1. The main issue involved in all these cases preferred by the partners of a firm is rather the same, i.e. whether the rejection of their claim for interest on refund of the tax paid under the Wealth Tax Act, stating that the tax paid was not in response to any ‘demand’ raised, but by way of self-assessment, is justified or not.
2. Since the sequence of events in all the three cases is almost similar, but for the name of the parties and difference in respect of the assessment year concerned, it will be enough, if reference is made to the facts, figures, exhibits and parties as arrayed in W.P. (C) No.1732 of 2008, more so, when the issue involved is purely a ‘question of law’.
3. The petitioner is a partner of the firm by name M/s Abad Fisheries and also a partner of another establishment by name M/s Abad Enterprises. In respect of the assessment year 1991-’92, return was filed under the Wealth Tax Act on 30.10.1991, declaring the net wealth of Rs.1,46,43,300/-. While filing the said return, the income of the firm was given, as estimated, since the accounts of the firm were not finalized. But, subsequently, a revised return was filed on 22.03.1992, declaring the net wealth as Rs.87,88,200/- based on the actual facts and figures. According to the petitioner/assessee, the assessee’s share in purchase tax paid by the other concern was liable to be excluded, more so, since the concerned Tribunal had already held in the assessee’s own case, that the purchase tax was an admissible liability. However, since the Department had already sought for a ‘reference’ against the said order passed by the Tribunal, the assessing authority ignored the revised return and finalized the assessment based on the entries as given in the original return, taking in the purchase tax element as well, vide Ext.P1.
4. Being aggrieved of Ext.P1 assessment order, the petitioner preferred an appeal before the first appellate authority (Commissioner), who accepted the case of the assessee and allowed the appeal. The said order in appeal was challenged from the part of the Revenue, by approaching the second appellate authority (appellate Tribunal), who reversed the decision of the first appellate authority. met with the situation, the petitioner/assessee filed an appeal before this Court, when orders passed by the lower authorities were set aside and the assessing officer/second respondent was directed to ‘re-do’ the assessment in accordance with law, in view of the observations therein. It was accordingly that the assessing officer passed Ext.P2 order, more or less following Ext.P1 original assessment order. But, an appeal preferred by the assessee, the appellate authority clearly found that the assessing authority had gone wrong and accordingly directed the assessing officer to allow the proportionate liability of the partner for purchase tax in the computation of net wealth. Pursuant to the said appellate order, the matter was again considered by the second respondent/assessing officer, who passed Ext.P3 assessment order on 11.11.2005, whereby it was held that, the tax paid by the petitioner was in excess, ordering consequential refund.
5. However, at the time of passing Ext.P3 order, the assessing officer had not sanctioned interest on the refund of excess tax paid by the petitioner and as such, Ext.P4 petition was filed by the petitioner/assessee before the assessing officer for granting interest, pointing out that, there was a mistake apparent on the face of the records, which required to be rectified. The assessing officer considered the matter, who held that, the payment effected by the petitioner/assessee was not against any notice of payment issued under Section 30 of the Act, the petitioner having effected payment under Section 15B of the Act. According to the assessing officer, ‘Explanation’ to Section 34(4B)(a) clarified that, interest would be payable, only if the payment was against any ‘notice of demand’ issued under Section 30. The claim for interest was accordingly rejected as per Ext.P5. Ext.P6 petition filed by the petitioner/assessee, before the first respondent under Section 25 of the Act, did not turn to be fruitful and the same was dismissed as per Ext.P7 order dated 28.09.2007, which made the petitioner to approach this Court by filing W.P.(C) 1732 of 2008. Almost similar is the course and events, pursued by the other petitioners and the authorities under the Act, in respect of W.P.(C) Nos. 3435 and 3436 of 2008.
6. Despite pendency of the matters for more than three years, the respondents have not chosen to file any counter affidavit. Mr. Jose Joseph, the learned standing counsel appearing for the respondents submits that no factual position is sought to be disputed and as such, non-filing of counter affidavit is of no consequence.
7. Mr. P. Balakrishnan, the learned counsel appearing for the petitioners submits that the idea and understanding of the respondents as to the eligibility of the petitioner/assessee to have interest on the refund under the relevant provisions of the Wealth Tax Act is quite wrong and misconceived. The learned counsel submits that the scheme of the Statute is rather similar to the position under the Income Tax Act and as such, though there is no direct decision on the point under the Wealth Tax Act, reliance can very well be made on the decisions rendered by the Apex Court with regard to the provisions under the Income Tax Act, particularly, in relation to Sections 214 and 244A. Reliance is sought to be placed on the decisions rendered by the Supreme Court in Modi Industries Ltd. and Others Vs. Commissioner of Income Tax and another [(1995) 216 ITR 759), Sandvik Asia Ltd. Vs. Commissioner of Income-Tax and others [(2006) 280 ITR 643 (SC)] and Commissioner of Income Tax Vs. H.E.G. Ltd. [(2010) 324 ITR 331 (SC)].
8. Mr. Jose Joseph, the learned standing counsel appearing for the respondents submits that, there is no dispute with regard to the law laid down by the Apex Court in the above decisions. But according to the learned counsel, the said decisions are not applicable to the case in hand. It is also pointed out that the above decisions are more with regard to the advance tax/TDS, with regard to which there was no control for the assessee, by virtue of the statutory mandate, unlike the position in the instant case, where the assessee has chosen to satisfy the excess tax himself, by way of self-assessment under Section 15B.
9. Since there is no dispute with regard to the facts and figures, it stands un-rebutted that the original return was filed by the assessee on the basis of the liability ‘as estimated’, since the accounts of the firms were not finalized. But later, on finalization of the accounts, actual facts and figures were brought to light, leading to the revised return, declaring the actual net wealth. Since there is no dispute as to the net wealth declared by the assessee/petitioner as above, the crucial question to be considered is, whether the tax liability of the petitioner/assessee was fixed based on the actual net wealth, as given in the revised return, facilitating refund if any, on time.
10. Going by the contents of Ext.P1 original assessment order passed by the second respondent, filing of the revised return is very much taken note of. It was also taken note of by the assessing authority that the Tribunal had already held in the assessee’s own case that the element of purchase tax was an admissible liability and that the assessee is entitled to have the assessment finalized in tune with the revised return. But, the said plea was not accepted by the second respondent/accessing authority, as given in Ext.P1 order itself, holding that, the Department had sought for a reference against the Tribunal’s order and the assessment was finalized accordingly, mulcting a higher liability. This made the petitioner/assessee to have it challenged by filing appeal before the first appellate authority, which was considered and allowed; but, the department succeeded in getting the same reversed. It was thereupon, that the petitioner/assessee approached this court by way of appeal, leading to quashing of all the orders and directing the assessing authority to ‘re-do’ the assessment as specified, leading to Ext.P2 order, almost in similar lines as given in Ext.P1. The petitioner/assessee was made to fight for the cause further and finally, the first appellate authority held that the course pursued by the assessing officer was wrong and directed the assessing officer to allow ‘proportionate liability’ for purchase tax in the computation of net wealth. This made the assessing authority to realize the correct position of law, thus leading to Ext.P3 order, holding that, there was an excess payment and ordered refund. Admittedly, the proceedings attained finality on passing Ext.P3 order by the second respondent, as the Department did not choose to challenge the same any further.
11. The un-controverted factual position as above reveals that Ext.P3 was the order, which ought to have been passed by the second respondent/assessing authority, in place of Ext.P1 original assessment order; had the correct position of law been understood and applied by the second respondent/assessing authority, on time. It took several rounds of litigations before different authorities/forum, including this Court, to make the second respondent/assessing authority realizes that the petitioner/assessee is entitled to have the assessment finalized in tune with the figures as given in the ‘revised return’. Had it been done by the assessing officer correctly, earlier, in tune with the relevant provisions of law and the undisputed facts as given in the ‘revised return’, the petitioner/assessee would have been entitled to have the refund of the excess tax paid then and there. Whether the ignorance of law on the part of the second respondent/assessing authority, or an incorrect course and procedure pursued by the said authority contrary to the relevant provisions of law in finalizing the assessment, should be reckoned to extend premium to the wrong-doer, is the question.
12. As conceded by the learned counsel for the petitioner, no direct decision on the point under the Wealth Tax Act, is in existence or brought to the notice of this Court. Section 15B of the Act deals with ‘self-assessment’, while ‘regular assessment’ is provided under Section 16. Sub Section (1) of Section 15B makes it obligatory on the part of the assessee to satisfy the tax on the basis of the figures given in the return, including by way of interest, if there is any delay in filing return. Sub section (2) of Section 15B says that, after the regular assessment under Section 16, the amount if any paid under sub Section (1) shall be deemed to have been paid towards such regular assessment. When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Wealth Tax Act, 1957, the assessing officer shall serve upon assessee, a notice of demand in the prescribed form specifying the sum so payable, as provided under Section 30 of the Act. Section 31 explains, when the tax becomes payable and when the assessee shall be deemed to be in default, with reference to the entries in the demand notice to be given under Section 30. Refunds are provided under Chapter VII A of the Act, more particularly, under Section 34A. Sub sections 3, 3A and 4 of Section 34A specifying the rate of interest and such other relevant aspects, are specifically made not applicable in respect of any assessment for the assessment year commencing from 01.04.1989 or any subsequent assessment year, as provided under sub Section (4A). The law applicable to the instant case, the assessment years being 1991-‘92/1992-’93, in sub Section (4B) of Section34A, which is extracted below for convenience of reference.
S.34A(4B) (a)Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of sub-section, be entitled to receive in addition to the said amount, simple interest thereon calculated at the rate of one half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.
Explanation: For the purposes of this clause, “date of payment of the tax or penalty” means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 30 is paid in excess of such demand.
(b) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, 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.
(c) Where as a result of an order under sub-section (3) of sub-section (5) of section 16 or section 17of section 23 (or section 23A) or section 24 or section 25 or section 27 or section 29 or section 35 or any order of the Wealth-tax Settlement Commission under sub-section (4) of Section 22D, the amount on which interest was payable under clause (a) has been increased or reduced, as the case maybe, 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 30 and the provisions of this Act shall apply accordingly.
(d) The provisions of this sub-section shall apply in respect of assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.
To understand the application of the above provision to the case in hand, a reference to the nature and course of business and the claim put forth by the petitioner/assessee will be more beneficial.
13. The assessee/partner of the firms ‘Abad Fisheries’ and ‘Abad Enterprises’ limited, is engaged in the export of marine products. The firms purchase products locally and subject to certain process, the same is exported to foreign countries. The firms claimed exemption from the liability to pay purchase tax under Section 5 of the KGST Act in respect of the purchase turn over. It was on the ground that the said turnover was exempted under Section 5(3) of the CST Act and in the return filed by the assessee, he claimed his share in the previous year of its accounts for liability towards payment of purchase tax under the KGST Act, showing it as a ‘debt’ owed by him. It was with reference to the said factual position, that some observations were made by this Court, when the assessing officer was directed to ‘re-do’ the assessment, as taken note of by the assessing authority while passing Ext.P2 order. It was accordingly, that the particulars were called from the assessee in this regard as well, however, holding that, as on date, there was no liability towards the payment of purchase tax, as a result of sales tax assessment and hence there could be no ‘debt’ owed by the assessee on the valuation date of that account. However, on further appeal, the correct factual position was meticulously analyzed by the appellate authority, who allowed the appeal and directed the assessing authority to reckon the purchase tax liability as a deduction and to fix the tax liability accordingly, giving proportionate share of the purchase tax liability as given in the revised return, declaring the net wealth. It was pursuant to the said order, that the position was set right by the assessing authority, by passing Ext.P3 order dated 11.11.2005 arriving at the excess payment and ordered refund. In other words, this was an exercise which ought to have been pursued by the assessing authority at the first instance itself i.e. while passing Ext.P1 assessment order and it was only because of the mis-consumption of the assessing authority as to the relevant provisions of law, that the proceedings took a different turn by virtue of Exts.P1 and P2, which were got corrected/set right only much later, by passing Ext.P3. This being the position, is there any default on the part of the assessee, to be mulcted with any liability for causing delay in finalizing the assessment so as to attract sub clause (b) of sub Section (4B), is the point; which can be answered only in the negative.
14. The claim for ‘interest’ put forth by the petitioner/assessee has been turned down by the second respondent as per Ext.P5 and thereafter by the first respondent in revision, as per Ext.P7. The only explanation as given by the second respondent in Ext.P5 is that, interest is payable only if payment was effected pursuant to a ‘demand notice’ issued under Section 30, as given in the explanation to Section 34 A (4B); whereas the payment effected by the petitioner/assessee was under Section 15B, by way of ‘self-assessment’. But, ‘self-assessment’ is very much a mode of assessment, in view of the settled law on the point. The Statute also mandates that the tax payable by way of self-assessment is to be remitted along with the return. Sub section (2) of Section 15B makes it crystal-clear that, once a regular assessment is made under Section 16, any amount paid under Sub section 1 of Section 15B shall be deemed to be paid towards such regular assessment. Only if any residual liability is there, to have satisfied towards the balance amount of tax, interest, penalty or fine as the case may be, in consequence of any order under the Act, would it become necessary to have issued a demand notice under Section 30. If the amount is paid accordingly, in terms of the Statute as above, the same would require to be refunded with interest as specified when the actual liability is subsequently varied on appeal/revision/order rectifying the mistake, or under such other circumstances.
15. The absence of issuance of any notice under Section 30 will not or cannot tilt the balance in any manner as the liability to pay the amount is not on the basis of the demand notice, but on the basis of the assessment. Issuance of notice under Section 30 is only a consequential step to have the due amount realized. To put it more clear, a law-abiding citizen, who discharges the liability voluntarily as a prudent man to satisfy the same pursuant to the assessment (whether it be self-assessment or otherwise) without waiting for issuance of notice of demand, cannot be put in more disadvantageous position than a person who satisfies the due amount with interest or otherwise for the delay if any, after issuance of a notice of demand. With regard to the eligibility to have refund, the cause originates from the actual assessment. The Scheme of the Statute is such that, it visualizes payment of interest, if the amount due to the assessee is wrongfully retained at the hands of the revenue/department. There is absolutely no merit or rationale on the part of the respondents in taking a contrary stand in Ext.P5 or in Ext.P7 on this score. This is more so, when once the assessment has been completed and the tax paid has been adjusted, the amount becomes the tax paid pursuant to assessment order and as such, if any refund arises later, the same has necessarily to carry interest as well.
16. Referring to the relevant provisions of the Income Tax Act, particularly Sections 214 and Section 244 (1A), it has been held by the Apex Court in Modi Industries Ltd and Others Vs Commissioner of Income Tax and another [(1995) 216 ITR 759), that the assessee is entitled to have interest on the excess payment of advance tax. The legislative history has been discussed in the said decision, explaining the meaning of the term ‘regular assessment’. The reliance placed on the said decision by the assessee has been simply brushed aside by the first respondent, while passing Ext.P7 order in revision, stating that, the provisions considered by the Apex Court do not relate to an assessment order commencing on or after 01.04.1989, and that the assessee’s claim was for payment of interest under Section 34A (4B)(a) of the Wealth Tax Act, 1957 introduced w.e.f. 01.04.1989. The first respondent’s observation in Ext.P7 is that interest ordered by the Apex Court on revision was in respect of excess payment of ‘advance tax’ and ‘tax deducted at source’. According to the first respondent, ‘advance tax’ being paid on estimate basis, before the end of the previous year on a notionally fixed total income, may vary on finalization of the accounts of the previous year and in the case of ‘tax deducted at source’, the assessee is having no control over the tax payment, as the same is statutorily fixed irrespective of the income derived from receipts; whereas in the case of payment of self-assessment tax under Section 15B(1), the concerned assessee has full control over the payment, as the same is actually required to be paid only after finalization of the accounts and after computing the net wealth chargeable for the relevant valuation date. This Court finds that the logic and reasoning given in Ext.P7 to distinguish (1995) 216 ITR 759 is quite wrong and misconceived, if not puerile.
17. The Apex Court had further occasion to consider the law, as to the liability to satisfy interest on refund in respect of ‘advance tax’ paid in excess of the tax as assessed, in Sandvik Asia Ltd. Vs. Commissioner of Income Tax and Others [(2006) 280 ITR 643 (SC)]. After referring to the earlier decisions on the point, including Modi Industries Case (cited supra), it was held by the Bench that the assessee was entitled to have interest, also by virtue of general principles to pay interest, on the accounts wrongfully retained. The said decision was relied on by a Division Bench of the Madras High Court in Commissioner of Income Tax Vs. Cholamandalam Investment and Finance Co. Ltd. [(2007) 294 ITR 438 (Mad.)] and the appeal preferred by the Department/Revenue was dismissed, upholding the eligibility of the assessee to have interest on refund. The substantial question of law sought to be considered by the Bench was with reference to the question whether the assessee was entitled to have interest on the refund of tax paid under Section 140A, made on ‘self-assessment’, bringing the same within the purview of “any other case” under Section 244A(1)(b). After discussing the relevant provisions of law and the binding judicial precedents, the Bench observed that, besides the statutory liability, in view of the law declared by the Apex Court in Sandvik Asia Ltd’s Case(cited supra), the assessee was entitled to have interest on refund, following the general principle to pay interest on sums wrongfully retained. The above decision was challenged by the Revenue before the Apex Court and a three-member Bench, after considering the said case along with the connected cases, has affirmed the decision in Commissioner of Income Tax Vs. Cholamandalam Investment and Finance Co. Ltd. [(2007) 294 ITR 438 (Mad.), as per the common verdict passed in Commissioner of Income Tax Vs. H.E.G. Ltd. [(2010) 324 ITR 331 (SC)].
18. There is no factual controversy at all, that the petitioners had filed a revised return declaring the actual net wealth, which however was ignored by the assessing officer, while passing Ext.P1, till the same was finally accepted after different rounds of litigations, by passing Ext.P3. Had the assessing authority passed a proper order as given Ext.P3 at the initial stage i.e. when Ext.P1 order was passed, applying the correct position of law to the actual facts and circumstances, the petitioner would have obtained the refund then and there, as contemplated under the Statute. The protracted litigation became inevitable, only because of the wrong course pursued by the respondents and later, the version of the petitioner/assessee came to be accepted, as per Ext.P3, which became final, as the department did not pursue the matter any further. All the while, the amount paid by the petitioner/assessee was in excess of the actual liability, with reference to figures as given in their revised return, which was being enjoyed by the respondents, retaining the same at their hands, generating funds. In other words, the said excess amount was being wrongfully retained by the Revenue, virtually preventing the petitioner/assessee from obtaining the refund at proper time. This being the position, this Court finds that the petitioners are entitled to succeed in view of the decision by the Apex Court cited supra.
19. In the above circumstances, the impugned orders are set aside and it is declared that the petitioners are entitled to get interest on refund as provided under Section 34A (4B)(a) of the Wealth Tax Act, 1957. The respondents are directed to compute the figures in this regard and the due amount by way of interest shall be disbursed to the petitioners, as expeditiously as possible, at any rate, within three months from the date of receipt of copy of the judgment.
The Writ Petitions are allowed. No cost.