ORDER
V. K. SINHA, A.M. :
These three appeals filed by the assessee are being disposed of by a common order for the sake of convenience.
ITA No. 64 All/1996
2. This is the main appeal and the dispute relates to an order under s. 154 of the Act, dt. 16th January, 1995, passed by the AO withdrawing interest under s. 244(1A) of the Act on refund allowed to the assessee by an earlier order dt. 17th March, 1994, passed by the AO giving effect to an order under s. 254 passed by the Tribunal. The order under s. 154 resulted from a series of earlier orders. A synopsis of the relevant dates and orders is given below in chronological order for the sake of convenience :
Sl. No.
Date
Remarks
1.
31-7-1974
Time-limit for filing a return under s. 139(1) of the Act.
2.
7-11-1974
Extension allowed by the AO for filing the return under proviso to s. 139(1) of the Act on an application in Form No. 6 filed by the assessees.
3.
6-12-1974
Return filed by the assessee under s. 139(4) of the Act.
4.
23-2-1977
Revised return filed.
5.
28-1-1978
Order served upon the assessee to get its accounts audited under s. 142(2A) of the Act.
6.
15-2-1978
Honble Allahabad High Court stayed the assessment proceedings till further order.
7.
3-03-1987
Honble Allahabad High Court dismissed the writ petition. Consequently, the stay order also stood vacated.
8.
18-10-1989
Honble Allahabad High Court disposed a misc. petition filed by the Department staying that the Department could not come to know about the vacation of the stay order. Honble High Court passed an order saying that as a result of dismissal of the writ petition on 3rd March, 1987, the interim stay order stood vacated.
9.
10-11-1989
An assessment order was passed under s. 144 of the Act computing the total income at Rs. 62 lacs. Credit for payments under s. 140-A was not given.
10.
21-11-1989
Order under s. 154 was passed allowing credit for taxes paid under s. 140-A of the Act
Rs.
Tax
35,80,500
Less : Paid under s. 140A
31,94,970.
3,85,530
Interest under s. 139(8)
1,43,220
Interest under s. 215/217
11,23,370
Tax payable
16,52,120
11. 26-2-1990
12. 22-3-1991
Assessment set aside by the CIT(A). The Tribunal passed order in ITA No. 1107 (All)/1990 dt. 22nd March, 1991 holding that the assessment framed by the AO, being time-barred was non-est.
13. 25-9-1991
Order passed by the AO giving effect to order under s. 254 of the Tribunal. It stated therein that assessment was not in existence and demand was revised accordingly. A direction was given to allow interest as per rules. Amount refundable was computed in the demand notice as under :
Rs.
Taxes paid
31,94,970
Interest under s. 244(1A)
7,60,504
Total refundable
39,55,474
Computation of interest is also given in demand notice. It was calculated from 1st October, 1975
The refund was withheld under s. 241 of the Act.
14. 15-7-1992
Notice under s. 263 issued by the CIT, Kanpur, proposing to revise above order dt. 25th September, 1991. The errors pointed out were :
(i) Proviso to s. 240 of the Act inserted w.e.f. 1st April, 1989, had been overlooked.
(ii) Tax payable was Rs. 30,95,707 and tax paid was Rs. 31,94,970 and, therefore, only Rs. 99,263 was refundable.
(iii) Interest under s. 244(1A) allowable comes to Rs. 14,889 as against Rs. 7,60,504 allowed in the order dt. 25th September, 1991.
15. 10-9-1993
Order under s. 263 passed by the CIT holding that proviso to s. 240 is clarificatory and hence retrospective. According to it, no interest was payable to the assessee. Order passed by the AO dt. 25th September, 1991 was set aside to be passed afresh in accordance with law.
16. 11-10-1993
Order passed by the AO giving effect to order under s. 263. The amount refundable was worked out at Rs. 99,235 as per observations of the CIT. No interest was allowed to the assessee.
17. 10-11-1993
The AO passed order under s. 154 allowing interest under s. 244 for 30 months from May, 1991 to October, 1993 amounting to Rs. 32,240.
The assessees appeal in ITA No. 62 (All)/1996 relates to this issue.
18. 11-2-1994
The Tribunal passed order in ITA No. 1987/All/1993 cancelling the order passed under s. 263 by the CIT and restoring the order of the AO 'allowing the complete refund of the amount deposited by the assessee in absence of any legal/valid assessment order framed by the AO having jurisdiction'.
19. 17-3-1994
Order passed by the AO giving effect to order under s. 254 of the Tribunal dt. 11th February, 1994. It was stated therein that the assessee was entitled to refund and interest w.e.f. May, 1991. Interest under s. 244(1A) amounting to Rs. 13,87,906 was computed.
This order is subject-matter of appeal, ITA No. 63/All/1996.
20. 29-3-1994
Refund becoming due in consequence of order dt. 17th March, 1994, was issued by the Asstt. CIT.
21. 5-5-1994
The application filed by the assessee under s. 154 seeking rectification of quantum of interest in the order dt. 17th March, 1994. According to the assessee, the amount of interest worked out to Rs. 82,43,349 as against Rs. 13,87,906 determined the AO.
22. 23-9-1994
Notice issued by the AO for rectification under s. 154 proposing to withdraw the amount of interest of Rs. 13,87,906 allowed under s. 244(1A) of the Act in the order dt. 17th March, 1994.
23. 16-1-1995
Order under s. 154 passed by the AO. Assessees petition under s. 154 dt. 5th May, 1994 claiming enhanced interest at Rs. 82,43,349 rejected holding separately as per notice dt. 23rd September, 1994, under s. 154 issued by the AO that the assessee was not entitled to any interest either under s. 244(1) or under s. 244(1A) of the Act. The interest of Rs. 32,240 granted on 10th November, 1993 and Rs. 13,87,906 granted on 7th March, 1994, were withdrawn and assessee was directed to pay Rs. 14,20,146.
24. 13-12-1995
The CIT(A) confirmed the finding of the AO under s. 154 and dismissed the assessees appeal.
3. Having identified the various dates and events precisely, relevant facts may also be noted in brief in a narrative form. The assessee paid certain amounts of tax as self-assessment under s. 140-A of the Act and an assessment order was passed later on. This assessment order was declared to be time-barred and non est by the Tribunal. In the order giving effect to the order of the Tribunal, the AO directed refund of taxes paid under s. 140A of the Act and also interest under s. 244(1A) of the Act amounting to Rs. 7,60,504. This order was set aside under s. 263 by the CIT on the ground that no interest was payable to the assessee in view of proviso to s. 240 inserted w.e.f. 1st April, 1989, which was held to be retrospective. The AO withdrew the interest in an order giving effect to the order under s. 263. However, interest of Rs. 32,240 was granted later under s. 154 of the Act. Thereafter, the order under s. 263 was cancelled by the Tribunal. The AO passed an order dt. 17th March, 1994, giving effect to the order of the Tribunal and computed interest under s. 244(1A) of Rs. 13,87,986, which was actually refunded alongwith refund of tax paid. This is an important order in the dispute before us.
4. Neither side was satisfied with the quantum of interest in the order dt. 17th March, 1994. The assessee filed an application under s. 154 seeking enhancement of the interest to Rs. 82,43,349, whereas the AO issued a notice under s. 154 seeking withdrawal of the entire interest. Finally, an order under s. 154 was passed on 16th January, 1994, whereas the assessees application was rejected and the AOs proposal was carried out, resulting in withdrawal of the entire interest and raising of consequent demand. This gave rise to the impugned order of the CIT(A), which we shall now examine in greater detail.
5. It was conceded before the CIT(A) that the provisions of s. 244(1) were not applicable to the present case and, therefore, the assessees arguments revolved round the issue that interest was payable to the assessee under s. 244(1A) of the Act. The assessment order has spelled out the following three conditions for allowance of such interest, which were also accepted by the assessees learned counsel :
(i) The payment of the disputed amount of tax must have been made as a result of an order of assessment or penalty duly passed,
(ii) Such payment must have been made on or after 1st April, 1975; and
(iii) The refund resulted from an order passed in an appeal or other proceedings'.
6. Taxes had been paid as self-assessment under s. 140A of the Act from 15th January, 1975 to 31st March, 1975 totalling Rs. 31,94,970 (See para 8 of the order under s. 154). However, it was submitted before the CIT(A) that they were deemed to have been paid in pursuance of an order of assessment dt. 10th November, 1989 relying on a decision of the Supreme Court in Modi Industries Ltd. vs . CIT : [1995]216ITR759(SC) . It was, thus, claimed that the first condition was satisfied.
7. It was next submitted that since the assessment order was passed on 10th November, 1989, which was after 1st April, 1975, the second condition was also satisfied.
8. It was further claimed that the refund resulted from the order of the Tribunal dt. 22nd March, 1991. The third condition was, therefore, satisfied.
9. The CIT(A) was not satisfied. A reference was made to the order of the Tribunal dt. 11th February, 1994, against order of the CIT under s. 263 and the following passage from para 7 was extracted :
'..... Consequently, the Tribunal was of the opinion that the assessment order framed by the ITO was illegal, barred by limitation and was non est in the eyes of law. There is no direction or order of the Tribunal to refund the amount of tax paid. Thus the refund did not become due by the order of the Tribunal, but became due as no valid legal assessment order was framed either upto 31st March, 1977, or even alternatively latest by 25th April, 1987. It is because of non-framing of the assessment order that the refund became due to the assessee. The Tribunal only declared the order illegal and invalid framed by the Department after 1st April, 1977 or latest alternatively after 26th April, 1987, when the amended provision introduced by Direct Tax Laws (Amendment) Act, 1987 were not in operation. When the very law had not come into existence, we are of the opinion that the learned CIT was not justified in the eyes of law to revise the order passed by the AO for refund. As the facts stood, the assessee was entitled for the refund of the entire tax deposited by it as no assessment existed in the eyes of law and as held by various Honble High Courts ....'
10. The CIT(A) observed that it was quite clear from the above that the tax paid became due not on account of the order of the Tribunal, but because no legal and valid assessment order was framed upto the period of limitation. Thus, the first condition was not satisfied.
11. The CIT(A) further took a view that when the refund of tax paid became due on account of limitation for assessment being over, there was only question of adjustment of pre-paid taxes on completion of an assessment, which alone could give it the character of 'regular tax payment'. Further the entire pre-paid taxes were paid before 1st April, 1975. Thus, the second condition was not satisfied ... Reliance was placed on a decision of the Punjab & Haryana High Court in CIT vs . Leader Engg. Works .
12. Relying again on the order of the Tribunal extracted above, the CIT(A) held that the refund did not become due because of the order of the Tribunal, but became due as no legal assessment order was framed upto 31st March, 1977. The third condition was also not satisfied.
13. There was a ground before the CIT(A) [Ground No. 2(a)] according to which the withdrawal of interest involved interpretation of the scope of s. 244(1A) of the act and there was no mistake apparent from the record and the ITO wanted to review his order. The CIT(A) did not accept these contentions. She took a view that action under s. 154 can certainly be resorted to because charging or paying interest under the provisions of IT Act, 1961, was mandatory and not discretionary, except where there is a specific provision for waiver. The AO was, therefore, justified in resorting to s. 154.
14. The CIT(A) thereafter, rejected the assessees contention for interest of Rs. 82,43,349 and also confirmed the AOs action in withdrawing the interest. The assessees appeal was dismissed. The assessee is now in appeal before us.
15. The learned counsel for the assessee has raised a preliminary objection before us, according to which the AO had no jurisdiction to pass an order under s. 154 of the Act since his order dt. 25th September, 1991, giving effect to the order of the Tribunal dt. 22nd March, 1991, had merged with the order under s. 263 dt. 10th September, 1993. The Bench invited his attention to the provisions of s. 154(1A) of the Act, according to which where any matter has been 'considered and decided' in a revision proceeding, the AO may still rectify the order under s. 154 in relation to any matter 'other than the matter, which has been so considered and decided'. The learned counsel invited our attention to a copy of notice under s. 263 of the Act dt. 15th July, 1992, where the question of interest had been considered in the words 'interest under s. 244(1A) allowable comes to Rs. 14,889 only against Rs. 7,60,504 worked out in order under s. 254 of 25th September, 1991. 'Thereafter, the order under s. 263 dt. 10th September, 1993, had dealt with the proviso to s. 240, according to which no interest was payable at all. The order of the AO dt. 25th September, 1991 had been set aside as a whole and, therefore, according to the learned counsel interest had also been considered and decided by the CIT.
16. Our attention was thereafter invited to the order of the Tribunal dt. 11th February, 1994, cancelling the order under s. 263. In para 8 thereof, it had been held that the refund of the assessee became due on 1st April, 1977. He, therefore, submitted that interest under s. 244(1A) had been considered and decided by the Tribunal also there was further merger with the order of the Tribunal.
17. The learned Departmental Representative, on the other hand, submitted that there was no merger since both the CIT and the Tribunal had given a decision only on the question of applicability of the proviso to s. 240 and not on interest under s. 244(1A) of the Act.
18. We have considered the rival submissions carefully on this preliminary issue. As noted earlier, the AO had allowed interest under s. 244(1A) amounting to Rs. 7,60,504 in his order dt. 25th September, 1991, giving effect to the order of the Tribunal dt. 22nd March, 1991. Thereafter, the CIT took a view in his order under s. 263 that the proviso to s. 240 inserted w.e.f. 1st April, 1989, would be applicable as it was declaratory and consequently retrospective. In view of this proviso if the assessment is annulled, the refund shall become due only of the amount of tax paid in excess of the tax chargeable on the total income returned by the assessee. Evidently she had not decided on the question of interest under s. 244(1A) of the Act, though she may have considered it in her notice to the assessee. In our opinion, the decision of the Tribunal also rested on the same issue and not on interest under s. 244(1A) of the Act. We, therefore, hold that there was no merger as contended before us.
19. We also find further that the learned counsels contention for merger is relatable to the order of the AO dt. 25th September, 1991. However, subsequently there was an order passed by the AO on 17th March, 1994, giving effect to order of the Tribunal dt. 11th February, 1994. In this order, the AO allowed interest under s. 244(1A) amounting to Rs. 13,87,986 and the present dispute relates to this order and not earlier order. There is no contention before us that this order merged with any order of a higher authority.
20. For the above reasons, the preliminary objection raised by the learned counsel regarding merger of the AOs order is hereby rejected.
21. The learned counsel thereafter submitted that withdrawal of interest under s. 244(1A) amounting to Rs. 13,87,986 was outside the scope of s. 154 of the Act, which was confined to rectification of a mistake apparent from record. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by long drawn process of reasoning on points on which there may conceivably be two opinions. A decision on a debatable point of law is not a mistake apparent from record. Reliance was placed on the decision of the Supreme Court in T. S. Balaram, ITO vs . Volkart Bros. : [1971]82ITR50(SC) .
22. The learned counsel thereafter referred to the three conditions for grant of interest under s. 244(1A) of the Act mentioned in the assessment order and extracted by us above. The first condition was that the payment of the disputed amount of tax must have been made as a result of an order of assessment or penalty duly passed. It was true that the assessee had paid only self-assessment tax under s. 140A, but the adjustment of self-assessment tax towards regular assessment should be considered as payment for the purpose of s. 244(1A) of the Act. Reliance was placed on the following decisions :
1. CIT vs . Upper India Steel . ;
2. CIT vs. Leader Engineering Works (supra);
3. Cynanamid India Ltd. vs . K. N. Anantharama Ayyar : [1993]203ITR561(Bom) ;
4. Asian Techs. Ltd. vs . Dy. CIT : [1995]213ITR378(Ker) ;
5. National Agricultural Co-operative Marketing Federation of India Ltd. vs . Union of India : [1981]130ITR928(Delhi) ;
6. Leader Valves (P) Ltd. vs . Asstt. CIT and
7. ITO vs . Delhi Cloth Mills Ltd. .
23. The learned counsel fairly stated that the Full Bench of the Gujarat High Court had taken a contrary view in the case of Bardolia Textile Mills vs . ITO : [1985]151ITR389(Guj) , but subsequently the matter stood concluded in the assessees favour by the decision of the Supreme Court in Modi Industries Ltd. & Ors. vs. CIT (supra). In view of the above, the taxes should be taken to have been paid as a result of the order of assessment dt. 10th November, 1989 and first condition was satisfied.
24. Since the date was 10th November, 1989, which was after 1st April, 1975, the second condition was also stated to be satisfied.
25. The learned counsel thereafter submitted that the Tribunal had made an observation in their order dt. 11th February, 1994, extracted by us above, that the refund did not become due by the order of the Tribunal, but became due as no legal and valid assessment order was framed. However, this was a very debatable issue in light of a contrary finding by the Madras High Court in Seshayee Paper & Boards Ltd. vs . IAC : [1986]157ITR342(Mad) .
He, therefore, submitted that the matter went outside the scope of s. 154 of the Act.
26. For the above reasons, the learned counsel submitted that the order under s. 154 withdrawing interest of Rs. 13,87,986 should be reversed.
27. The learned Departmental Representative, on the other hand, relied on the order of the CIT(A). He emphasised that the Tribunal had held that the assessment order was non est and, therefore, no regular assessment dt. 10th November, 1989, existing. Thus, there was no question of converting the self-assessment tax under s. 140A into tax paid on regular assessment. The Tribunal itself had made it clear that the refund did not become due because of the order of the Tribunal. He therefore, stated that none of the three conditions were satisfied and it was an obvious and patent mistake rectifiable under s. 154 of the Act. There was no debate involved at all. Reliance was placed on the decision of the Supreme Court in M. K. Venkatachalam, ITO vs . Bombay Dyeing & . : [1958]34ITR143(SC) , where it was held that a mistake of law which is glaring and obvious is rectifiable. According to the learned Departmental Representative, the mistake of law in the present case fell into this category. He, therefore, submitted that the order under s. 154 withdrawing the refund should be upheld.
28. We have considered the rival submissions carefully. It has to be borne in mind that the issue before us arises from an order under s. 154 of the Act i.e., rectification of a mistake apparent from record. The learned counsel for the assessee has rightly relied on the decision of the Supreme Court in T. S. Balram vs. Volkart Bros. (supra). We have, therefore, to see whether the mistake on the record is an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. We, have, therefore, to approach the matter not merely on merits of the contentions but also with a view to ascertain whether the matter is such that s. 154 would apply.
29. The three conditions for allowance of interest under s. 244(1A) of the Act have been rightly summarised for our present purpose in the assessment order and extracted by us above. The payments of tax under s. 140A were made from January to March, 1975, as given in para 8 of the order under s. 154. Prima facie, they have not been made as a result of an order of assessment or penalty duly passed. However, the provisions of s. 219 have to be considered, according to which payment of advance tax shall be treated as a payment of tax for an assessment. Similarly, it is laid down in s. 140A(2) of the Act that after a regular assessment has been made, any amount paid under sub-s. (1) as self-assessment shall be deemed to have been paid towards such regular assessment. The Honble Supreme Court considered this question in Modi Industries Ltd. vs. Asstt. CIT (supra) as far as tax deducted at source and advance tax was concerned and held that for the purpose of s. 244(1A) of the Act, they must be treated as payment of income-tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, in other words, the date of the assessment order (See p. 808-G, H and p. 809-A). This sets to rest the controversy as far as TDS and advance tax are concerned. We need not to go into the other decisions of High Courts cited by the learned counsel, all of which were rendered earlier.
30. On the same reasoning and applying the provisions of s. 140A(2) of the Act, it has been held in ITO vs. Delhi Cloth Mills Ltd. (supra) that payments under s. 140A on account of the self-assessment get converted into payments towards regular assessments on the date of assessment. Thus, in our opinion, the matter is sufficiently debatable. It is not just that there may be conceivably two views, but a view contrary to the view of the Department has already been taken in the above decisions.
31. If the view taken in the above decision is followed, then the payment of self-assessment tax is to be taken as payment as a result of an order of assessment dt. 10th November, 1989, and the first two conditions stand satisfied.
32. It is now to be seen whether the refund resulted from an order passed in an appeal or other proceedings. The extract from the order of the Tribunal given above does say that the refund did not become due by the order of the Tribunal, but became due as no valid, legal assessment was framed. We are not on merits of this decision. The only question before us is whether this is a debatable matter. In our opinion, the learned counsel has rightly relied on the decision in Seshayee Paper & Boards Ltd. vs. IAC (supra). It was held that even a wrong order has a finality and unless that finality is disturbed by an process known to law or by a process authorised by law, the rights of assessee and the Revenue will continue to be governed by that order. In view of these observations, we hold that it is sufficiently debatable whether the refund resulted from an order passed by the Tribunal or not, so as to take the matter outside the purview of s. 154.
33. For the above reasons, we hold that withdrawal of refund of Rs. 13,87,986 by an order under s. 154 could not have been made and the order of the CIT(A) in this regard is hereby reversed.
34. Ground No. 5 before us raises a consequential issue and relates to the order of the CIT(A) confirming rejection of the assessees claim for interest on refund from the date of payment of tax in case payments were made after 31st March, 1975, and from 10th November, 1989, in case payments were made before 1st April, 1975. The CIT(A) has not given any decision on this aspect and, therefore, the matter is restored to the file of the CIT(A) for this limited purpose. For statistical purposes, this ground is allowed.
35. In the result, the assessees appeal is partly allowed.
ITA No. 62/All/1996
36. As noted earlier, the AO passed an order under s. 154 dt. 11th October, 1993, giving effect to an order under s. 263 passed by the CIT. No interest was allowed to the assessee. The assessee filed an application dt. 2nd November, 1993, under s. 154 of the Act claiming interest. Consequently, an order under s. 154 was passed on 10th November, 1993, allowing interest under s. 244 from May, 1991, to October, 1993, amounting to Rs. 32,240.
37. The assessees appeal before the CIT(A) against the order under s. 154 was dismissed on the ground that it was infructuous as she had held that no interest at all was allowable to it under the Act. The assessee is now in appeal before us.
38. We have held above that the interest already allowed under s. 244(1A) cannot be withdrawn under s. 154. Regarding quantum of interest, the matter has not been adjudicated by the CIT(A). We, therefore, restore it to the file of the CIT(A) with the direction to give a decision on merits after giving both sides an opportunity of being heard.
39. For statistical purposes, the assessees appeal is treated as allowed.
ITA No. 63/All/1996
40. We have noted above that the AO passed an order dt. 17th March, 1994, giving effect to the order of the Tribunal dt. 11th February, 1994 and allowing interest of Rs. 13,87,986. It was stated therein that the assessee-company was entitled to get refund and interest thereon w.e.f. May, 1991. The assessee filed an appeal before the CIT(A) disputing the date of May, 1991, for giving interest. According to the assessee interest was due from 1st April, 1977.
41. The CIT(A) treated the appeal as infructuous and dismissed it since she had held separately that no interest at all was allowable. The assessee is now in appeal before us.
42. We have heard the rival submissions. We have already held separately that interest allowed under s. 244(1A) of the Act cannot be withdrawn under s. 154 of the Act. The CIT(A) should, therefore, now decide the ground on merits. The matter is accordingly restored to the file of the CIT(A).
43. For statistical purposes, the assessees appeal is allowed.