THE KERALA MINERALS AND METALS LTD.,KOLLAM vs. THE DICT, KOLLAM

Appellant by: Shri Rajeev R., CA Respondent by: Smt. J.M. Jamuna Devi, Sr. D.R. Date of Hearing: 16.01.2024 Date of Pronouncement: 28.03.2024 O R D E R Per: Sanjay Arora, AM This is an Appeal by the Assessee agitating the Order dated 24.12.2021 by the Commissioner of Income Tax (Appeals), Income Tax Department [CIT(A)], partly allowing the assessee’s appeal contesting the rectification order u/s. 154 of Income Tax Act, 1961 (the Act) dated 02.09.2010 for Assessment Year (AY) 2005-06.

by the assessee before us, Gd. 1 pertains to the applicability of s. 244A(3) of the Act; Gd. 2 relates to the applicability of s. 240, and Gd. 3 – which was not pressed before us, relates to the lack of opportunity by the ld. CIT(A). Ground 3 is, accordingly, dismissed as not pressed.

4. The issue, thus, arising before us is if the period, April, 2005 to August, 2009 stands rightly excluded by the Revenue in granting refund on the principal sum of Rs.915.24 lakhs to the assessee. In fact, the said sum includes Rs.232.65 lakhs appropriated by the Revenue from the refund arising to the assessee for AY 2007-08, which would therefore only be subsequent to April, 2005 and, accordingly, the claim (AY : 2005-06) The Kerala Minerals and Metals Ltd. v. Circle - 1, Kollam for interest on this sum can not possibly relate back to April, 2005, but only to the period following its appropriation.

Refund on appeal, etc.

5.2 It is apparent that the Legislature did not intend the issue of interest on refund to be subject to litigation, i.e., to the extent possible, defining all possible circumstances under which a refund may arise, also providing a residual clause beginning with the words “In any other case…..” in s. 244A(1), to cover any eventuality under which a refund may arise to an assessee/tax payer, as well as laying down the various parameters toward the same therein, viz. the principal sum; time period; rate of interest, etc. The reduction in the said period is only where the delay in granting the refund is attributable to the assessee [s. 244A(2)], for which the issue, where disputed, is to be decided per the administrative channel. The limited scope of the instant appeal proceedings before us is if the refund indeed arises as a result of the order u/s. 260A, in which case, keeping the period constant, the principal sum on which refund granted is increased or, as the case may be, decreased. This is as only where the instant case does not fall therein, could it be said to fall u/s. 244A(2), as 4 (AY : 2005-06) The Kerala Minerals and Metals Ltd. v. Circle - 1, Kollam indeed the Revenue claims, restricting the assessee’s claim on that basis, and which would operate to exclude our purview in the matter. 5.3 In our opinion, it is not a case of refund arising as a result of an order u/s. 260A of the Act. Section 244A(3) makes it clear that the same envisages an order for the relevant year, i.e., of the refund. The order by the Hon'ble High Court in the instant case is under it’s appellate jurisdiction, invoked by the assessee in respect of its assessment of AY 2004-05. The same stands disallowed by the Hon'ble High Court, finding the liability qua which the impugned deduction is being claimed as falling in another year, i.e., the previous year relevant to AY 2005-06, endorsing thus the stand of the Revenue. It, however, allowed the assessee liberty to move the Revenue under the rectification procedure, or any other remedy, for getting the claim for AY 2005- 06 or a later year. This therefore is to be read and understood not as a direction by the Hon'ble High Court, either to the Revenue or to the assessee for that matter, as mistakenly understood by them, but as allowing the assessee to pursue the remedy under law inasmuch as it found the assessee’s claim as valid for AY 2005-06. The Hon'ble High Court may well have stopped at holding the impugned claim as not admissible for the year under appeal, i.e., AY 2004-05, stating the reason/s, deciding thus the question of law raised before, and admitted by, it. The proceedings under the Act, there is no gainsaying, are with reference to an assessment year, which is the unit of assessment, and for which reference, for the sake of completeness of this order, may be made to ITO vs. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC); Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC); Dy. CIT v. Ace-Multi Axes System Ltd. [2018] 400 ITR 141 (SC). It was not incumbent on it to travel beyond the confines the issue before it, i.e., the admissibility of the assessee’s claim for the relevant year, and by enabling the assessee to pursue the matter under law for the current year, it has only decided the matter in a more equitable manner. The same cannot be interpreted to mean that it has thereby held the assessment for AY 2005-06 as mistaken, and thus liable for rectification. Reference in this context be made to the 5 (AY : 2005-06) The Kerala Minerals and Metals Ltd. v. Circle - 1, Kollam decision in Muralidhar Bhagwan Das (supra). The Hon’ble Court was seized of the issue as to what constitutes a ‘finding’ or ‘direction’ in a decision/order. It held as under: ‘(v) That the expression “finding” and “direction”, in the second proviso to section 34(3), meant respectively, a finding necessary for giving relief in respect of the assessment for the year in question, and a direction which appellate or revisional authority, as the case may be, was empowered to give under the sections mentioned in that proviso. A “finding", therefore, could only be that which was necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner might hold, on the evidence, that the income shown by the assessee was not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context was that the income did not belong to the relevant year. He might incidentally find that the income belonged to another year, but that was not a finding necessary for the disposal of an appeal in respect of the year of assessment in question.’ (emphasis, supplied) This stands reiterated by it in Rajinder Nath v. CIT [1979] 120 ITR 14 (SC). 5.4 Now, this is precisely what transpires in the instant case; the Hon’ble Court finding as a fact that the approval and, thus, crystallization of the liability being claimed did not, even as contended by the Revenue, occur in the previous year relevant to AY 2004-05. Why, the assessee disputing the disallowance for AY 2004- 05, despite the disallowance being for the reason that appealed to the Hon'ble Court, i.e., that the liability under reference did not crystallize in the year of claim, could not have possibly claimed non-deduction as a mistake apparent from record; it having in fact not made any claim for that year. Why, even as observed by the Bench during hearing, the assessee’s rectification application in August, 2009 would be barred by time. Continuing further, even if, for the sake of argument, the assessee could have pressed for rectification, i.e., in view of the Revenue’s stand as to the year of admissibility of the claim being for AY 2005-06, the delay in pressing the same is only attributable to the assessee, excluding the period of delay for reckoning interest. The assessee’s claim for the refund arising to it u/s. 244A(3) does not, for the reasons afore-stated, find out approval and, rather, reinforces the Revenue’s case with reference to s. 244A(2) of the Act. 6 (AY : 2005-06) The Kerala Minerals and Metals Ltd. v. Circle - 1, Kollam 5.5 We are, we may clarify, equally unimpressed with the Revenue’s stand of the refund under reference arising to the assessee u/s. 240 of the Act. There has been no annulment of the assessment for AY 2005-06 nor, in consequence, any fresh assessment. Rather, as afore-noted, there are no appellate proceedings for that year. 5.6 In our opinion, the refund to the assessee in the instant case arises u/s. 237 of the Act. The assessee’s application dated August, 2009 to the Assessing Officer (AO), i.e., consequent to the dismissal of it’s appeal for AY 2004-05 by the Hon'ble Court on 08.06.2009, is an application which is to be regarded as one u/s. 237 of the Act. The so called refund order dated 02.09.2010 is an expression of the satisfaction by the AO as contemplated by the provision. Sure, it would attract compensatory interest u/s. 244A, but the same shall necessarily be subject thereto. We are, in stating so, conscious of the AO noting beneath the refund order of the same being granted consequent to the Hon'ble High Court order dated 08.06.2009. That would, however, not make it necessarily so. As afore-stated, the injunction by the Hon'ble High Court per it’s said order (in dated 08.06.2009) is only to allow the assessee the claim for AY 2005-06, the next year, or in fact in any other later year, following the process of law. It is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter: CIT v. C. Parakh & Co. (India) Ltd. [1956] 29 ITR 661 (SC) (also see: Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC)). No refund would have arisen to the assessee without it applying for the same upon accepting the dismissal of it’s claim for deduction for AY 2004-05 by the Hon'ble Court. That the AO’s satisfaction is also, in part, on account of the observation by the Hon'ble High Court, is another matter. In fact, the Revenue having disallowed the assessee’s claim on the ground of the accrual falling in the following year, ought to have, on such an application being moved by the assessee, irrespective of any intervention by the Hon'ble High Court, or assuming non-reference thereto by the asseessee, been satisfied about the assessee’s entitlement to refund. It cannot blow hot and cold at the same time. This is 7 (AY : 2005-06) The Kerala Minerals and Metals Ltd. v. Circle - 1, Kollam particularly so as the assessee having made the claim for AY 2004-05, could not possibly have made the said claim, once again, for AY 2005-06. As it appears, it is precisely for such and like reasons that the law provides for grant of refund to an assessee u/s. 237 of the Act. This is as the Revenue is bound, and it is nobody’s case that it is not so, by law, as well as the processes thereof. This is exactly what the order dated 08/6/2009 does, i.e., it precludes the Revenue to, acting unreasonably, not accept it’s claim for refund u/s. 237 for AY 2005-06, eschewing it moving the Hon’ble High Court under it’s writ jurisdiction for that year. We also draw support from the decision in Wipro Ltd. v. CIT [2021] 438 ITR 581 (Kar), holding that the Revenue is bound to refund the excess tax collected by it.