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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SANJAY ARORA, AM & SHRI PAWAN SINGH, JM
सुनवाई क� तार�ख / : 02.6.2016 Date of Hearing घोषणा क� तार�ख / : 24.6.2016 Date of Pronouncement आदेश / O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-11, Mumbai (‘CIT(A)’ for short) dated 11.11.2011, dismissing the Assessee’s appeal contesting its assessment u/s.143(3) r/w s. 147 of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2003-04 vide order dated 26.12.2008.
The appeal raises two issues, which we shall take up in seriatim. We may begin by recounting the facts of the case. The assessment in the instant case was framed u/s. (A.Y. 2003-04) Standard Chartered Bank vs. DDIT (IT) 143(3) of the Act on 30.12.2005 at an income of Rs.847.37 crores, as against the returned income of Rs.708.21 crs. (vide return filed on 21.11.2003), determining the refund to the assessee at Rs.2678.95 lacs. After adjusting the demand for A.Y. 2002- 03 (raised at Rs.1802.13 lacs vide notice of demand dated 22.3.2016), refund for the balance amount of Rs.876.83 lacs was issued on 31.3.2006. Subsequently, the assessment u/s. 143(3) r/w s. 147 was made on 26.12.2008 at an income of Rs.891.58 crs., resulting in reduction in the refund amount to Rs.822.31 lacs. Interest u/s. 234D on the excess refund of Rs.1856.64 lacs (i.e., Rs.2678.95 lacs – Rs.822.31 lacs) @ 0.5% p.m. for 33 months (i.e., April 2006 to December, 2008) was charged at Rs.3,06,34,637/-. This was sought to be revised by charging interest u/s.234D for 34 months (i.e., from March, 2006 to December, 2008), at Rs.315.63 lacs, resulting in an increase in the interest u/s. 234D by Rs.9,28,322/-. This constituted the first adjustment u/s. 154. The second relates to charge of interest u/s. 220(2), omitted to be levied per the demand notice pursuant to reassessment dated 26.12.2008 that led to additional demand of Rs.21,62,99,104/-, served on the assessee on 29.12.2008, so that it was due on 30.1.2009. A refund of Rs.1387.10 lacs (for A.Y. 2007-08) was adjusted on 16.3.2009, and the balance Rs.775.89 lacs was paid by the assessee on 26.3.2009. There was thus a delay of two months in the payment of the demand, which stood increased to Rs.2172.27 lacs due to short levy of interest u/s.234D by Rs.9.28 lacs. Interest u/s. 220(2) thereon was, accordingly, levied for two months, i.e., February and March, 2009, at Rs.43,44,549/-. The assessee, being unsuccessful in the first appeal, contests both the levies.
We have heard the parties, and perused the material on record. 3.1 The assessee’s objection for interest u/s. 234D is two-fold. Firstly, that it could be levied only from A.Y. 2004-05 onwards and, two, that the interest had been rightly charged in the first instance in-as-much as the refund order for Rs.876.83 lacs was received by it only on April 7, 2006. The legal position stands clarified by the Hon’ble (A.Y. 2003-04) Standard Chartered Bank vs. DDIT (IT) jurisdictional High Court per its decision in CIT vs. Indian Oil Corporation Ltd. (in of 2011, dated 12.12.2012) since followed in CIT vs. Colgate Pamolive (India) Ltd. [2015] 370 ITR 728 (Bom). The provision of section 243D shall, irrespective of the assessment year, apply whenever an assessment is made on or after 01.6.2003, date from which the provision has been made effective. The levy of interest could, again, only be for the period after 31.5.2003, as also clarified in CIT vs. Kerala Chemicals & Proteins Ltd. [2010] 323 ITR 584 (Ker), also relied upon by the Revenue. The position has been in fact endorsed by the Hon’ble Apex Court in CIT v. Reliance Energy Ltd. [2013] 358 ITR 371 (SC). The assessee’s second objection also would not pass muster in-as-much as the refund has been granted on 31.3.2006 (upon adjustment of part refund and issue of refund order for the balance amount). The assessee, it may be noted, has not objected to the said adjustment, which though does not appear to be consistent with the procedure u/s. 245 as explained by the Hon’ble Apex Court in Sushila Rani v. CIT [2002] 253 ITR 775 (SC). The assessee has raised another objection, stating that in-as-much as no refund has been granted u/s. 143(1), the provision of section 234D shall not apply. The ld. CIT(A) has dismissed the said plea opining that what the Revenue has done, per the order u/s.154, is stating the interest leviable u/s. 234D at the correct amount. True, but then non contesting of levy u/s.243D (per assessment) should not bar the assessee from raising a legal plea when further interest is levied, even if by way of restating the amount leviable at the enhanced, correct amount. The demand for Rs.9.28 lacs, it needs to be appreciated, stands raised for the first time vide demand notice dated 23.9.2010 pursuant to order u/s.154 of even date. The revision does not detract from the fact that the interest, which is being levied thus, is in pursuance to a refund which was not granted u/s. 143(1) in the first instance – the genesis of the excess refund (in the first instance) being the refund granted u/s.143(3) on 30.12.2005. The assessee’s plea that the qualifying condition of section 234D is not met, so that it would have no application, holds water. We are conscious that these are rectification proceedings, but (A.Y. 2003-04) Standard Chartered Bank vs. DDIT (IT) s. 154 admits of a legal plea as well, provided the issue raises is not debatable, which it is not in view of the clear language of the provision. To raise a contention that s. 234-D shall apply even where the ‘excess’ refund is issued u/s. 143(3) is to inject a debate in the matter, barred u/s.
Though it is indeed surprising as to why refund was not issued on processing of the return u/s. 143(1), it is the admitted and undisputed position that the refund was issued only on assessment u/s. 143(3) on 30.12.2005. We, accordingly, direct deletion of the increase in the interest charged u/.s 234-D per the rectification proceedings, and the assessee succeeds.
3.2 Coming to the second issue, the A.O. has levied interest u/s.220(2) at Rs.2172.27 lacs and, thus, on Rs.9.28 lacs levied u/s. 234D only vide order u/s. 154 dated 23.9.2010. Interest u/s. 220(2) is on the delayed payment of the demand. How could the same be levied for the period February and March, 2009 on the demand raised only on 23.9.2010? Though, surely, the revision would relate back to the date on which the demand (at the incorrect amount) was raised, i.e., 26.12.2008, there was no occasion for the assessee to pay the enhanced amount of Rs.9.28 lacs, i.e., prior to 23.9.2010. The levy of interest is thus, in our view, barred on equitable grounds. When a demand is not raised, there is no question of the assessee being in default in respect thereof. Reference in this context may also be made to the decision in Vikrant Tyres Ltd. v. ITO [2001] 247 ITR 821 (SC). Interest u/s. 220(2), as levied, on this sum, is therefore not valid in law, and is accordingly deleted. We state this without prejudice to the fact that we have found the said charge and, thus, the said demand as not valid in law. That leaves us with the interest on the balance demand of Rs.2162.99 lacs, due for payment on 30.1.2009. We may at the outset clarify that to the extent it relates to interest u/s. 220(2), though styled as an order u/s.154, it is only an order u/s.220(2) on, ostensibly, the delayed payment of demand raised vide demand notice dated (A.Y. 2003-04) Standard Chartered Bank vs. DDIT (IT) 26.12.2008. The same has been discharged, as per the records of the Department, as under: a) Rs.1387.10 lacs on 16.3.2009 against refund for A.Y. 2007-08 due to the assessee in pursuance to order u/s.154 dated 21.1.2009 (for that year); and b) Rs.775.89 lacs, paid on 26.3.2009.
Clearly, Rs.775.89 lacs has been paid only in March, 2009 as against the due date of 30.1.2009, so that the interest for two months (or part thereof) is valid. As regards Rs.1387.10 lacs, the ld. CIT(A) has interpreted the word ‘paid’ occurring in s. 220(2) to mean the date of actual adjustment where the recovery of demand is by way of an adjustment of refund, which is undisputedly only on 16.3.2009. He also notices that there is no request for adjustment of refund by the assessee, also distinguishing the assessee’s reliance on Vishwanath Khanna v. Union of India, 2011-TIOL-410 (Del) on that basis. The assessee’s case is that it has not received any interest u/s. 244A (for A.Y. 2007-08) for the period 21.1.2009, i.e., the ostensible date of grant of refund, to 16.3.2009, i.e., the date of actual adjustment. The money has always remained with the Department, which cannot have it both ways in-as-much as one cannot have a cake and eat to it too! Interest, after all, is compensatory in character. In our considered view, therefore, ‘grant’ of refund has to be considered in a holistic and not a pedantic manner. It may not imply the date of receipt of the refund order, and its’ signing may signify its grant, as held in Rajasthan State Electricity Board v. CIT [2006] 281 ITR 274 (Raj.), but surely it must be followed by it’s issue. If it is not ‘issued’, a term legally well explained, as in R.K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163 (SC), can the refund be said to have been granted? The amount cannot remain in vacuum, so that either the refund has not been or has been granted, even if by way of adjustment, to the assessee, i.e., at any given point of time. Adjustment, after all, is only a manner of ‘grant’ of refund, and should be, therefore, simultaneously, or almost so. The moot question, therefore, is whether the Revenue is in law obliged to pay interest u/s.244A (A.Y. 2003-04) Standard Chartered Bank vs. DDIT (IT) (for A.Y. 2007-08) or, in the alternative, not entitled to charge interest u/s. 220(2) for the said two month period, given that the assessee did not admittedly request the AO to adjust the refund for A.Y. 2007-08, which though – on being carried in March 2009, was not been objected to by it. In other words, this may not necessarily impact the interest u/s.220(2), in which case it may have an implication as to the date of grant of refund for A.Y. 2007-08 and, thus, a direct bearing on the interest u/s.244A for that year. The date of refund voucher/order (for A.Y. 2007-08), much less it’s full details, viz. the date of ‘issue’, the date of its cancellation (which precedes the adjustment/set off against tax payable), etc. are relevant, and which are not on record. If the grant of refund for A.Y. 2007-08 is 16.3.2009 (i.e., in March, 2009), the assessee would be entitled to interest u/s.244A up to that date in accordance with the said provision. On the other hand, if the same stands ‘granted’ in January, 2009, how is it that it is not ‘issued’ but continues to be in the possession of the Revenue even on 16/3/2009, as implied the adjustment of the refund against the tax liability for the current year, not requested for by the assessee. That is, there is possibly no reason for the Revenue to have delayed its’ adjustment against the demand for the current year, outstanding on 21/1/2009, so that the assessee cannot be made liable for interest on such delayed adjustment. Reference in this context is also drawn to the decision in Suresh B. Jain v. P.K. P. Nair [1992] 194 ITR 148 (Bom) as well as others on the aspect of ‘grant’ of refund, as judicially explained, rendered in the context of ss. 244 & 244A. We, accordingly, setting aside the order of the ld.CIT(A) on this issue, restore the matter back to the file of the assessing authority for proper determination of this aspect of the matter in accordance with the law, i.e., the date of grant of refund for A.Y. 2007-08, issuing definite findings of fact. We are conscious that the refund is for another year, not before us. However, its grant and adjustment is intrinsic to the demand u/s. 220(2), so that the two are inextricably linked. We decide accordingly.
(A.Y. 2003-04) Standard Chartered Bank vs. DDIT (IT) 4. In the result, the assessee’s appeal is partly allowed and partly allowed for statistical purposes.