Karsanbhai & Shantaben Oral Discretionary Family Trust, Ahmedabad V. Income Tax Officer, Ward-5(3)(1), Ahmedabad

ITA 411/AHD/2022

AI Insights

The case involves Karsanbhai & Shantaben Oral Discretionary Family Trust, which appealed against the orders of the Commissioner of Income Tax (Appeals), Ahmedabad, concerning the adjustment of tax and interest refunds for the assessment years 1983-84 and 1984-85. The primary contention was about the method of adjusting the refund received against the due tax and interest. The Tribunal found that the earlier refund was short and ruled that the interest should be adjusted first against the refund, followed by the principal amount, based on the principles of fairness and previous judicial decisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134548 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-01-2023
• Assessment Year: 1983-1984
• Appeal Filed On: 30-10-2022
• Other Referred Cases: Nima Specific Family Trust Vs. ACIT (SCA No.7073 of 2018), Union Bank of India vs. ACIT reported in 72 taxmann.com 348
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 154; 143(3); 244A; 72

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.411-412/AHD/2022 िनधाᭅरण वषᭅ/Asstt. Years: (1983-1984 & 1984-1985) Karsanbhai & Shantaben Oral Discretionary Family Trust, Nirma House, Ashram Road, Ahmedabad-380009. PAN: AABTK2987K Vs. I.T.O. Ward-5(3)(1), Ahmedabad. (Applicant) (Respondent) Assessee by : Shri Himanshu Shah, A.R Revenue by : Shri Sanjaykumar, Sr. D.R सुनवाई कᳱ तारीख/Date of Hearing : 09/01/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 11/01/2023 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned two appeals have been filed at the instance of the Assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals), Ahmedabad of even dated 05/08/2022 arising in the matter of assessment order passed under s. 154 & 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years (1983-1984 & 1984-1985) respectively. ITA nos.411-412/AHD/2022 A.Ys. 1983-84 & 1984-85 2 2. The assessee has raised the following grounds of appeal: 1. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income-tax (Appeals) has erred in points of law and facts. 2. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income-tax(Appeals) has grossly erred in dismissing the appellant’s ground in segregating the refund issued into tax refund and interest refund and adjusting the tax refund from tax refund due and interest refund from interest refund due instead of adjusting the entire refund granted first against the interest refund due and thereafter against the tax refund due. 3. Your appellant reserves the right to add, alter, amend all the or any of the above grounds of appeal as may be advised from time to time. 3. The only effective issue raised by the assessee is that the learned CIT (A) erred in holding that the refund issued is to be segregated into tax refund and interest refund and be adjusted accordingly. 4. The facts in brief are that the assessee in the present case is a Trust and filed the return of income having tax liability at Rs. Nil for AY 1983-84. Nevertheless, the assessee has paid the advanced tax amounting to Rs. 37,500/-. However, the dispute arose between assessee and revenue with respect to the income tax liability. In between, the assessee deposited further tax amount and the refund was also issued. Finally, the dispute settled in favour of the assessee and taxes paid became due to be refunded along with interest. The AO in while computing the final refund of taxes and due interest adjusted the earlier issue of refund by segregating the same as refund of tax and refund of interest and adjusted from due amount accordingly. 5. The assessee being aggrieved preferred an appeal before the learned CIT(A) and contended that refund issued on earlier occasion should first be adjusted against the interest due on refund and if remaining, then be adjusted against the principal amount of tax due to be refunded. 6. The learned CIT(A) dismissed the plea of the assessee by observing as under: ITA nos.411-412/AHD/2022 A.Ys. 1983-84 & 1984-85 3 8.2 On the above issue, this office finds no fault with action of LJAO in impugned contested order, which has been passed following order of Hon’ble Gujarat High Court’s decision in related case of Nima Specific Family Trust Vs. ACIT (SCA No.7073 of 2018). Thus, this ground of appeal is dismissed. 7. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before me. 8. The learned AR before me contended that the amount of interest on the refund granted earlier shall be adjusted against the interest amount for which the assessee is entitled. 9. On the other hand, the learned DR contended that the AO has rightly attributed the amount of refund granted to the assessee under section 244 of the Act towards the principal and interest respectively. 10. I have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that that the amount of refund issued on earlier was short granted by the revenue. Thus the issue arises whether the assessee can claim the recovery of the interest amount first out of the refund granted by the revenue or the same should be adjusted towards the principal amount of tax refund. At the outset, I find that there was identical issue before me in case of Karsanbhai Kachrabhai Patel HUF bearing ITA No. 183/Ahd/2022, where I have decided the issue in favour of the assessee vide order dated 21-12-2022 by observing as under: 7. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that the assessee has paid advanced tax of ₹ 1,71,780/- whereas the income was determined at rupees NIL. Accordingly, the amount of advance tax paid by the assessee became due to him (the assessee). The 1st refund of ₹ 1,09,410/- was granted by the revenue against the advance tax paid by the assessee. As on the date of refund of ₹1,09,410/-, the calculations made by the assessee and the revenue stand as under: a. As per the calculation of the assessee - Advance tax due to be refunded Rs. 1,71,780/- - Interest up to the date of first issue of refund Rs. 76,872/- b. As per the conclusion of the revenue - Advance tax due to be refunded Rs. 1,71,780/- - Interest up to the date of first issue of refund Rs. 76,872/- ITA nos.411-412/AHD/2022 A.Ys. 1983-84 & 1984-85 4 7.1 At the time of 1st refund of ₹ 1,09,410/-, there was no dispute between the assessee and the Department qua the principal amount of refund viz a viz the interest thereon till November 1987 which has been elaborated in the immediate preceding paragraph. 7.2 Further, there is also no dispute to the fact that the amount of refund was short granted by the Revenue in November 1987. The assessee has first adjusted the full amount of interest of ₹ 76,870/- payable till November 1987 against the refund of ₹ 1,09,410/- and the balance amount of ₹ 32,538/- was treated as the recovery against the principal amount of ₹ 1,71,780/- only, thus leaving the principal amount due at Rs. 1,39,242/- only. As per the assessee, the interest should be calculated on this amount till the date of issuance of second instalment of refund. 7.3 On the contrary, the revenue was of the view that the amount of refund for ₹ 76,920/- should be treated as adjustment against the principal amount and the balance amount of ₹ 32,490/- should be adjusted against the interest of ₹ 76,872/- only. Thus, the issue arises whether the assessee can claim the recovery of the interest amount out of the refund granted by the revenue or first the principal amount should be adjusted against the refund granted by the revenue. This controversy has been answered by Mumbai tribunal in the case of Union Bank of India vs. ACIT reported in 72 taxmann.com 348 wherein it was held as under: “3.10 It is noted from the observations of the Hon'ble Supreme Court that it has been observed that whatever money has been received by the department, it ought to be refunded ex aequo et bono. It is a Latin phrase which means 'what is just and fair' or 'according to equity and good conscience'. Something to be decided ex aequo et bono is something that is to be decided by principles of what is fair and just. A decision-maker who is authorized to decide ex aequo et bono is not bound by legal rules but may take account of what is just and fair. Thus, if we decide the issue before us ex aequo et bono, then it would be decided by the principles of what is fair and just and not necessarily as per strict rule of law. Thus, since the statute itself has already prescribed a particular method of adjustment in explanation to section 140A(1), then justice, fairness, equity and good conscience demands that same method should be followed while making adjustment for refund of taxes, especially when no contrary provision has been provided. Under these circumstances and aforesaid discussion, we find that the judicial proprietary demands that order of the Tribunal of earlier years must be followed and therefore we direct the AO to re-compute the amount of interest u/s. 244A by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Thus, with these directions, the appeal of the assessee is allowed.” 7.4 In view of the above we hold that the amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee in the given facts and circumstances. 7.5 We are also conscious to the fact that the AO has made a reference in his order to the judgment of the Hon’ble Supreme Court in the case of Gujarat Flouro chemicals reported 24 taxmann.com 338 wherein the issue was different than the case on hand. The Hon’ble Supreme Court has directed as under: 8. The argument in Sandvik Asia Ltd. (supra) on behalf of the assessee was that it was entitled to compensation by way of interest for the delay in payment of the amounts lawfully due to it which were wrongly withheld for a long period of seventeen years. Vide Paragraph (23) of Sandvik Asia Ltd. (supra), the Division Bench held that, in view of the express provisions of the Act, the assessee was entitled to compensation by way of interest for the delay in payment of the amounts lawfully due to the assessee, which were withheld wrongly by the Revenue. With due respect, Section 214 of the Act does not provide for payment of compensation by the Revenue to the assessee in whose favour a refund order has been passed. Moreover, in Sandvik Asia Ltd. (supra), interest was ordered on the basis of equity. 7.6 However, in the case on hand before us, the facts are altogether distinguishable from the facts of the case which were there before the Hon’ble Supreme Court as discussed above. In our ITA nos.411-412/AHD/2022 A.Ys. 1983-84 & 1984-85 5 humble understanding, we find that there was no question before the Hon’ble Supreme Court whether the amount of refund granted by the Revenue first has to be adjusted against the interest or the principal. Accordingly, no benefit can be derived by the revenue based on the judgment of Hon’ble Supreme Court cited above. As such, the issue on hand is identical to the controversy which was there before the Mumbai tribunal in the case cited above and the same has been resolved. The relevant extract of the order of the ITAT has already been reproduced somewhere in the preceding paragraph. In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT (A) and direct the AO to allow the amount of interest to the assessee in the light of the aforesaid discussion and as per the provisions of law. Hence, the ground of appeal of the assessee is allowed. 10.1 Before us, no material has been placed on record by the Revenue to demonstrate any contrary decision of the Higher Judicial Authorities. Before me, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the case cited above nor has placed any contrary binding decision in its support. Thus respectfully following the above finding I hereby allow the ground of appeal of the assessee. 10.2 In the result, appeal of the assessee is allowed. Coming to ITA No. 412/Ahd/2022 for A.Y. 1984-85. 11. At the outset, I note that the issue raised by the assessee in its grounds of appeal for the AY 1984-85 are identical to the issues raised by the assessee in ITA No. 411/AHD/2022 for the assessment year 1983-84. Therefore, the findings given in ITA No. 411/AHD/2022 shall also be applicable for the year under consideration i.e. AY 1984-85. The appeal of the assessee for the assessment 1983-84 has been decided by us vide paragraph No.10 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 1983-84 shall also be applied for the year under consideration i.e. AY 1984-85. Hence, the grounds of appeal filed by the assessee is hereby allowed. 11.1 In the result, the appeal of the assessee is allowed. ITA nos.411-412/AHD/2022 A.Ys. 1983-84 & 1984-85 6 12. In the combined results, both the appeals of the assessee are allowed. Order pronounced in the Court on 11/01/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 11/01/2023 Manish