| SooperKanoon Citation | sooperkanoon.com/61903 |
| Court | Income Tax Appellate Tribunal ITAT Madras |
| Decided On | Feb-11-1986 |
| Judge | D Meenakshisundaram, G Raghavan |
| Reported in | (1986)19ITD604(Mad.) |
| Appellant | Seventh Income-tax Officer |
| Respondent | Sitalakshmi Ginning Factory |
2. This appeal arises out of the income-tax assessment of Sitalakshmi Ginning Factory (the assessee). The assessment year is 1980-81 for which the previous year ended on 31-12-1979. The main objection of the revenue in this appeal is that the Commissioner (Appeals) was not justified in directing the ITO to grant interest under Section 214 of the Income-tax Act, 1961 ('the Act') on the refund of excess tax paid by the assessee amounting to Rs. 22,568. The Commissioner (Appeals) found from the assessment order that the ITO determined a net refund of Rs. 22,568 after giving credit for a sum of Rs. 85,000 paid by the assessee during the financial year 1979-80. The ITO described this payment as 'tax paid otherwise', whereas the assessee contended that this was actually the advance tax paid by it under Section 209A of the Act. The ITO refused to grant any interest under Section 214 on this refund of Rs. 22,568 since he declined to recognise the payments made by the assessee during the financial year 1979-80 as advance tax payments. The Commissioner (Appeals) further found that though some assessment was already made on the assessee before 15-6-1979 when the first instalment of advance tax was due and thus though the assessee was required to file the statement of advance tax in Form No. 28A prescribed by the Income-tax Rules, 1962, ('the Rules') the assessee had filed an estimate in Form No. 29 prescribed by the Rules. He further found that in this estimate filed by it, the assessee disclosed a larger amount of current income than what the assessee would have been required to disclose in Form No. 28A. The assessee paid the following amounts of advance tax instalments of Rs. 8,800 on 12-6-1979, Rs. 8,800 on 11-9-1979 and Rs. 67,400 on 12-12-1979, thus, making up a total amount of Rs. 85,000. The Commissioner (Appeals) further found that just because the assessee filed an incorrect form, namely, Form No. 29 instead of Form No. 28A, the ITO was refusing to recognise the payments of Rs. 85,000 as advance tax payments. The Commissioner (Appeals) felt that the stand of the ITO was neither fair nor legal, as held by the Tribunal, Madras Bench 'C in the case of ITO v.Balasubramania Mills Ltd. [1984] 7 ITD 785. The Commissioner (Appeals) pointed out that this decision of the Tribunal was rendered on 17-11-1983 and only after seeing this decision of the Tribunal the assessee filed the additional ground claiming interest under Section 214. Since this additional ground raised by the assessee was purely a legal one, he admitted the same. He further held that according to the decision of the Tribunal even if an incorrect form of advance tax was used by the assessee, still the actual payment made during the financial year should be regarded as advance tax payment The Commissioner (Appeals) also held that actually in the present case the assessee paid more advance tax than what was strictly necessary. He also referred to and relied on the decision of the Madras High Court in the case of Addl. CIT v. Chitra Sagar [1980] 121 ITR 699. He, therefore, accepted the assessee's contention in the additional ground and directed the ITO to grant interest under Section 214 on the refund due to the assessee and allowed the additional ground raised by the assessee. This is being objected to by the revenue in the present appeal.
3. After hearing the learned counsels on both sides, we do not find any merit in the appeal filed by the revenue. In fact, the learned departmental representative, Shri S.V. Jagannathan, did not dispute the facts set out above, nor the applicability of the two decisions relied on by the Commissioner (Appeals) to grant relief to the assessee. We may further add that in addition to these two decisions, the latest decision of the Madras High Court in CIT v. T.T. Investments & Trades (P.) Ltd. [1984] 148 ITR 347 is directly in favour of the assessee.
This position was not disputed by the revenue. Their only plea was that they want to keep this issue alive. We, therefore, respectfully follow the two decisions of the Madras High Court in Chitra Sagar's case (supra) and T.T. Investments & Trades (P.) Ltd.'s case (supra) and the decision of the Tribunal in the case of Balasubramania Mills Ltd. (supra) and hold that the Commissioner (Appeals) was right in accepting the assessee's contentions and in directing the ITO to allow interest to the assessee on the refund due to it under Section 214.
4. However, the learned departmental representative raised another objection by way of an argument at the time of hearing of the appeal on the question of maintainability of the additional ground that was filed by the assessee before the Commissioner (Appeals) on the non-granting of interest under Section 214 by the ITO. According to Shri Jagannathan, this argument of the revenue would be covered by ground No. 2 raised before us and that since this was purely a legal issue, the revenue should be allowed to raise the same. He also contended that no appeal would lie against an order disallowing interest under Section 214 as held by the Special Bench of the Tribunal in ITO v. India Tyre & Rubber Co. (I) (P.) Ltd. [1983] 3 SOT 92 (Bom.). He further submitted that this Special Bench decision has been consistently followed by the Madras Benches of the Tribunal. He also referred us to two orders, the first one is of the Madras Bench 'C of the Tribunal in the case of Second ITO v. J. Gowrishankar [IT Appeal No. 1264 (Mad.) of 1984, dated 18-5-1985]. The other order is in the case of Fourth ITO v. Smt.
Rajammal [IT Appeal No. 2406 (Mad.) of 1984, dated 30-8-1985].
5. Shri Santhanakrishnan, the learned counsel for the assessee submitted that the contentions of the revenue are untenable in view of the direct authority of the Madras High Court in the case of Rajyam Pictures v. Addl. CIT [1978] 114 ITR 847. He pointed out that in this case it has been held by the Madras High Court that no appeal will lie under Section 246 (c) of the Act against the imposition of interest alone as it is not an order of assessment and that in an appeal filed against the assessment, the levy of penal interest also could be challenged. Their Lordships of the Madras High Court followed the decision of the Bombay High Court in CIT v. Jagdish Prasad Ramnath [1955] 27 ITR 192. The learned counsel, therefore, submitted that in view of this decision of the Madras High Court, the additional ground raised by the assessee before the Commissioner (Appeals) was maintainable and was rightly entertained by the Commissioner (Appeals).
6. In his reply, Shri Jagannathan, the learned departmental representative, drew our attention to the fact that the Tribunal in the case of J. Gowrishankar {supra) has considered this decision of the Madras High Court also, but still preferred to follow the Special Bench decision in India Tyre & Rubber Co. {I) (P.) Ltd.'s case {supra). He, therefore, argued that we should also hold that the appeal to the Commissioner (Appeals) by way of an additional ground against the non-granting of interest under Section 214 was not maintainable.
7. We have carefully perused the Special Bench decision relied on by the revenue as well as the decision of the Madras High Court relied on by the assessee's learned counsel. We have also studied the other two orders of the Madras Benches of the Tribunal relied on by the revenue.
It is our considered view that the additional ground filed by the assessee before the Commissioner (Appeals) against the non-granting of interest under Section 214 was perfectly maintainable in law and was rightly entertained by the Commissioner (Appeals). The decision of the Madras High Court in Rajyam Pictures' case {supra) directly and fully supports the case of the assessee. At pages 849 and 850 after referring to the decision of the Bombay High Court in the case of Jagdish Prasad Ramnath {supra) their Lordships of the Madras High Court held as follows : ... We respectfully follow the reasoning in this judgment on the facts of this case as no appeal has been preferred against the assessment order as such. Appeals were taken only from the order imposing penal interest. In fact, the assessee had not questioned the imposition of tax. The only matter sought to be agitated is against the imposition of penal interest. We, therefore, hold that no appeal will lie against such imposition of penal interest alone under Section 246{c) of the Income-tax Act....
It would be noticed that in the said case before the Madras High Court the assessee had not filed any appeal against the assessment order as such, but had filed an appeal against an order imposing penal interest.
It was for this reason that their Lordships answered the question in favour of the revenue and against the assessee in the said case. This decision of their Lordships was delivered on 30-1-1978.
8. It will be noticed that the Special Bench decision was passed on 23-2-1978. Apparently, the decision of the Madras High Court in Rajyam Pictures' case {supra) could not have been available to the parties to bring the same to the notice of the Special Bench at the time of hearing of the case. In fact, there is really no conflict between this decision of the Special Bench and the decision of the Madras High Court, as the facts of the case before the Special Bench also show that the assessee in the said case had filed an appeal only against the non-granting of interest under Section 214 and not on any other point in the assessment order as such. We are, therefore, of the view that this Special Bench decision would not stand in the way of the assessee in the present case.
9. In addition to the decision in the case of Rajyam Pictures {supra), we find that there are two more decisions of the Madras High Court, which are in favour of the assessee. The first one is in the case of CIT v. City Palayacot Co. [1980] 122 ITR 430 (Mad.). While answering the second question their Lordships held as follows : The arguments appeared to proceed before us as if there were some inconsistencies between the two decisions of this Court. In South India Flour Mills (P.) Ltd. v. CBDT [19681 70 ITR 863, it was ruled that the levy of penal interest could not be challenged in any appeal. In the later decision in Rajyam Pictures' case [1978] 114 ITR 847 also, the same view was taken, but with the modification that in an appeal against the assessment there could be a challenge to the legality of the levy of interest. There is no inconsistency between the two decisions. This aspect as to whether the legality of the levy of penal interest could be challenged in an appeal against the assessment on other aspects had not to be considered in the earlier decision. The same view as taken in the later decision of this Court has also been taken by the Calcutta High Court in CIT v. Lalit Prasad Rohini Kumar [1979] 117 ITR 603, which has reviewed all the earlier cases on the point.
It will be noticed from the above passage that their Lordships have pointed out that there was no inconsistency between the two decisions in the case of Rajyam Pictures {supra) and South India Flour Mills {P.) Ltd. v. CBDT [1968] 70 ITR 863 (Mad.).
10. The next decision is the one in the case of Triplicane Urban Cooperative Society Ltd. v. CIT [1980] 126 ITR 125 (Mad.). In this case, after referring to all the earlier decisions of the Court and also the decision of the Calcutta High Court in CIT v. Lalit Prasad Rohini Kumar [1979] 117 ITR 603, their Lordships of the Madras High Court held as follows : The view taken in the last-mentioned case was that so long as the assessee had some grievance regarding the assessment, he could include his objection to the levy of interest in the appeal before the AAC but an appeal will not, however, lie only against the levy of interest simpliciter. The same principal would hold good even with reference to the claim of interest by the assessee on the refund due to him. In CIT v. Lalit Prasad Rohini Kumar [1979] 117 ITR 603, the Calcutta High Court also has taken the same view, viz., the interest factor in the assessment could not by itself be a subject-matter of appeal before the AAC. But there is no bar to its being raised as part of the appeal on other grounds.
Again, their Lordships have held as follows on the facts of the case before them : ... The assessee could have challenged the order dated 20th July, 1971, before the AAC if it had any other grievance against such order. Unfortunately, it could not take up the matter before the AAC, because it had no other grievance against that order. (p. 133) 11. In our view, the above-mentioned passages quoted from the decision of the Madras High Court in the case of Triplicane Urban Co-operative Society Ltd. {supra) clinches the issue in favour of the assessee and against the revenue. Apparently, the attention of the earlier Benches of the Tribunal in the two decisions relied on by the revenue was not drawn to these three decisions of the Madras High Court and the passages quoted above. We may mention that in the case of Smt. Rajammal (supra) it was an ex parte order as the assessee did not appear before the Tribunal at the time of hearing. In the case of J. Gowrishankar (supra) though there is a reference to the decision in the case of Rajyam Pictures (supra), the abovementioned passages from the case of Triplicane Urban Co-operative Society Ltd. (supra) was not brought to the notice of the Bench. If the said passages had been brought to their notice, we have no doubt that the decision of the Tribunal would have been in favour of the assessee.
12. For the reasons discussed above, we hold that neither the Special Bench decision nor the other two orders of the Tribunal would stand in the way of the assessee's contention being accepted that the additional ground filed before the Commissioner (Appeals) was maintainable. All the three decisions of the Madras High Court from which we have quoted above, are directly in point and are in favour of the assessee. In the present case, the assessee had filed an appeal objecting to the disallowance of its claim under Section 80HH of the Act. This was the main ground of appeal before the Commissioner (Appeals). It was only by way of an additional ground the assessee had taken the non-granting of interest under Section 214 on the amount of tax refunded to it by the ITO. Therefore, we respectfully follow the three decisions of the Madras High Court in the cases of Rajyasn Pictures (supra), City Palayacot Co. (supra) and Triplicane Urban Co-operative Society Ltd. (supra) and hold that the additional ground raised by the assessee before the Commissioner (Appeals) was competent and maintainable in law and was rightly admitted and allowed by the Commissioner (Appeals).