(A) is artificial and unwarranted. 4. The Ld CIT(A) erred in stating that the provisions of 244A(3) are not applicable without appreciating the fact that the said provisions are applicable as the refund was increased consequent on the order of CIT (A). 5. Without prejudice to above, the Ld CIT(A) ought not to have justified the stand of AO in not letting the matter viz 'determining the period to be excluded from the period for which interest is payable' be decided by CIT as required in sub sec 2 to sec 244A. The reasoning by Ld CIT(A) that as no interest was payable at the first instance, the question of reference to CIT would not arise is incorrect and unwarranted. 6. The Ld CIT(A) ought to have appreciated that the unilateral withholding of interest by AO on the perceived delay attributable to assessee is beyond the power conferred in the said section and hence the order passed thereof is liable to be struck down. 7. Without prejudice to the above, interest is compensation for money lying with the department and as these amounts were with the department interest ought to have been granted. Your Appellant craves leave to add amend and or vary grounds of Appeal before or during the course of hearing. ITA No.6818 & 6824/M/12 (2001-02): 1. The Ld CIT(A) erred in confirming the order of the AO disentitling interest u/s. 244A and thereby confirming the action of the AO in granting the same at Rs.23.91 crore as against Rs.179.42 crore contrary to law and facts and circumstances of the case. The difference in interest had arisen on account of AO not granting the same on the refund arising for interest accrued but not

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due from 01/04/2001 on the contention that the claim in respect of the same was only made in the notes forming part of the return of income. 2. The Ld CIT(A) failed to appreciate that a sum of Rs 374.05 crore had become refundable to the assessee vide order u/s. 143(3) rws 250 dated 06/06/2011 and said refund is entitled to interest u/s. 244A(1). 3. The Ld CIT(A) ought to have appreciated that a refund arising on account of order of CIT(A) is also squarely covered by the expression "Where refund of any amount becomes due to the assessee under this Act", as appearing in sec 244A(1) and hence entailed interest under said provision. The distinction sought to be made by Ld CIT(A) is artificial and unwarranted. 4. The Ld CIT(A) erred in stating that the provisions of 244A(3) are not applicable without appreciating the fact that the said provisions are applicable as the refund was increased consequent on the order of CIT (A). 5. Without prejudice to above, the Ld CIT(A) ought not to have justified the stand of AO in not letting the matter viz 'determining the period to be excluded from the period for which interest is payable' be decided by CIT as required in sub sec 2 to sec 244A. The reasoning by Ld CIT(A) that as no interest was payable at the first instance, the question of reference to CIT would not arise is incorrect and unwarranted. 6. The Ld CIT(A) ought to have appreciated that the unilateral withholding of interest by AO on the perceived delay attributable to assessee is beyond the power conferred in the said section and hence the order passed thereof is liable to be struck down. 7. Without prejudice to the above, interest is compensation for money lying with the department and as these amounts were with the department interest ought to have been granted. Your Appellant craves leave to add amend and or vary grounds of Appeal before or during the course of hearing.

Assessee,bank filed its return of income on 31.10.2001 declaring total income of Rs.14, 66,97, 81,957/-. The AO competed the assessment on 13.2.04 u/s. 133 of the Act determing the income of assessee at Rs.26,35,49,42,360/- 2.Effective ground of appeal is about not granting of interest u/s.244A of the Act.The brief facts of the case are that the assessee had offered "interest accrued but not due on securities" as interest income on accrual basis in its return of income and had paid taxes accordingly,that later on it was claimed that the portion of interest income which had not become due to the bank as on 31.03.2001 should not be taxed during the year under consideration,that a note in that regard was inserted to the Return of Income,that the assessee had paid tax on accrual basis.The AO while passing the order,u/s 143(3)of the Act,did not allow the claim made by it.Aggreived by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA),in the appellate proceedings,the FAA allowed the claim of the assessee with regard to interest accrued but not due on securities and allowed relief.While giving effect of order of the FAA and while computing the interest due to the appellant u/s 244A,the AO computed the interest by excluding the refund

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arising on account of interest accrued but not due on securities.The assessee filed an application before the AO in that regard.He disposed off the application holding that even if the assessee got relief from the appellate authority, it could not get 244A interest,that delay was on part of the assessee for making claim,that the claim was not made in the return of income.The assessee approached the CIT and in his order,passed u/s.264 of the Act,he held that prima facie the claim made by the assessee appeared to be genuine.As the AO refused to grant refund,as stated earlier,in response to the application filed by the assessee u/s.154 of the Act,so,the assessee filed an appeal before the FAA. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).The FAA held that the assessee had offered "interest accrued but not due on securities" as taxable income in its return of income and had paid taxes accordingly,that the AO accepted the fact and there was no refund of any amount due on this account on passing order u/s.143(1) and order u/s.143(3) of the Act. Referring to the provisions of sub section 3 of the section 244A of the Act,the FAA held that the amount of refund became due for the first time because of order of the appellate authority,that it was not a case of enhancement or reduction of the refund amount,that the reliance placed by the assessee on the provisions of sub section 3 to the Section 244A was misplaced,that the provision of sub- section(3) of the section 244A of the Act would be applicable only when refund of any amount was increased or reduced by the appellate authorities,that where refund of any amount did not become due to the assessee under sub-section(1)there was no question of increasing or reducing the same as mentioned in sub-section(3),that the assessee had offered interest accrued but not due on securities as taxable income in its return of income and had paid taxes accordingly,that the AO accepted the fact and thus there was no refund of any amount due on that account on passing order u/s 143(1) and order u/s 143 (3) of the Act,that the refund became due for the first time because of FAA's order,that there was no increase or reduction in the refund of amount due,that the assessee was entitled to claim refund u/s.244A of the Act.He relied upon the judgment of Assam Roofing Ltd. (330 ITR 87) and dismissed the appeal filed by the assessee. 4.During the course of hearing before us,Authorised Representative(AR)stated that the AO had ignored the specific direction issued by CIT,that the stand taken by the AO was contrary to the decisions of south India Bank Ltd. (340 ITR 574), ACC Ltd. (2012- TIOL-120-ITAT-Mum) and Union Bank of India (ITA/No.2522/Mum/2011).With regard to decision,relied upon the FAA i.e. Assam Roofing Ltd.(supra) the AR stated that the above mentioned decision was distinguishable, in that case assessee had voluntarily paid tax on subsidy, that the assessee had made the claim in the return itself by way of notes, that it did not pay any tax,that it did not admit that the deduction was not available to it, that the claim made by it as per the return of income was rejected by the AO, that the assessee had challenged the order of the AO before the FAA.The AR referred to the sub- section 3 of the Section 244A of the Act and stated that the provision was introduced to enable the AO to vary the interest according to variation in

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assessed income.He referred to the Circular No. 549 dt.1.10.89 and stated that the Circular provided for automatic revision of amount on refund where the amount of varied refund as a result or order of reassessment/ rectification/appeal/ revision/settlement.He further argued that interest was compensatory in nature, that when the AO would make reassessment or rectification to his original order either based on judicial decision or by retrospective amendment, the income would be reassessed, that in such cases department would not take a stand that no interest over and above the amount originally levied was to be paid u/s. 234 of the Act, that the AO took cognigance of one of the notes and chose to ignore the particular note,that there was no delay attributable to the assessee in any proceedings, the grant of refund, that no finding of delay was given by the CIT or CCIT. He referred to the judgment of Larson and Toubro Ltd(330ITR340)State Bank of Travancore (2013-TIOL-II20-HC-Kerala-IT)and ACC Ltd.(ITA Nos.6262 & 6263/2010/Mum/(90-91 & 91-92-dt.21.12.2011).The Departmental Representative(DR)supported the order of the FAA and relied upon the case of Assam Roofings Ltd.(supra) 5.We have perused the material before us.We find that the assessee had offered "interest accrued but not due on securities" as interest income on accrual basis in its return of income and had paid taxes accordingly,that later on it was claimed that the portion of interest income which had not become due to the bank as on 31.03.2001 should not be taxed during the year under consideration,that a note in that regard was inserted to the Return of Income,that the assessee had paid tax on accrual basis,that the AO while passing the order u/s 143(3) did not allow the claim made by it,that in the appellate proceedings,the FAA allowed the claim of the assessee and allowed relief,that while giving effect of order of the FAA and while computing the interest due to the appellant u/s 244A, the AO computed the interest by excluding the refund arising on account of "interest accrued but not due on securities", that the CIT in his order u/s.264 of the Act held that the claim of the assessee appeared to be genuine prima facie,that the assessee filed an application before the AO in that regard,that the AO disposed off the 154- application holding that even if the assessee got relief from the appellate authority,it could not get 244A interest,that delay was on part of the assessee for making claim,that the claim was not made in the return of income.Referring to the provisions of 244A(2) of Act,he held that the department would have paid refund while processing of return u/s.143(1),that refund became due for the first time because of FAA’s order, that the FAA upheld the order of the AO,that he referred to the provisions of section 244A(3)of the Act. 5.1.Before proceeding further we would like to discuss the brief hisorty,background and the principles governing the grant of refund and interest.Chapter XIX of the Act,contains various provisions relating to refund of the amount of tax paid by an assessee.Section 244A of the Act has specifically been made effective from the AY.1989-90.It is only from that AY.that the right, to get interest on the tax deducted at source if it is refunded or refundable,was recognised. Circular No.549, 31.10.1989,clarifies the purpose and object of introducing section 244A of the Act to replace sections

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214,243 and 244 of the Act as providing for payment of interest by the Department for delay in grant of refunds since there were some lacunae in the earlier provisions with regard to non-payment of interest by the Government to the assessee for money remaining with the Government.In the matter of Tata Chemicals (363 ITR 658)the Hon’ble Supreme Court has elucidated and clarified the philosophy behind granting interest as under: “Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the amount of tax which has been duly paid in prescribed time and provisions in that behalf forms part of the recovery machinery provided in a taxing statute. Refund due and payable to the assessee is a debt owed and payable by the Revenue.The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances.The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex aequo et bono ought to be refunded,the right to interest follows, as a matter of course……. Interest is a kind of compensation for use and retention of money collected unauthorisedly by the Department.A general right exists in the State to retain any tax collected for its purpose, and a corresponding obligation exists to refund to individuals any sum paid by them as taxes which are found to have been wrongfully exacted or are believed to be, for any reason, inequitable. The statutory obligation to refund carries with it the right to interest also. This is true in the case of assessees under the Act.When the collection is illegal, there is a corresponding obligation on the Revenue to refund such amount with interest inasmuch as it had retained and enjoyed the money deposited.” 5.2.Broad principles culled out from various judgments of the Hon’ble Courts can be summarised as under: i.Provisions of Section 244A(1)and(2) of the Act govern the award of interest on refund.A conjoint reading of the provisions shows that the assessees are entitled to receive interest on the amount of refund at the rates prescribed in clauses(a)and (b)of sub-section(1)of section 244A.The rationale underlying this provision is to compensate the assessees in lieu of the deprivation of their property right by virtue of unlawful collection of tax.In other words,the Act has provided that when the amount is refunded it should carry interest as a matter of course and that if the payment of tax made by an assessee is in excess and the has to refund the excess tax to the depositor,interest is required to be paid on such refund. ii.Section 244A of the Act,would spring into action only in the event of refund of excess amount of tax,penalty,tax collected at source or paid as advance tax,or treated as paid u/s.199 of the Act. The liability of the Revenue to pay interest under section 244A is only towards the excess amount of tax or penalty,demanded and collected by it in discharge of the liability of an assessee. iii.Interest payment is a statutory obligation and non-discretionary in nature to the assessee.The language employed in section 244A of the Act is clear and plain.It grants a substantive right i.e.right of interest is not procedural.

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iv.The words used in section 244A of the Act are where refund of any amount becomes due and payable to the assessee under the Act,the assessee shall be entitled to receive in addition to the amount simple interest calculated in the manner stipulated. The Legislature has not used the words ‘tax paid or the principal amount of tax paid. The words used by the Legislature are any amount and said amount.The words, are, therefore, much wider and broader than the tax amount, which is to be refunded.The words any amount would include within their scope and ambit the interest element, which has accrued and is payable on the date of the refund. Thus, when the Revenue does not pay the full amount of refund but a part of the amount is paid, it will be liable to pay interest on the balance outstanding amount.The balance outstanding amount may consist of the tax paid or the interest,which is payable till the payment of the part amount and interest payable on the principal amount,which remained outstanding thereafter. v.In clause (a) of section 244A of the Act,the words used are refund is granted.Refund is granted the moment the concerned officer has signed the order regarding payment of the interest under section 244A.Interest has to be granted till the date when the order regarding payment of interest has been signed. vi.There is no difference between :(i) the tax paid under section 115WJ, which deals with advance tax in respect of fringe benefits ; or (ii) the tax collected at source under section 206C;or (iii) any tax paid by way of advance tax or any tax treated as paid under section 199, which deals with credit for tax deducted,which are provided under section 244A(1)(a). vii.No interest is payable if the amount of refund is less than 10 % on regular assessment with regard to the refund of advance tax paid under section 115WJ in respect of fringe benefits ; (ii)the tax collected at source under section 206C ; and (iii)advance tax or any tax treated as paid under section 199, but with respect to other tax under section 244A(1)(b), the interest shall be payable even if the amount is less than 10 % of the tax as determined under section 143(1)or on regular assessment, because there is no proviso to section 244A(1)(b) as provided under section 244A(1)(a) of the Act. viii.Under the Explanation to section 140A(1),it is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance,if any,shall be adjusted towards the tax payable.This interpretation follows the same principle,when the Revenue defaults and makes part payment of the amount refundable.The interpretation also ensures that the AO/Revenue refunds the entire amount,which is due and payable, including interest payable under section 244A.It discourages part payment.There is no other provision under the Act under which an AO/Revenue can be made liable to pay interest when part payment is made and the entire amount, which is refundable is not paid to the assessee.Otherwise,the AO/Revenue can refund the principal amount and not pay the interest component under section 244A for an unlimited period with impunity and without any sanction,which would amount to allowing a premium on non-compliance with the law.When a refund order is issued, it should include the interest payable on the amount which is refunded. If the

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refund does not include interest due and payable on the amount refunded,the Revenue would be liable to pay interest on the shortfall.This does not amount to payment of interest on interest.In short,it would be incorrect and improper to regard payment of interest,when part payment is made,as interest on interest. ix.In calculating the interest payable,the section provides for different dates from which the interest is to be calculated.Clause (a) of sub-section (1) of section 244A talks of payment of interest on the amount of tax paid under various sections.Under this clause,the interest shall be payable for the period starting from the first day of the AY.to the date of the grant of refund.Clause (b) of sub-section (1) of section 244A opens with the words in any other case that means in any case other than the amounts paid under clause (a) of sub- section (1) of section 244A .Under this clause,the rate of interest is to be calculated at the rate of one and a half % per month or a part of a month comprised in the period or the periods from the date or, as the case may be,either the dates of payment of the tax or the penalty to the date on which the refund is granted.The Explanation appended to clause (b) of the sub- section clarifies that the date of payment of tax or penalty would mean the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. x.The assesses are entitled not only to the refund of tax deposited u/s.195(2) of the Act,but also to interest from the date of payment of such tax. xi.The moment the return is processed u/s. 143(1)(a) and refund is issued on the basis of intimation under section 143(1)(a),an enforceable legal right is created in favour of the assessee under section 244A and simultaneously the AO is under legal obligation to grant the interest.Merely because the quantum of such interest may vary on assessment made u/s.143(3),it cannot be said that the legal right was not acquired on the date of refund.The effect of assessment under section 143(3) would be that interest on refund under section 244A would get substituted in terms of sub-section (3) of section 244A without affecting the right already accrued.Income can be said to accrue on the date of refund itself.If the interest is varied under sub-section (3) of section 244A, then the interest originally granted would be substituted by the reduced or increased amount,as the case may be. xii.If an assessee files returns in time,then,the assessee would be entitled to interest under section 244A(1) of the Act for the entire period, i.e.,from the first day of the AY.till the date of granting refund.However,when a return is filed with delay,the return cannot be acted upon until the delay is condoned by the statutory authority.As and when the delay was condoned, the entire period of delay from the date of filing returns till the date of condonation of delay has to be treated as attributable to the assessee while determining the eligible interest in terms of section 244A(2)of the Act.In other words,if an assessee is responsible for the delay in the finalisation of the proceedings on the basis of which he becomes entitled to the refund, then the period of delay is to be excluded from the total period for which interest becomes payable. xiii.There is nothing in the plain language of sub-sections (1) and (2) of section 244A from which it can be inferred that the assessee can be deprived of interest in respect of the period during which the application for refund

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remains pending before the competent authority.The right to receive interest on the amount of refund does not depend on the submission of the application by the assessee.Rather,it follows as a natural corollary to the assessee’s right to receive refund.So,the mere fact that the application filed by the petitioner was decided expeditiously cannot be made a ground for declining the prayer for award of interest. xiv.Once the AO allows the interest from a particular date,valuable rights accrues to the assessee.If he wants to take a different view,in exercise of the power u/s.154 of the Act,he has to issue a notice to the assessee in that regard.An order of rectification passed by the AO,reducing the interest,without issuing a notice would be invalid. xv.Excess interest paid under section 244A(1) can be demanded under section 154 of the Act as provided under section 244A(3). xvi.If money is retained in the hands of the Revenue only by way of deposit as security for meeting the liability and not appropriated in discharge of the tax liability,then no interest is payable u/s. 244A of the Act on the excess amount held in the hands of the Revenue as deposit for the period. 5.3.Now,we would like to test the decisions of the FAA on the touchstone of above referred principles.The assessee had filed the return of income in time and the AO or the FAA has not alleged that belated return was filed for the year under consideration.Therefore,it cannot be held that there was delay on part of the assessee.It is observed that the assessee had in the notes, accompanying the return,had mentioned that in the past Bank’s claim for taxing on securities on due basis was allowed up to AY.1990-91,that this year also interest on securities should be taxed on due basis.While completing the assessment the AO ignored the said note,but he took note about the broken period interest(note 13)and accordingly taxed it.The selective approach of the AO is beyond comprehension.As a representative of the Sovereign,he has collect due taxes only-he is not a mere tax gatherer.It was his duty to consider both the notes whatever would have been the result.But,he conveniently overlooked the note that would have gone against him.If he had considered the facts about broken period,he should have deliberated upon claim made by the assessee for taxing on securities on due basis.

We would like to discuss the application filed by the assessee u/s.264 of the Act,before the CIT. In his order dated 05.08.2011 the CIT-2,Mumbai,has mentioned that while giving effect to the orders of the FAA,the AO granted interest of Rs. 109,31,31,821/- and Rs.23,91,12,942/- respectively for the AY.2001-02 & 2002-03,u/s.244A of the Act,that the assessee filed a petition stating that there has been short grant of interest u/s. 244A for both the AY.s.,that it was entitled for an amount of Rs.377,97,43,141/- as interest and Rs.179,79,07,533/- respectivley for AY.2001-02 and 2002-03.Before him,The assessee filed detailed working of the above interest for both the AY.s.He called for a report from the AO.In his reply dated 15.7.2011,the AO stated that interest u/s. 244A had been correctly computed and the assessee has not claimed interest on due basis, for AY.s.2001-02 and 2002-03.On going through the report of the AO,the computation of interest u/s. 244A and also

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the facts mentioned by the assessee in the grievance petition,he held that the AO had not considered some of the important aspects while computing the interest u/s. 244A,that one of the ground on which interest u/s. 244A was not granted,was that the amount of refund was less than 10% of the tax determined,that as per the assessee's submission the refund position post TDS and Advance tax is as follows: Amount in Rs.Crore A.Y.2001-02 AY. 2002-03 Tax as per assessment order 545.83 1,322.64 10% of tax 54.58 132.26 Refund post TDS and advance tax 330.25 222.81 The CIT found that for both the AY.s. the refund amount exceeds 10% of the tax demand and that the AO’s contention to the contrary was factually incorrect.He further held that the AO had granted lesser amount as interest u/s.244A on the basis of the following reasons namely the assessee had not put this claim while filing the return of income,that the assessment order had no mention of giving assessee interest on due basis as the assessee has all along claimed it on accrual basis,that it had made the claim for the first time before the FAA and that the amount in relation to this ground was quantified for the first time during giving effect to the FAA.The assessee filed a detailed reply to the observations made by the AO.The CIT decided the application as under: “On going through the grievance petition I am of the opinion that there is considerable merit in the arguments of the assessee relating to short grant of interest u/s. 244A. Accordingly the assessing officer is directed to recompute the interest u/s. 244A for both the assessment years after giving adequate opportunity to the assessee.” We are not able to find any reasons as to what prompted the AO to ignore the directions of the CIT.Inspite of the clear directions of the superior officer,he did not recomputed the interest that was due to the assessee.The behaviour of the AO-i.e.claiming that the amount of refund was less than 10% of the tax determined and ignoring the direction of the CIT-proves that he had decided that the assessee should not given interest even if it was due to it.The approach of the AO is against the provision of the Act and cannot be endorsed. Coming to the delay on part of the assessee,we hold that deciding the issue of period is outside the domain the AO.The CIT and the CCIT are the authorities who have to decide the issue of delay.Nothing is brought on record to prove that either of the two officers had dealt the question of dealy.Therefore,we are of the opinion,that if there was any delay it was not attributable to the assessee,as stated earlier.Besides,the AO should have brought on record the facts that could distinguish the facts of the case as compared to the facts of earlier AY.s.i.e. AY.s.up to 1990-01.Without considering the relevant facts he should not rejected the claim made by the assessee.As far as the order of the FAA is concerned we would like to mention that he had referred to the provisions of sub section 3 of the section 244A of the Act and had relied upon the case of Assam Roofing (supra).

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Here,we would like to discuss the matter of South Indian Bank Limited(supra).In that case the assessee did not make any claim for deduction of provision for bad debts in its original return but before completion of the assessment the assessee made a claim of deduction of provision for bad debts on 10.01.2001,which was rejected by the AO for failure to establish the claim.The FAA allowed the claim and remanded the matter to the AO.Refund was granted to the assessee while issuing the revised order based on the order in appeal.He denied interest on the refund on the ground that it was attributable to an additional claim of deduction of provision for bad debt which was allowed by the FAA.However, the FAA held that the assessee was entitled to interest under section 244A from 10.01.2001, and not from 01.04.1999, as claimed by the assessee in terms of section 244A(1)(a) of the Act.The reason behind limiting the interest from) was that the assessee did not claim any deduction of provision for bad debt in the original return but in the course of assessment. According to the FAA,the assessee was not entitled to any interest for the period prior to date on which the claim was made which lead to the refund. The Tribunal held that the assessee was entitled to interest from April 01.04.1999,onwards.On appeal to the Hon’ble Kerala High Court,held as under: 5.The contention of the counsel for the Revenue is that delay in refund is on account of delay in making the claim for deduction of bad debts and so much so by virtue of sub-section (2) of section 244A the Department is entitled to decline interest to the assessee for the period up to the date on which the claim of deduction of bad debts is allowed by the Commissioner of Income-tax (Appeals). According to the standing counsel, the Tribunal did not consider even the scope of sub-section (2) of section 244A which led to granting the relief to the assessee in terms of their claim. Counsel for the assessee, on the other hand, contend that interest under section 244A is mandatory and the same is payable from the beginning of the assessment year to the date of grant of refund. What we find from sub- clause (1) is that interest is payable at the rate prescribed therein on the refund ordered to the assessee which is obviously excess tax paid. The period for which interest is payable will depend on the nature of payment of tax which is refunded to the assessee. In the case of payments covered by clause (a) of section 244A(1) interest is payable from the beginning of the relevant assessment year till the date of grant of refund. However, in the case of payments of tax in any of the forms other than those referred to in clause (a) interest is provided in clause (b) of section 244A(1) from the dates of payment of such tax or penalty till the date of grant of refund. This case is obviously covered by clause (a) and so much so the assessee is entitled to interest on excess refund from the beginning of the assessment year till the date of grant of refund which is granted by the Tribunal. However, the question is whether operation of sub-section (2) justifies denial of interest for any period thereof as claimed by the Revenue. 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

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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 for 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. 7. The next question to be examined is whether there is any substance in the contention of the standing counsel for the Revenue that belated claim of deduction of provision for bad debt under section 36(1)(vii)(a) will disentitle the assessee from getting interest on refund up to the date of making claim. Admittedly, the assessee did not make any claim for deduction of provision for bad debt in the original return filed. However, before completion of the assessment the assessee made a claim of deduction of provision for bad debt on January 10, 2001, which was rejected by the Assessing Officer for failure to establish the claim by the assessee. The, Commissioner of Income-tax (Appeals) in the appeal filed against the assessment allowed the claim and remanded the matter to the Assessing Officer. Refund is granted to the assessee while issuing the revised order based on order in appeal filed by the assessee. The question to be considered is whether belated claim for deduction which when allowed entitled the assessee for refund is a situation covered by sub- section (2) of section 244A of the Act. The situation covered by sub-section (2) is only delay in completion of proceedings granting refund that is attributable to the assessee. Obviously, refund is issued as a result of assessment whether original or revised. If the assessee causes any delay in completion of such proceedings under which the refund is granted, then certainly the period of delay attributable to the assessee only is the period for which the assessee is not entitled to interest. In this case, the Assessing Officer has not established that the assessee has caused any delay in issuing the refund order. Of course, if the assessment is delayed by the assessee by taking time for production of document without which refund cannot be granted, then certainly, the delay in assessment is attributable to the assessee disentitling the assessee for interest for such period under sub-section (2) of the above Act. In this case, assessment was taken up in the usual course and before completion of assessment, the assessee made the claim which was considered and rejected by the Assessing Officer. However, in appeal the claim was allowed and based on the Commissioner

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of Income-tax (Appeals) order the Assessing Officer granted refund. We do not find any material to hold that the delay in establishing the claim with documents that led to refund is attributable to the assessee and so much so this is not a case covered by sub-section (2) of the Act. We, therefore, hold that belated claim of deduction made on January 10, 2001, by the assessee will not justify denial of interest otherwise eligible under section 244A(1)(a) from April 1, 1999, to January 10, 2001. We, therefore, uphold the order of the Tribunal declaring the assessee's eligibility to get interest from April 1, 1999, till the date of refund. 8. We notice a lacunae in the statute in the above provision because the situation that arose in this case is not contemplated therein. The Department could contend that if all claims of deduction were made in the original return and higher amount of refund was claimed in such return, the officer could have granted refund under section 143(1) of the Act itself thereby avoiding interest on refund in regular assessment for longer period. Return was in fact processed under section 143(1) and based on claims in the original return, refund was granted in terms of the claim made by the assessee.However, higher amount of refund and interest thereon are liable to be paid by the Department from the beginning of the assessment year only because the assessee made belated claim for deduction leading to entitlement of higher amount of refund of tax paid which was allowed only by the appellate authority.Therefore, it could be provided in section 244A(1)(a) that interest on refund is payable on the amount of refund claimed in the original return filed and not on excess refund later claimed or happened to be claimed based on belated claims of deduction, exemption, etc. However, in the absence of any such provision under section 244A limiting interest payment on the refund claim in the original return, the assessee is entitled to interest on excess tax refunded in terms of clauses (a) and (b) of section 244A(1) of the Act subject to the limitation contained in sub-section (2) discussed above. We would also like to refer to the case of ACC Ltd.(supra).Facts of the case were that the assessee had not made certain claims before the AO in the course of original assessment or before the FAA.It raised additional grounds before the ITAT on inclusion and exclusion of certain amounts for deduction under section 80HHC and 80I.The Tribunal after admission of additional grounds restored the issues to the file of the AO for fresh consideration. While giving effect to the orders of the ITAT,he allowed certain claims resulting in refund to the assessee due to re-determination of total income. It was the assessee's contention that the interest u/s.244A was not allowed on such refund on the reason that the assessee has not made claims originally under section 244A (2) and any delay on the part of the assessee should be excluded.The FAA agreed with the above contention stating that since the assessee had not claimed the amounts originally,the AO was correct in not allowing interest under section 244A to the appellant company in compliance to the provisions of section 244A(2) of the Act.The Tribunal deliberated and decided the matter as under:

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4.2. It was the submission of the learned counsel that similar issue arose in the case of CIT vs. South Indian Bank Ltd (2011) 237 CTR 74 (Ker) wherein it was held that belated claims of deduction by the assessee will not justify denial of interest on refund arising out of such claims otherwise eligible under section 234A(1). However it was also the submission that the Assessing Officer has not followed the provisions of section 244A(2) and declined interest under section 244A(2) without referring the matter to CCIT or CIT and therefore, the Assessing Officer's action cannot be justified following the principles laid down by the ITAT in the cases of OCIT vs. Videocon International Ltd 6 SOT 227 (Mum) 2006-TIOL-90- ITAT-MUM) and Artist Tree Pvt. Ltd vs. Income Tax Officer (2005) 93 ITO 603 (Mum). It was also submitted that giving effect to the orders of the ITAT are proceedings equivalent to Sec.154 as has been considered by the Hon'ble Bombay High Court in the case of Empire Industries Ltd vs. CIT (1992) 93 ITR 295 (Bom). Further issue is such that two views are possible, the Assessing Officer's action in denying the interest under section 244A in consequential proceedings is not correct. 4.3.The learned Departmental Representative however, submitted that the decision of the assessee's in making the claim belatedly has resulted in refunds in consequential proceeding only and had the assessee made the claims at the time of filing the return, the Revenue would have issued refund without any interest liability at the earliest possible time and therefore, the Assessing Officer was correct in denying the interest on the delay attributable to the assessee under section 244A(2). The Ld.DR relied on CIT Vs Assam Roofing Ltd, 330 ITR 87 (Gau) for the proposition that appellate proceedings has to be included in the expression 'proceeding' as appearing in sub section 2 of Sec. 244A. Therefore delay in making claim is attributable to assessee as held in the above case. 4.4.We have heard the rival contentions and perused the orders placed on record on this issue. Even though the Hon'ble Kerala High Court has held in the case of CIT vs. South Indian Bank Ltd (2011) 237 CTR 74 (Ker) that the belated claim of deduction by the assessee will not justify the denial of interest and refund arising out of such claims otherwise eligible under section 244A(l), in this case the refund arose consequent to the orders of the ITAT under section 254. Therefore, in our view the provisions of section 244A(3) will apply which is as under: xxxxx There is no denying the fact that the assessee was allowed interest under section 244A(1) earlier in the original assessment proceedings.Therefore, as a result of orders under section 254 which the Assessing Officer has passed now, the interest under section 244A(1) will have to be increased or reduced accordingly and the Assessing Officer has no option to vary the period on interpretation of provisions of section 244A(2). Provisions of section 244A(2) does not apply in these facts of the case, as the assessee was already been granted interest under section 244A(1) and the period for such refund has already been determined. If consequent to the orders under section 254 the resultant order gives rise to further refund, the

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Assessing Officer has to increase the interest on the enhanced refund without varying the period for which interest was granted earlier. 4.5 The case of revenue is supported by judgment of Hon'ble Gauhati High Court in the case of CIT Vs Assam Roofing Ltd, 330 ITR 87(Gau) but in that case interest u/s 244A (1) was granted for the first time after the order of CIT(A) in which claim was made. Moreover the Hon'ble Kerala High Court in the case of South Indian Bank (supra) held against revenue and in favor of assessee. No jurisdictional High Court judgment was brought to our notice.Therefore, the view favourable to assessee is to be followed. However, we are of the view that provisions of Sec 244A(3) are applicable on the facts of this case. AO has no obligation to re determine the period for which interest was to be granted once interest was granted in earlier proceeding.He has to enhance or decrease on the quantum only. In view of this, we direct the Assessing Officer to increase or reduce the interest under section 244A(1) r.w.s. 244A(3) and rework the interest accordingly. 4.6 Since the Assessing Officer also has not referred the matter to the Chief Commissioner or CIT where any question arises as to the period to be excluded, the action of the Assessing Officer in excluding certain period is also not acceptable. Respectfully following the principles laid down by the ITAT in the case of DCIT vs. Videocon International Ltd (2006)6 SOT 247 (Mum) assessee (2006-TIOL-90-ITAT-MUM) and Artist Tree Pvt Ltd vs. Income Tax Officer (2005) 93ITD 603 (Mum), Assessing Officer's action cannot be justified on this reason also. However, as provisions of section 244A(3) are very clear, in our opinion, Assessing Officer has no option to vary period for granting increased interest when the period was already fixed in the original proceedings under section 244A(1). Accordingly the Assessing Officer is directed to rework the interest. The respective grounds are considered allowed.” From the above discussion,it is clear that assessee had filed its return in time,that the refund amount exceeded 10% of the tax demand,that the AO had not followed the directions of the CIT and had not recomputed the interest,that the claim about taxing the securities interest was part of the return filed by the assessee.Therefore,there was no justification on part of the AO not to grant further interest to it.As far as the order of the FAA is concerned,we would like to rely upon the decisions of South Indian Bank Limited(supra)and ACC Ltd.(supra).We hold that the assessee is entitled for interest u/s.244A of the Act from first day of April of the AY. and that the AO was not justified in restricting it to the date from the order of the FAA.Effective ground of appeal for both the Appeals are decided in favour of the assessee and the order of the FAA is reversed. ITA No.6818 & 6824/M/12 (2001-02): The facts and circumstances of the case for the year under appeals are identical except for the amount of refund involved.Following our order for the earlier year,we decide the effective ground of appeal in favour of the assessee for both the appeals.

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As a result,appeals filed by the assessee for both the AY.s.stand allowed.” 3.2. We find that in the aforesaid order dated

31/08/2015, the Tribunal considered the factual matrix in the

light of various decisions including the decision from Hon'ble

Guwahati High Court in the case of CIT vs Assam Roofing Ltd.

330 ITR 87 (Gau.), the decision of the Tribunal in DCIT vs

Videocon International ltd. (2006) 6 SOT 247 (Mum.)and

various other decisions, like CIT vs South India Bank Ltd.

(2011) 237 CTR 74 (Kerala) and found that the assessee had

filed its return of income in time, that the refund amount

exceeded 10% of the tax demand, that the Assessing Officer

had not followed the directions of the CIT and had not

recomputed the interest. The claim of securities interest was

part of the return filed by the assessee. Therefore, there was

no justification on part of the Ld. Assessing Officer not to

grant further interest to it. As far as the order of the First

Appellate Authority is concerned, we would like to rely upon

the decisions of (340 ITR 574), ACC Ltd. (2012- TIOL-120-

ITAT-Mum) and Union Bank of India (ITA

No.2522/Mum/2011). Following the aforesaid decision of the

22 M/s State Bank of India ITA No.1360/Mum/2016

Tribunal, we find no infirmity in the order of the Ld.

Commissioner of Income Tax (Appeal), resultantly, the appeal

of the Revenue is dismissed.

Finally, the appeal of the Revenue is dismissed.

This Order was pronounced in the open court in the

presence of ld. representatives from both sides at the

conclusion of the hearing on 21/05/2018.

Sd/- Sd/- (N.K. Pradhan) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 21/05/2018

f{x~{tÜ? P.S /�नजी स�चव

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai,