By the Court
On an application filed under section 256(1) of the Income Tax Act, 1961, the Tribunal, Jaipur, has referred the following question for our opinion :
'Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the assessing officer erred in law in withdrawing the interest allowed under section 244(1A) and in cancelling the order dated 21-5-1991, withdrawing the interest under section 244(1A) of the Income Tax Act, 1961 ?'
2. The assessee-Hindu undivided family was allowed refund of Rs. 54,364 as per order under section 154 of the Income Tax Act, 1961, dated 15-10-1990, on account of interest under section 244(1A) of the Act, in respect of assessment years 1958-59 and 1959-60. However, a demand of Rs. 28,163 was created against the assessee-Hindu undivided family vide ITNS-150, dated 22-1-1990, and the refund was adjusted against such. demand and such order of adjustment was passed prior to 1-4-1975. By subsequent order dated 21-5-1991, the Income Tax Officer withdrew the interest allowed by him under section 244(1A) of the Act and in appeal his action was upheld by the learned Deputy Commissioner (Appeals).
3. In an appeal before the Tribunal, Jaipur, it was argued that when the interest was allowed to the assessee under section 244(1A) of the Income Tax Act, 1961, the interest could not have been withdrawn in an order under section 154 of the Income Tax Act, 1961. This issue has been considered by Delhi High Court in the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) and CIT v. Dalmia Cement (Bharat) Ltd. : [1982]137ITR681(Delhi) . While considering the issue, the Tribunal has decided the issue as under :
'In the case of National Agricultural Co-operative Marketing Federation of India Ltd. (supra) the Delhi High Court has held that the advance tax paid earlier will get converted into a payment on the date of initial assessment of the tax due for the assessment year concerned. Carrying that sentence to its logical end, the assessee must be held entitled to interest on the amount of advance tax also to the extent it is found refundable from the date of the excess payment right upto the date of actual refund. Reiterating the same legal position in the case of CIT v. Dalmia Cement (Bharat) Ltd (supra) it was held that the Income Tax Officer had no jurisdiction to revise his earlier order to withdraw the interest by resort to the provisions of section 154 of the Act on the ground that there was a mistake which was required to be rectified, because the question whether the orders passed by the Income Tax Officer to give effect to the appellate orders were 'regular assessments' was of great difficulty and complicity and one of doubt and debate. This view of the Delhi High Court was affirmed by the Supreme Court by dismissing the Special Leave Petition of the department vide (1985) 145 ER 65 (St). The contention of the learned counsel for the assessee, therefore, gets good support from the decision of the High Court. I, therefore, hold that the Income Tax Officer erred in law in withdrawing the interest allowed to the assessee under section 244(1A) of the Act vide his order dated 15-10-1990. His subsequent order dated 21-5-1991, withdrawing the interest under section 244(1A) of the Act is accordingly cancelled.'
4. Mr. Singhi, learned counsel for the revenue, submits that the language of section 244(1A) of the Act, is plain and simple. When the language requires that the interest under section 244(1A) is payable only on the amount paid after 1-4-1975, then only the simple interest on the refunded amount can be allowed. If the amount has been paid earlier to 1-4-1975, no interest on refund can be allowed. It is an apparent, mistake on record and the interest which had wrongly been paid on refund, the Income Tax Officer had rightly withdrawn that interest.
5. Mr. Kasliwal, learned counsel for the assessee, submits that the assessee is entitled to interest for the entire year on the amount of pre-assessment tax paid and found it to be excessive of the required demand after giving effect to the appellate order for the assessment year 1976-77. He placed reliance on the decision of Punjab & Haryana High Court, in the case of CIT v. Hansa Agencies (P) Ltd and the decision of the Apex Court, in the case of Modi Industries Ltd. & Ors. v. CIT & Anr : [1995]216ITR759(SC) .
6. The relevant provisions of section 244(1A) of the Income Tax Act, 1961, reads as under :
'244(1A)Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31-3-1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted :
Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted:
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceedings :
Provided also that where any interest is payable to an assessee under this subsection, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess.'
7. Sub-section (1A) of section 244 of the Income Tax Act, 1961, has been inserted with effect from 1-4-1975. Before we go into the facts of the case in hand, we would like to refer some observations of various High Courts.
8. In the case of Sag Construction Associates v. Union of India & Ors. : [1998]234ITR501(Delhi) the High Court of Delhi at p. 502 observed as under :
'It is, therefore, clear that with the passing of the order of assessment dated 22-2-1983, without regard to the fact that the assessment order was set aside by the Assistant Commissioner the amount of TDS lost its such character and the same was deemed to have been paid in pursuance of the order of assessment. Hence, section 244(1A) would be clearly attracted.'
9. In National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India & Ors. (supra), at p. 953,, Delhi High Court observed as under :
'The second provision to which we would like to refer is the provision contained in section 244(1A) which has also been extracted earlier. This is a new provision introduced by the Finance Act of 1975. It provides that where payments of tax are made by an assessee after 31-3-1975, he would be entitled to interest in respect of such payments to the extent they are refunded on being found to be in excess of the amount of tax ultimately found due as a result of an appeal, revision, reference of rectification. Such interest is payable from the date of the payment of the excess amounts right up to the date of refund. '
The assessee is entitled for interest under section 244(1A) from the date of excess payment to date of refund.
10. In CIT v. Dalmia Cement (Bharat) Ltd., (supra), the issue before Delhi High Court when the interest under section 214 was allowed, can it be withdrawn in an order under section 154 of the Act. The Delhi High Court has considered this aspect and held that as issue regarding regular assessment is debatable, therefore, the interest paid under section 214 cannot be withdrawn in an order under section 154 of the Act.
11. In Modi Industries Ltd. & Ors. v. CIT & Anr. (supra), their Lordships have considered the meaning of 'regular assessment' for the purpose of section 214 of the Act. Their Lordships have summarised the judgment at p. 808 which reads as under :
'(i) Up to 31-3-1975, interest under section 214 is payable from the first day of April of the relevant assessment year to the date of the first assessment order. The amount on which the interest is to be paid is the amount of advance tax paid in excess of the tax payable by the assessee as calculated in the regular assessment (the first assessment order). The amount on which interest was payable did not vary due to the reduction or enhancement of tax as a result of any subsequent proceeding. But with effect from 1-4-1985, while the period for which interest was payable remained constant, the amount on which the interest was payable, varied with the variation in the quantum of refund as a result of any subsequent orders.
(ii) If any tax is paid pursuant to an assessment order after 31-3-1975 (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by the Income Tax Officer as payment of tax in discharge of the assessee's tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount under section 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source 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 word, the date of the assessment order.
(iii) With effect from 1-4-1985, interest payable under section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of the tax brought about by orders passed subsequent to the regular assessment as mentioned in sub-section (1A).'
And finally their Lordships held that 'regular assessment' could only mean the original assessment made under section 143 & 144 of the Act.
12. In CIT v. Hansa Agencies (P) Ltd. (supra) the issue before the Punjab & Haryana High Court was regarding payment of interest under section 244(1A) of the Act, 1961. The Punjab & Haryana High Court has taken the view that assessee is entitled to interest under section 244(1A) of the Act on the sum of Rs. 65,281 as well, as has been held by the Tribunal but the interest had to be paid from 30-8-1976, when the original assessment was framed under this sub-section.
13. It is true, that if any amount has been paid for the assessment in which assessment has been made after 1-4-1975, the advance tax paid or TDS has been deducted that be treated as payment after 1-4-1975, and if the total tax paid is in excess of the tax payable on assessed income, the tax paid prior to 1-4-1975, but assessment made after 1-4-1975 that cannot be ignored for the purpose of interest under section 244(1A) of the Act.
14. In the case in hand, the facts are not in dispute that the assessment had been made on 22-1-1956. On the date of assessment, not only the provisions of sub-section (1A) of section 244 was not forming the part of the Income Tax Act, 1961, but even Income Tax Act, 1961, was not in existence, therefore, there is no question of payment of interest under section 244(1A) of the Act, on the excess amount of the tax paid much before 1-4-1975. The assessee is not entitled for interest under section 244(1A) of the Act. The interest is payable only on the excess tax paid on or after 31-3-1975, the assessed cannot get the benefit of section 244(1A) of the Act. In the cases referred above, the assessment was made after 1-4-1975. In the case in hand the assessment had been made much before the date referred to in section 244(1A) of the Act, 1961. The Tribunal has wrongly relied upon the decision of Punjab & Haryana High Court, in the case of CIT v. Hansa Agencies (P) Ltd. (supra), in that case the relevant assessment year was 1976-77.
15. When the interest has wrongly been allowed, in our view the interest allowed, under sub-section (1A) of section 244 of the Act, can be withdrawn in order under section 154 of the Act, as that is an apparent mistake which can be rectified in order under section 154 of the Act, 1961.
In the result, we answer the question in negative, i.e., in favour of the revenue and against the assessee.
The reference application stands disposed of accordingly.