INSILCO LIMITED,GURGAON vs. ACIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘C’ NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No. 2586/Del./2011 Asstt. Year : 1993-94 Insilco Ltd., vs. A.C.I.T., 11(1), 1 & 2, 12th Floor, German Centre, New Delhi. For Industry & Trade, Bulding No. 9, Tower-B, DLF Cyber City, Phase-III, Gurgaon0122002 (Haryana) [PAN: AAACI 1203N] (Appellant) (Respondent) Appellant by : Sh. V.P. Gupta, Advocate & Sh. Anubhav Kumar, Advocate Respondent by : Sh. Surender Pal, Sr. DR Date of hearing : 18.02.2016 Date of pronouncement : 07.03.2016 ORDER Per L.P. Sahu, Accountant Member: This is assessee's appeal against CIT(A)'s order dated 15-3-2013, relating to A.Y. 1993-94. Following grounds are raised: “1. That the CIT(A) erred in not adjudicating and allowing the grounds raised before him in the appeal filed by the appellant against order dated 24-12-2005 passed u/s 154 of the Act by the Assessing Officer. 2. That the CIT(A) erred in not appreciating that the order dated 24- 12-2005 passed by the AO was illegal, unwarranted, void and beyond the powers of the AO u/s 154 of the Act and deserve to be quashed.

2 ITA No.2586/Del./2011

3 ITA No.2586/Del./2011

2.1. Thereafter AO passed an order u/s 154 dated 30-7-2004 in A.Y. 1993- 94 giving credit for TDS amounting to Rs. 61,58,7327- instead of Rs. 68,98,588/-, as originally allowed. In the tax computation made with order u/s 154 AO allowed refund of Rs. 61,58,732/- and interest thereon u/s 244A of the Act from 1-4-1993 to 30-7-2004 amounting to Rs. 75,44,408/-. AO while withdrawing credit for TDS in A.Y. 1992-93 also charged interest u/s 220(2). 2.2. On these orders, assessee filed appeals as under:

1992-93: Assessee challenged the chargeability of interest u/s 220(2). 1993-94: Assessee claimed further credit for TDS of Rs. 7,39,856/-. Being the difference of credit earlier given in A.Y. 1992-93 and thereafter in A.Y. 1993- 94 (68,98,588 - 61,58,732).

2.3. Ld. (TIT(Appcals)-XIV, New Delhi \ ide two separate orders dated 3 1-3- 2005, held as under:

1992-93: Interest u/s 220(2) of the Act should not be charged as demand was not outstanding at any stage and therefore, provisions of sec. 220(2) were not applicable.

1993-94: In respect of short credit of TDS of Rs. 7,39,856/-, ld. CIT(Appeals) directed the AO to allow credit in any year, either in A.Y. 1993-94 or in A.Y. 1992-93.

4 ITA No.2586/Del./2011

2.4. Consequent to the order of Id. CIT(Appeals) for A.Y. 1992-93, quashing the interest u/s 220(2), AO issued further notice u/s 154 dated 6-8-2005 of the Act, proposing as under:

"Subsequent to the order passed by the CIT(A) vide appeal no. 118/04- 05/CIT-XIV/Del/ dated 3 1 -3-05 A.Y. 1992-93 quashing the charging of interest u/s 220(2} of the Act of Rs. 1,30,10,5827- for A.Y. 1992-93, it is proposed to withdraw interest u/s 244A for A.Y. 1993-94 of Rs. 71,39,7897- out of total interest granted of Rs. 75,44,408/- vide order u/s 154/143(l)_(a) dated 30-7-2004 as interest is to be granted till the date of issue of refund i.e. 30-3-1994."

2.5. Assessee filed its objections vide letter dated 16-8-2005 contending that here was no mistake in the order dated 30-7-2004 while granting interest u/s 244A of the Act. AO himself proposed action u/s 154 earlier to withdraw credit for TDS in A.Y. 1992-93 and allow the same in A.Y. 1993-94 along with interest u/s 244A of the Act; that each year was a separate unit and interest u/s. 244A of the Act was allowable in A.Y. 1993-94 independent of any demand/ refund, interest charged/ allowed in A.Y. 1992-93. Thereafter, AO again issued notice u/s 154 dated 5-9-2005 on similar lines to notice dated 5-8-2005, to which assessee replied dated 15-9-2005 reiterating its stand.

2.6. AO, however, passed order u/s 154 of the Act dated 24-10-2005 by which interest u/s 244A granted earlier was withdrawn to the extent of Rs. 72,01,376/- out of interest on refund earlier allowed as under: “Order u/s 154/154/143(1) of the Income Tax Act, 1961” Order u/s 154 of the I.T. Act, 1961 was passed on 30.07.2004 wherein interest u/s 244A of Rs. 75,44,408/- was granted to the assessee from 3.4.1993 to 31.3.2004 i.e. the date of issue of refund. The facts of the case are that the Hon'ble ITAT vide order ITA no. 6639/Del/94 dated 17.09.2002 for assessment year 1992-93 held that interest income of Rs. 2,69,84,301/- does not pertain to A.Y. 92-93 but pertain to A.Y. 93-94. In

5 ITA No.2586/Del./2011

the order u/s 254/ 143(3) passed for AY 92-93 on 28.6.2004 , credit for TDS amounting to Rs. 68,98,588/- relating to interest income of Rs. 2,69,84,301/- was withdrawn. At the time of withdrawal of TDS credit a demand of Rs. 2,04,62,717/- including interest u/s 220(2) amounting to Rs. 1,30,10,582 was raised in the assessment year 1992-93. After withdrawal of TDS credit from the AY 92-93, credit of Rs. 61,58,732/- was allowed to the assessee in AY 93-94. Apart from TDS, an interest u/s 244A amounting to Rs. 75,44,408/- was also allowed to the assessee on that credit from 1st day of assessment year to the date of issue of refund i.e. From 1.4.93 to 30-7-04. Simultaneously interest u/s 220(2) of Rs. 1,30,10,582 was charged from the date of issue of refund to the date of withdrawal of credit. The assessee went into appeal against the said order and the C1T(A)-X1V vide appeal No. 118/04-05/CIT(A)-XIV/Del dated 31.3.2005 has quashed charging of interest u/s 220(2) on the ground that the interest u/s 220(2) can be charged if there is a demand notice and there should be a default in paying the amount so demanded within the time stipulated in the notice. As the charging of interest u/s 220(2) was quashed by the CIT(A), allowance of Interest u/s 244A in the assessment year 93-94 become Infructuous as the refund in question was originally issued on 29.6.93 for Rs. 10,15,480/- and on 30.3.94 for Rs.64,36,655/- and the interest u/s 244A is allowable only upto the date of issue of refund i.e. upto 29.6.93 and 30.3.94 respectively in the assessment year 1992-93 from where the credit withdrawn i.e. Rs. 343032/- -. To proposed withdrawal of interest paid in excess amounting to Rs. 72,01,376/-, a notice u/s 154 dated 05.09.2005 was issued to the assessee fixing the case for 15.09.2005. In response to notice u/s 154, the counsel for the assessee has filed a reply dated 15.09.2005 stating that there is no mistake in the order u/s 154 dated 30.07.2004 and requested not to pass rectification order u/s 154. The reply filed by the assessee was duly considered. In this regard section 244A(l)(a) clearly speaks that where the refund is out of any tax collected by way of IDS or paid by way of advance tax during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 1 % per month or part of a month comprised in the period from the 1st day of April of assessment year to the date on which the refund is granted. In the particular case the interest u/s 244A is allowable to the assessee from 1.4.93 to 29.6.93 on Rs. 8,83,022/- and from 13.9.93 to 31.3.94 on Rs. 52,75,710/-. The total interest allowable thus comes, to RS.343032/-. Keeping in view of the aforementioned order

6 ITA No.2586/Del./2011

of the CIT(A) and reading of section 4A(l)(a), the excess interest amounting to RS.72,01,376/- is hereby withdrawn. Issue revised forms. Withdraw excess interest allowed u/s 244A of Rs. 72,01,3 76/- and allow interest only upto the issue of refund in the assessment year 1992-93 i.e. upto 29.6.93 and 30.3.94 as per rules."

2.7. Aggrieved, assessee preferred first appeal. Ld. CIT(Appeals), however, dismissed the assessee's appeal by following observations:

"7. This being the facts of the case it is seen that the appellant had itself offered the entire income for assessment for the assessment year 1992-93 and the refund was given to the appellant on 30-3-94. However, this case was taken up for scrutiny and on 30-3-94 a demand of Rs. 2,14,58,452/- was raised. The issues were decided against the assessee by the CIT(A) regarding the taxability of income as income from other source. However, in its appeal before the ITAT the appellant took an additional ground which reads as under: "That in the alternative and without prejudice to ground no. 3, even if the interest of Rs. 2,69,84,301/- is in the nature of income same is not income of assessment year 1992-93 as no legal right had accrued to receive public issue money as well as interest thereon till 31st March, 1992.”

7 ITA No.2586/Del./2011

section (2) of Section 244A. If a wrong claim is made by the appellant then sub clause (2) of Section 244A are attracted which reads as under:

"If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable and whether any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner of Commissioner whose decision thereon shall be final"

3.1. Besides, the remaining credit of Rs. 7,39,856/- was granted in A.Y. 1992- 93. It shall be pertinent to mention that the amounts of refunds, issues about interest on refunds were allowed in favour of the assessee after due approval of order of CIT, Delhi-IV, New Delhi vide order dated 29-7-2004, which is placed on the record, relevant portion is as under:

"You were directed to take all remedial actions and send compliance report by 05.05.04. I also personally explained to you that orders u/s. 154 should only be passed after allowing opportunity of being heard. However, no report was received in the succeeding two months in spite of several

8 ITA No.2586/Del./2011

telephonic reminders in this regard. Examination of file reveals that you had sent the refund proposal to Addl. CIT, Range-II on 28.05.04 by passing order u/s 154 without allowing opportunity to the assessee. These were sent back by Addl. CIT on 04.06.04 with the directions that orders u/s.184 may be passed after allowing opportunity of being heard. Finally, you resubmitled the proposal vide letter No.308 dated 29.06.04 but again orders u/s.154 were passed for AY.94-95 to 2002-03 without allowing opportunity. However, in accordance with the instructions earlier conveyed, credit for TDS of Rs.68.98 lacs allowed in A Y.92-93 was withdrawn. However, the relevant year wise chart was again not submitted. As per the proposals resubmitted by you vide letters No.308 & 309 dated 29.06.04, you have sought approval as under.- (i) For issuing refund of Rs. 4,64,09,2027- for AY.92-93. (ii) For issuing refund of Rs. 1,53,14,7587-for A.Y.93-94 and for adjusting this amount against the demand of Rs. 2,04,62,7177-. After examining the relevant files, I found that there is a need for making necessary corrections on ITNS-150 prepared by you and these have duly been explained to you personally. Therefore, your proposal for issue of following refunds is approved.- (i) Refund of Rs. 4,64,09,202/- for A.Y.92-93. This is with reference to order u/s.254 read with sec. 143(3) and the fact may accordingly be duly stated on ITNS-150. Minor calculation corrections may be made at your end. Against this refund, you would adjust the demand of Rs. 2,04,62,717/- raised for AY.92-93 by passing order u/s.184 read with sec. 143(1)(a) withdrawing credit for TDS in respect of the income which is not assessed in this year. Consequently, for AY.92-93, there is a demand as calculated by you which has to be collected out of refund. (ii) Approval is also granted for issue of refund for A.Y 93-94. You may also adjust the demand raised for A.Y.2003-04. You may also re-check that TDS credit should be allowed only on income assessed for A Y. 93-94.

9 ITA No.2586/Del./2011

You would appreciate that because of exceptional delay in passing the appeal effect orders, the revenue had to suffer by paying substantial amount of interest. Therefore, it is always advisable to take prompt action in such cases.

3.2. It is vehemently argued that the interest on refund which has been calculated with the concurrence of Addl. CIT & CIT, New Delhi cannot be termed to carrying mistake apparent from record.

3.3. Ld. counsel contends that order u/s 154 can be rectified only if there is a glaring mistake apparent from the record. The order passed by AO to give effect to the ITAT order dated 30-7-2004 was a valid order passed as per the directions of a higher appellate authority. It cannot be called carrying mistake apparent from the record as in none of the rectification orders AO has ever indicated any reasons for delay in refund attributable to the assessee. The determination now, as to whether the delay in granting refund is attributable to the assessee or not, is a debatable issue to arrive at a conclusion after consideration of facts and arguments. The same cannot be called mistake apparent from record and carried out u/s 154. Therefore, the impugned order which is to be rectified u/s 154 contains no apparent mistake.

3.4. In the first para of the 154 order AO has referred only to the history; in second para, AO has relied on the order for A.Y. 1992-93 in which the Id. CIT(Appeals) quashed the interest u/s 220(2) which also has no relevant to A.Y. 1993-94. AO has arbitrarily held that the interest granted to assessee for A.Y. 1993-94 became infructuous, which is a distinct and separate issue. According to Id. counsel, both the years are distinct and separate taxable entities, quashing of interest u/s 220 for A.Y. 1992-93 has no relation with

10 ITA No.2586/Del./2011

grant of interest u/s 244A for A.Y. 1993-94. Therefore, there exists no mistake for A.Y. 1993-94 which is sought to be relied on by AO.

3.5. Ld. counsel then relied on Hon'ble Supreme Court judgment in the case of Sandvik Asia Ltd. Vs. CIT & others b(2006) 280 ITR 643 (SC), holding that assessee has a right to be compensated for wrongful detention of monies by the department. Further reliance is placed on Hon'ble Supreme Court judgment in the case of Mepco Industries Ltd. Vs. CIT & Anr. (2009) 319 ITR 208 (SC), which in turn has relied on other Supreme Court judgment, for the proposition that rectifiable mistake must be one which is apparent from the record and not dependent on long drawn process of reasoning or having two opinions: "10. Before concluding, we may state that in Deva Metal Powders (P) Ltd. vs. Commr., Trade Tax 2008(2) SCC 439, a Division Bench of this Court held that a 'rectifiable mistake' must exist and the same must be apparent from the record. It must be a patent mistake, which is obvious and whose discovery is not dependent on elaborate arguments. 11. To the same effect is the judgment of this Court in the case of CCE vs. ASCU Ltd. 2003 (151) ELT 481 (SC), wherein it has been held that a 'rectifiable mistake' is a mistake which is obvious and not something which has to be established by a long drawn process of reasoning or where two opinions are possible. Decision on debatable point of law cannot be treated as "mistake apparent from the record". 3.6. AO has decided the merits about the period of eligibility of interest in the garb of a rectificatory order that now assessee was eligible for refund for the period 1-4-1993 to 29-6-1993 and from 30-9-1993 to 31-3-1994 only. This conclusion depends upon verification of facts and interpretations as the remaining period has not been attributable to any fault on the part of the assessee, as there is no whisper about it. If refund and interest thereon issued

11 ITA No.2586/Del./2011

earlier is altered due to effect of an appellate order, in that case provisions of section 244A(3) are applicable which are as under:

"244A(3) - Where, as a result of an order under sub-section (3) of section 115 WE or section 115WF or section 115WG or subsection (3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub- section (4) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly." 3.7. Thus, if by any order of the Court any amount of refund is increased or reduced, in that case the amount of interest allowable u/s 244A is to be accordingly increased or reduced. In this case the interest in question was awarded to assessee consequent to ITAT directions which is covered u/s 244A(3). The order dated 30-7-04 was passed consequent to ITAT judgment dated 17-9-02 and as per the effect of the order of the ITAT if the refund of the assessee became due, the interest is to be awarded to the assessee thereon. If any further 154 order is proposed to be passed, then it should be in conformity with ratio laid down by the Hon'ble Supreme Court judgments in the cases of Sandvik Asia Ltd. (supra) & Mepco Industries Ltd. (supra). In the impugned order the AO has not whispered about any delay which is attributable to the assessee for delayed grant of refund and the order of the AO which was in conformity with sec. 244A(3) has been held to be a mistaken order without pointing any mistake.

12 ITA No.2586/Del./2011

3.8. Most importantly the amount of refund and interest thereon u/s 244A was allowed to assessee consequent to verification by Addl. CIT & CIT, New Delhi as mentioned above in the order dated 29-7-04. Thus, on both the counts the AO's order becomes argumentative, against the law. The impugned 154 order being argumentative, interpretative and based on change of opinion cannot be called a rectificatory order. In the garb of rectificatory order the AO has attempted to decide the merits and reduce interest without there being any mistake in contradistinction to directions of his own Addl. CIT & CIT.

"244A(2) -If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final." 4.1. It is further pleaded that in this case the delay was attributable to assessee inasmuch as the assessee claimed the impugned to be income for A.Y. 1992-93 and when the head of income was changed, the assessee at the level of ITAT raised the issue about its taxability in A.Y. 1993-94. Therefore, the proceedings resulting in the refund were delayed for reasons attributable to the assessee and the period so attributable shall be excluded while calculating the period of interest payable. The AO failed to apply Sec. 244A(2), while granting interest, this mistake was sought to be rectified by AO.

4.2. In case of dispute about reasons of delay of refund the same was to be referred by assessee to the CCIT or the CIT concerned. The assessee instead of

13 ITA No.2586/Del./2011

recoursing to these authorities has approached the ITAT, which has no jurisdiction to decide this issue.

5.1. With these orders on record and in the absence of any allegation about assessee's default, the issue of interest on refund cannot be readjudicated in the garb of rectification. Ld. CIT(Appeals) while deciding assessee's appeal should not have issued further directions to AO to consider the issue of 244A(2) afresh. Reference to reconsider 244A by CIT(A) itself makes the order of AO & CIT(A) to decide afresh argumentative issues i.e. to consider the delay attributable to the assessee. For this purpose new facts are to be ascertained and the responsibility about delay is to be fixed, which cannot be done by way of rectification u/s 154. The Id. CIT(Appeals)'s action is wrong inasmuch as neither the issue arises out of the order of AO nor any enhancement notice was served on the assessee.

5.2. Besides, AO's rectification and CIT(A)'s direction is at variance with the approval of refund and interest accorded by Addl. CIT & CIT, New Delhi after due verification of records and reports.

5.3. Hon'ble Supreme Court in the case of Mepco Industries Ltd. and other judgments (supra), has laid down that mistake rectifiable u/s 154 means one

14 ITA No.2586/Del./2011

which is glaring and which is not dependent on long drawn process of reasoning and having two opinions.

15 ITA No.2586/Del./2011

sought to be rectified, ld. CIT(Appeals) should not have given a direction to examine afresh the assessee's case u/s 244A(2). We are unable to agree with Id. DR that ITAT has no jurisdiction inasmuch as either there is allegation for attributable to reasons for delay in granting of refund nor AO ever raised this dispute in first order giving effect to ITAT order. On the plain reading of the provisions of sec. 244A(3) if the assessee's refund is increased in that case the increased interest u/s 244A is to be given by way of a statutory exercise. The merits about delay and reasons attributable to assessee fall within the realm of arguments and regular proceedings and not rectification of mistakes, more so amount of refund is concurred by Addl. CIT & CIT. Thus the impugned order of AO passed u/s 154 cannot be upheld. Similarly, ld. CIT(Appeals) also erred in not deciding the dispute as raised in grounds of appeal and instead gave a fresh direction to verify facts and examine the applicability of sec. 244A which would require ascertainment of fresh facts, reasons and accountability.