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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
O R D E R
PER Waseem Ahmed, Accountant Member:
- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-6, Kolkata dated 31.12.2015. Assessment was framed by ACIT, Circle-54, Kolkata u/s 154 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 06.08.2013 for assessment year 2006-07. The grounds raised by the assessee per its appeal are as under:- “1. The learned Commission of Income Tax (Appeals)-6 [“CIT(A)” for short]has erred on facts and in law in treating the sum of Rs.3,20,046 granted as interest u/s/. 244A and included in the amount refunded on 28-7-2011 as refund out of taxes paid;
2. The learned CIT(A) has erred on facts and in la in not directing the learned AO to compute interest allowable under section 244A in accordance with the express S.R.Batliboi & CO vs. DCIT, Cir-22, Kol Page 2 provisions of section 244A(3) of the Act and thereby, not to treat interest granted earlier as amount refunded towards taxes.
3. The learned CIT(A)as erred on acts and in law in not granting interest u/s.244A upto the date of actual grant of refund.
4. The order of the learned CIT(A) to the extend indicated above is contrary to the facts, law and the principles of natural justice.
5. The appellant craves leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal.” Shri Debobrate Ghosh, Ld. Authorized Representative appeared on behalf of assessee and Shri Arindam Bhattacharjee, Ld. Departmental Representative appeared on behalf of Revenue.
2. First inter-connected issue raised by assessee in Ground No. 1 and 2 is that Ld. CIT(A) erred in adjusting the amount of interest of ₹3,20,046/- granted u/s 244A of the Act against the amount of refund of taxes.
3. Briefly, the facts of the case are that assessee is a partnership firm and engaged in the profession of Chartered Accountancy. The assessee was granted refund in consonance with the order of Ld. CIT(A) passed by the Assessing Officer u/s 251 r.w.s 143(3) vide dated 29.06.2010 along with interest u/s 244A of the Act as detailed under:- Refund Rs.20,59,506 Added interest u/s 244A Rs. 1,85,355 Total Rs.22,44,861 Subsequently, AO revised his order vide dated 28.07.2011 and computed the amount of refund as under:- Refund Rs.22,44,861 Add interest Rs. 1,34,691 Rs.23,79,552 Subsequently, the AO filed the rectification application u/s 154 of the Act and again the AO rectified his mistake vide order dated 06.08.2013 and computed the amount of refund as well as interest as under:- Refund Rs.41,76,267 Less; R.V. already issued vide No.288516 dt.09.07.09 Rs.23,79,552 Refund Rs.17,96,715 Add: interest u/s 244A of IT Act Rs. 1,84,575 Now refundable Rs.19,81,290 S.R.Batliboi & CO vs. DCIT, Cir-22, Kol Page 3 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the amount of refund was determined by the AO in his order passed u/s. 154 of the Act dated 06.08.2013 for ₹41,76,267/- only. However, said amount was reduced by the amount of refund already granted to it vide R.V No.288516 dated 28.07.2011 for ₹23,79,552/- inadvertently. The breakup of the refund amount issued in R.V. No.288516 stand as under:- Amount of refund Rs.20,59,506 Interest u/s. 244A (vide order dated 29.6.10) Rs. 1,85,355 Interest u/s 244A (vide order dated 28.7.11 Rs. 1,34,691 In view of above, the assessee submitted that the amount representing the refund of tax (not including interest granted u/s 244A of the Act) should be adjusted against the amount of refund determined for ₹41,76,267/- u/s. 154 of the Act vide dated 06.08.2013. However, Ld. CIT(A) disregarded the contention of assessee’s submission and confirmed the order of AO by observing as under:- “5.1 I have considered the submissions of the appellant explaining as to why the computation of interest u/s.244A of the Act is not correct, in its view. The first point of dispute is that interest of Rs.3,20,046/- paid on 28.07.2011 u/s 244A was treated as refund out of taxes paid. The appellant ahs referred to the provisions of section 244A(3) and an order of the LD. CIT(A)-VIII, Kolkata in appeal No.50/CIT(A)/Kol/11-12 dated 17.05.2012 in the case of Ernst & Young (P) Ltd. to state that the AO was not right in treating the refund of Rs.3,20,046/- given on 28.07.2011 as refund of taxes paid and not payment of interest, thereby reducing the total interest computed u/s.244A. with due respect to the Ld. CIT(A)-VIII, Kolkata, I do not agree with the contention of the appellant. Sub-section (3) of Section 244A merely lays down that interest payable u/s. 244A(1) will be increased / reduced in consequence of various orders, including orders of appellate authorities, passed after the order in which interest u/s 244A(1) was first granted. The sub-section, in no way, lays down that the interest computed in the earlier order will be deemed to have been paid in the earlier refund for the purpose of the revised computation u/s.244A(3) of the Act. The sub-section(3) of section 244A, in other words, does not lay down the priority for adjusting taxes or interest against the prior payment of refund. Thus, in my view, the AO was right in treating the earlier refund inclusive of the interest computed earlier u/s.244A(1) of the Act as out of taxes paid. There is another reason for taking this view. As the interest u/s. 244A was revised in the order under appeal, the interest could not have been said to have crystallized in the earlier order so as to infer that the interest computed then had already been paid out. Sub-section(3) of section 244A only lays down that interest u/s. 244A will be reduced or increased in accordance with subsequent orders and does not prescribe the method of computation of such increase or reduction. Hence, the appellant’s contentions in part (a) of the S.R.Batliboi & CO vs. DCIT, Cir-22, Kol Page 4 third ground are rejected. As regards the contentions made regarding incorrect computation of interest u/s.244A in part (b) to (d) of the third ground, the provisions of section 244A are clear and the AO to recompute the interest payable u/s. 244A, in accordance with law an after verification, till the date of grant of the refund. Accordingly, the appellant’s prayer for grant of interest u/s.244A of the Act till the date of appellate hearing is rejected.” Aggrieved by this, the assessee has come up in appeal before us.
5. Ld. AR for the assessee filed paper book which is running pages from 1 to 57 and reiterated the same arguments that were made before Ld. CIT(A) and he relied on the order of this Tribunal in the case of DCIT vs. M/s Ernst & Young Pvt. Ltd in for A.Y 2003-04 dated 30.04.2014. The relevant extract of the CIT-A order and Hon’ble Tribunal order is reproduced below:- “a) In treatingRs.2,29,85,384/- refund on 30.9.05 as refund out of gtax paid even though it included Rs.31,63,564 towards interest /s 244A of the Income Tax Act. b) In granting interest on Rs.1,49,79,822 for the period 1.10.2005 to 31.7.06 instead of granting interest on Rs.1,81,43,386 and consequently granting short interest; c) In not granting interest on Rs.44,78,062 from 28.7.06 to 31.7.06 i.e. for 1 month as per provisions of Rule 119A of the Income Tax Rules; d) In granting interest on Rs.1,94,57,884 for the period 1.8.06 to 28.2.07 instead of granting interest on Rs.2,26,21,448 and consequently granting short interest; e) In granting interest on Rs.3,05,88,892 for the period 1.3.07 to 29.3.07 instead of granting interest on Rs.3,44,19,137 and consequently granting short interest; f) In reducing R.6,66,681 being interest granted in order dt 29.3.07 passed u//s 154/251/143(3) of the Act twice. Once as refund granted on 29.3.07 and again as part of Rs.2,07,91,649 refunded on 30.3.07 g) In reducing Rs.2,07,91,469 instead of Rs.2,07,91,649 refunded on 30.3.07 by adjustment against demand of AY 2005-06 h) In granting interest on Rs.97,97,423 for the period 1.4.07 to 31.3.09 instead of granting interest on Rs.1.42,94,169 and consequently granting short interest.”
Against the above order of ld. CIT(A), Revenue filed an appeal raising the ground of appeal as under :
1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in granting interest u/s. 244A on interest and also holding that while issuing refund interest amount will take priority before principal amount.” The Revenue has raised the above ground and the finding of the Hon'ble Co-ordinate Bench is also reproduced below:- “The Ld. CIT, DR stated that the computation of CIT(A) is wrong but he could not point out which part of CIT(A)’s order is wrong and how. He could not identify mistake in allowing interest u/s.244A of the Act. Despite the entire facts available in S.R.Batliboi & CO vs. DCIT, Cir-22, Kol Page 5 the order of CIT(A), the Ld. CIT,DR could not point out any error, we feel that the directions of CIT(A) are as per law and we uphold the same. This appeal of Revenue’s appeal is dismissed.”
On the other hand, Ld. DR vehemently relied on the order of Authorities Below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the instant case, the amount of refund was determined by the AO three times. The relevant details of the refund determined by the AO along with the interest u/s.244A of the Act stand as under:- Sl.No Date of order Amount refund Interest Total 1 29.6.10 20,59,506 1,85,355 22,44,861 2 28.7.11 22,44,861 1,34,691 23,79,552 From the above, it is transpired that the amount of refund was granted at ₹20,59,506/- but the amount of interest was revised to ₹3,20,046/-. However, the above order was subsequently rectified u/s 154 of the Act vide order dated 06.08.2013 where the amount of refund of ₹3,20,046/- was adjusted against the amount of refund due to assessee. Thus, from the above we note that the amount of interest wrongly got adjusted with the amount of refund due to assessee. As such, the amount of ₹20,59,506/- originally determined as refund to assessee should have been adjusted against the amount of refund determined u/s 154 of the Act. Thus, after having reliance on the order of Co-ordinate Bench in (supra) and respectfully following the decision of this Tribunal, we direct the AO to compute the amount of interest under section 244A of the Act in light of above discussion and in accordance with the law. Thus we remand the matter back to the file of AO to compute the interest on refund in accordance with law. Consequently, this ground of assessee is allowed for statistical purpose.
Next issue raised by assessee in this appeal is that Ld. CIT(A) erred in not granting interest u/s.244A of the Act upto the date of actual date of refund.
At the outset, Ld. AR brought to our notice that the amount of refund was determined vide order dated 06.08.2013 u/s. 154 of the Act and the interest u/s. 244A of the Act was computed upto the date of order. However, the refund was actually S.R.Batliboi & CO vs. DCIT, Cir-22, Kol Page 6 granted to the assessee vide income tax refund order dated 18.02.2014 for ₹19,81,290/-. Ld. AR in support of assessee’s claim drew our attention on page 6 of the paper book where the refund voucher issued by the Income Tax Department dated 18.02.2014 was placed. Ld. AR prayed before the Bench to give direction to grant amount of interest u/s.244A of the Act till the date of actual refund granted to assessee. On the other hand, Ld. DR raised no objection if the direction is given to AO to compute the amount of interest u/s.244A of the Act as per the provision of law.
We have heard the rival contentions of both the parties and perused the material available on record. In the instant issue, AO is directed to grant the amount of refund as per the provision of Section 244A of the Act. In this regard, we rely on the order of assessee’s own case in for A.Y 2011-12 dated 13.09.2017 wherein the Tribunal has held as under:- “8. We have heard rival submissions and gone through the facts and circumstances of the case. The issue in respect to interest on refund and the issue is no longer res integra. The Hon'ble Bombay High Court, Nagpur Bench in Sunflag Iron & Steel Co. Ltd. Vs. CBDT ()(2016) 387 ITR 674 (Bom) after taking note of the decision of Hon'ble Supreme Court in CIT vs. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC) and CIT vs. H.E.G. Ltd. (2010) 324 ITR 331 (SC), Union of India vs. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC) and other cases, has observed as under:- ‘19. It could thus clearly be seen that the Hon'ble apex court in unequivocal term held that the expression “other proceedings under the Act” used in section 240 of the Act is wide enough to include any order passed in proceedings other than the appeals under the Act. Their Lordships further hold that the other proceedings under the Act would include orders passed under section154, orders passed by the High Court or Supreme Court under section 260 or orders passed by the Commissioner in revision applications under section 263 or in an application under section 273A of the Act.
It has further been observed that the tax refund is a refund of taxes when the tax liability is less than the tax paid. It has further been held that the payment of interest is a kind of compensation of use and retention of money collected unauthorizedly by the Department. It has further been held that when the collection is illegal, there is corresponding obligation of the Revenue to refund said amount with interest, inasmuch as they have enjoyed the money deposited.’ 9. In the light of the aforesaid observation of the Hon'ble Bombay High Court, we set aside the order of the Ld. CIT(A) and remand the matter back to the file