RAJASHEKHAR SWAMINATHAN IYER, MUMBAI V. DCIT 8(3), MUMBAI

ITA 5450/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2288 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 30-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2014
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: ASHOK D SHAH
• Section: 244A; 54; 154

Judgement Text

, , D, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.5450/MUM/2014 ASSESSMENT YEAR: 2009-10 RAJASHEKHAR SWAMINATHAN IYER, A-3 PALM BEACH APARTMENT JAI PRAKASH ROAD, VERSOVA MUMBAI -400 061 / VS. DCIT 89 ( 3) MUMBAI- ( REVENUE ) ( RESPONDENT ) P.A. NO. AAAPI0724R ASSESSEE BY SHRI ASHOK D. SHAH ( A R) REVENUE BY SHRI O.P. MEENA (D R) ! ' # / DATE OF HEARING: 30/06/2016 ' # / DATE OF ORDER: 27/07/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER OF LD. ORDER OF LD. COMMISSIONER OF INCOME TAX (APP EALS)-18 MUMBAI, {(IN SHORT CIT(A)}, DATED 10.10.2013 PAS SED AGAINST RAJASHEKHAR SWAMINATHAN 2 ASSESSMENT ORDER U/S 154 10.10.2013. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL THAT ASSESSEE SHOULD BE GRANTED INTEREST U/S 244A OF THE ACT FROM THE DATE OF ISSUA NCE OF ORDER U/S 143(1) UP TO THE ACTUAL DATE OF GRANTING OF FUN DS. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI OMPRAKASH MEENA, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI R.C. JAIN, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 3. THE BRIEF BACKGROUND OF THE CASE AS NOTED FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE AO PASSED AN ORDER U/S 154 OF THE I.T. ACT REJECTING THE CLAIM OF THE ASSESSEE RELATING TO INTEREST U/S 244A OF THE IT. ACT, WHEREIN THE AO HE LD THAT ON VERIFICATION OF RECORDS THE CONTENTION OF THE AS SESSEE WAS FOUND TO BE INCORRECT, SINCE THE REFUND OF RS.10,39,710/- DETERMINED U/S 143(1) WAS LESS THAN 10% OF GROSS TAX OF RS.1,49,11,408/-. AS PER THE PROVISION S OF INCOME TAX ACT, NO INTEREST U/S 244A SHALL BE PAYAB LE IF THE AMOUNT OF REFUND IS LESS THAN TEN PERCENT OF TH E GROSS TAX AS DETERMINED IN THE ASSESSMENT ORDER. THUS THE AO HAS HELD THAT THERE WAS NO MISTAKE APPARENT FROM RECORD S AND THE RECTIFICATION APPLICATION WAS REJECTED BY ORDER U/S 154. 3.1. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) AND SUBMITTED AS UNDER: THE LATEST SUPREME COURT JUDGMENT DELIVERED ON , 26.02.2014 CLEARLY SPELT OUT THAT INTEREST NEEDS TO BE PAID ON REFUND. INTEREST ON REFUND IS A SUBSTANTIVE RIGHT OF THE ASSESSEE AND STATUTORY OBLIGATIONS OF STATE. THE APEX COURT IN THE CASE OF UNION OF INDIA VS. TATA CHEMICALS LTD (363 ITR 658) HELD THAT AN ASSESSEE I S ENTITLED TO PAYMENT OF INTEREST FOR MONEY REMAINING WITH THE GOVT. WHICH WOULD BE REFUNDED. RAJASHEKHAR SWAMINATHAN 3 THE VARIOUS COURTS & THE CBDT CIRCULAR CLEARLY SAYS THAT SOON AFTER ORDER IS PASSED THE REFUND SHOULD B E GRANTED WITHIN A REASONABLE PERIOD, AND IN THE CASE OF DELAY THE ASSESSEE SHOULD BE COMPENSATED WITH INTEREST U/S 244 ON THE REFUNDABLE AMOUNT. IN OTHER WORDS VARIOUS HIGH COURTS HAVE INTERPRETED THAT IF AN ASSESSEE IS DEPRIVED OF THE USE OF [RINDS WHICH ARE REFUNDABLE IN LAW, THE AO IS DUTY BOUND TO COMPENSA TE FOR SUCH LOSS BY GRANTING INTEREST U/S 244. IN THE CASE OF TRUSTEES OF H.E.H. NIZAM'S RELIGIOUS FUND TRUST (15 CTR 239), HON'BLE ANDHRA HIGH COURT OBSERVED THAT IF THE AMOUNT IS NOT REFUNDED WITHIN STIPULATED TIME, INTEREST HAS TO BE PAID UNDER SEC. 244 OF THE ACT. INTEREST ON REFUND IS A SUBSTANTIVE RIGHT OF THE AS SESSEE & STATUTORY OBLIGATION OF THE AO CLAUSE (B) OF SUB SECTION (1) OF SEC. 244A OPENS WITH THE WORDS 'IN A NY OTHER CASE' THAT MEANS IN ANY OTHER CASE THAN THE A MOUNT PAID UNDER CLAUSE (A) OF SEC. 244A. CIRCULAR NO. 54 9, DT. 31 ST OCT. 1989, CLARIFIED THE PURPOSE AND OBJECT OF INTRODUCING SECTION 244A OF THE ACT TO REPLACE SECT IONS 214, 243 AND 244 OF THE ACT AS PROVIDING FOR PAYMEN T OF INTEREST BY THE DEPARTMENT FOR DELAY IN GRANT OF REFUNDS SINCE THERE WERE SOME LACUNAE IN THE EARLIE R PROVISIONS WITH REGARDS TO NON-PAYMENT OF INTEREST BY THE GOVERNMENT TO THE ASSESSEE FOR MONEY REMAINING WITH THE GOVERNMENT. INTEREST IS A KIND OF COMPENSATION FOR USE AND RETENTION OF MONEY COLLECTED UNAUTHORIZED BY THE DEPARTMENT A GENERAL RIGHT EXISTS IN THE STATE TO R ETAIN ANY TAX COLLECTED FOR ITS PURPOSE, AND A CORRESPOND ING OBLIGATION EXISTS TO REFUND TO INDIVIDUALS ANY SUM PAID TO THEM AS TAXES WHICH ARE FOUND TO HAVE BEEN WRONGFULLY EXACTED OR ARE BELIEVED TO BE, FOR ANY REASON, INEQUITABLE. THE STATUTORY OBLIGATION TO RE FUND CARRIES WITH IT THE RIGHT TO INTEREST ALSO. THIS IS TRUE IN THE CASE OF ASSESSEE UNDER THE ACT WHEN THE COLLECT ION IS ILLEGAL, THERE IS A CORRESPONDING OBLIGATION ON THE REVENUE TO REFUND SUCH AMOUNT WITH INTEREST INASMUC H AS IT HAD RETAINED AND ENJOYED THE MONEY DEPOSITED. RAJASHEKHAR SWAMINATHAN 4 EVEN THE DEPARTMENT UNDERSTOOD THE OBJECT BEHIND INSERTION OF SECTION 244A,AS THAT AM ASSESSEE IS ENTITLED TO PAYMENT OF INTEREST FOR MONEY REMAINING WITH THE GOVERNMENT WHICH WOULD BE REFUNDED. 3.2. LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSES SEE BUT DID NOT ACCEPT THE SAME ON THE GROUND THAT IN THE P RESENT CASE THE AMOUNT OF REFUND DETERMINED WAS AS RS.10,39,710 /- U/S 143(1), WHICH WAS LESS THAN 10% OF GROSS TAX THAT RS.1,49,11,408/-, AND THEREFORE, THE CLAIM OF THE A SSESSEE WAS NOT ACCEPTED. IN VIEW OF THE CLEAR PROVISIONS OF SE CTION 244A (1)(A) OF THE ACT. 3.3. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. COUNSEL AND THE LD. DR BEFORE US. THE LD. COUNSEL H AS FAIRLY ACCEPTED THAT IN CASE AMOUNT OF REFUND IS LESS THAN 10% OF THE GROSS TAX AS DETERMINED IN SUB-SECTION 143(1), THEN , NO INTEREST IS PAYABLE TO THE ASSESSEE. BUT, THE ASSES SEE SUBMITS THAT UNDISPUTEDLY, NO REFUND SHOULD BE PAYABLE UP T O THE DATE OF DETERMINATION OF TAX U/S 143(1). BUT, IF THE AMO UNT PAYABLE TO THE ASSESSEE IS WITHHELD BY THE DEPARTMENT BEYON D THAT DATE AND THAT TOO WITHOUT ANY REASONS ATTRIBUTABLE ON THE PART OF THE ASSESSEE, THEN AMOUNT OF REFUND SHOULD BE GR ANTED TO THE ASSESSEE FOR THE PERIOD DURING WHICH AMOUNT IS WITHHELD BY THE DEPARTMENT BEYOND THE DATE OF PASSING OF ORD ER U/S 143(1). IN SUPPORT OF HIS ARGUMENTS, HE PLACED RELI ANCE INTER ALIA UPON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. CHOLAMANDALAM INVESTMENT AND FINANCE CO. LTD. 294 ITR 438 (MAD) AND OF DELHI HIGH COURT IN CASE OF COURT ON ITS OWN MOTION VS. UOI AND OTHERS IN WRIT PETITION (C) RAJASHEKHAR SWAMINATHAN 5 2659/2012 DATED 14.03.2013. NO CONTRARY JUDGMENT WA S BROUGHT TO OUR NOTICE BY THE LD. DR. 3.4. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY BOTH SIDES AND FACTS OF THIS CASE BROUGHT BEFORE US . IT IS NOTED THAT THE PROVISIONS OF THE ACT HAS BEEN DRAFTED IN SUCH A MANNER THAT ASSESSEE IS OBLIGED TO PAY TAX THROUGH VARIOUS CHANNELS VIZ: I. TAX DEDUCTED/COLLECTED AT SOURCE II. ADVANCE TAX AND SELF ASSESSMENT TAX ETC. 3.4. THE PROVISIONS WITH REGARD TO DEDUCTION OF TAX AT SOURCE BY THE PAYERS ARE QUITE STRINGENT. THE PAYERS ARE B OUND TO DEDUCT THE TAX AT SOURCE FROM THE PAYMENTS MADE TO THE PAYEES IRRESPECTIVE OF THE FACTS WHETHER ANY AMOUNT OF TAX WOULD BE PAYABLE BY THE PAYEE ON ITS INCOME OR NOT. FURTHER, IT IS VERY DIFFICULT TO ESTIMATE THE EXACT AMOUNT OF T AXABLE INCOME IN VIEW OF UNCERTAINTIES IN LIFE AND BUSINESS COUPL ED WITH COMPLEX PROVISIONS OF LAW AND VARIOUS DEDUCTIONS AN D EXEMPTIONS AS MAY BE AVAILABLE TO AN ASSESSEE, AND THEREFORE, ASSESSEE IS AT TIMES REQUIRED TO PAY ADVANCE TAX PU RELY ON ESTIMATE BASIS. UNDER THESE CIRCUMSTANCES, THE ASSE SSEE UNDER STRINGENT PROVISIONS OF THE LAW ENDS UP IN PA YING MORE AMOUNTS OF TAX THEN HE IS LIABLE TO PAY IN A PARTIC ULAR ASSESSMENT YEAR. ON THE TOP OF THAT, THERE IS NO PR OVISION UNDER THE INCOME TAX LAW WHICH PERMITS AN ASSESSEE TO SET OFF THE EXTRA AMOUNT OF TAX PAID BY AN ASSESSEE IN A PA RTICULAR YEAR AGAINST THE AMOUNT PAYABLE IN THE SUBSEQUENT Y EAR AT THE TIME OF FILING OF RETURN FOR SUBSEQUENT YEAR. UNDER THESE CIRCUMSTANCES, THE REVENUE IS EXPECTED AND OBLIGED UNDER THE RAJASHEKHAR SWAMINATHAN 6 LAW TO RETURN THE EXCESS AMOUNT COLLECTED FROM THE ASSESSEE AS PER THE EARLIEST OCCASION WHILE FRAMING ORDER/INTIM ATION U/S 143(1). THE STATE IS NOT EXPECTED TO ENJOY UNJUST E NRICHMENT AT THE COST OF THE TAX PAYERS. ARTICLE 265 OF CONSTITU TION OF INDIA CLEARLY SAYS THAT NO TAX CAN BE COLLECTED EXCEPT WI TH THE AUTHORITY OF LAW. UNDER THESE CIRCUMSTANCES, VARIOU S COURTS HAVE TIME AND AGAIN ISSUED STRICT INSTRUCTIONS AND GUIDANCE TO THE REVENUE AUTHORITIES TO REFUND THE AMOUNT OF EXC ESS TAX COLLECTED FROM THE ASSESSEE ON ITS EARLIER CONVENIE NCE. IT IS FURTHER NOTED THAT THE CENTRAL BOARD OF DIRECTS TAX ES HAD ALSO COME OUT WITH VARIOUS INSTRUCTION TO AVOID UNDUE HA RDSHIP TO THE TAX PAYERS. 3.5. HONBLE DELHI HIGH COURT IN CASE OF COURT ON ITS O WN MOTION VS. UOI AND OTHERS IN W.P,(C) 2659/2012 DATE D 14.03.2013 ISSUED WRIT OF MANDAMUS FOR NECESSARY AC TION BY THE INCOME TAX DEPARTMENT, FOR PAYMENT OF INTERE ST U/S 244A OF THE INCOME TAX ACT 1961, ESPECIALLY WHEN TH E ASSESSEE IS NOT AT FAULT. SUBSEQUENT TO THE ABOVE D ECISION, THE CBDT CAME OUT WITH INSTRUCTION NO.7/2013 ON THE SUB JECT OF PAYMENT OF INTEREST U/S 244A ACT WHEN ASSESSEE IS N OT AT FAULT. 3.6. IN THE CASE OF SANDVIK ASIA LTD. VS CIT 280 ITR 64 3, HONBLE SUPREME COURT HELD AS FOLLOWS: 'IN VIEW OF THE EXPRESS PROVISIONS OF THE INCOME TA X ACT, 1961, AN ASSESSEE IS ENTITLED TO COMPENSATION BY WAY OF I NTEREST FOR THE DELAY IN THE PAYMENT OF AMOUNTS LAWFULLY DUE TO THE ASSESSEE WHICH ARE WITHHELD WRONGLY AND CONTRARY TO LAW. 3.7. HONBLE GAUHATI HIGH COURT IN THE CASE OF JWALA PR ASAD SIKARIA ( 175 ITR 535 ) HAS GONE TO THE EXTENT OF OBSERVING THAT THE ASSESSEE IS ENTITLED TO PAYMENT OF INTEREST ON REFUND DUE RAJASHEKHAR SWAMINATHAN 7 TO ASSESSEE FOR DELAY ON THE PART OF REVENUE EVEN I F THERE IS NO STATUTORY PROVISION IN THIS REGARD. 3.8. IN THE MATTER OF UOI VS TATA CHEMICALS (363 ITR 65 8) THE HONBLE SUPREME COURT HAS ELUCIDATED AND CLARIFIED THE PHILOSOPHY BEHIND GRANTING INTEREST AND HELD THAT P ROVIDING FOR PAYMENT OF INTEREST IN CASE OF REFUND OF AMOUNT S PAID AS TAX OR DEEMED TAX OR ADVANCE TAX IS A METHOD NOW STATUTORILY ADOPTED BY FISCAL LEGISLATION TO ENSURE THAT THE AMOUNT OF TAX WHICH HAS BEEN DULY PAID IN PRESCRIBE D TIME AND PROVISIONS IN THAT BEHALF FORMS PART OF THE REC OVERY MACHINERY PROVIDED IN TAXING STATUTE. REFUND DUE AN D PAYABLE TO THE ASSESSEE IS A DEBT OWED AND PAYABLE BY THE R EVENUE. THE STATE HAVING RECEIVED THE MONEY WITHOUT RIGHT, AND HAVING RETAINED AND USED IT, IS BOUND TO MAKE THE PARTY GO OD, JUST AS AN INDIVIDUAL WOULD BE UNDER LIKE CIRCUMSTANCES. TH E OBLIGATION TO REFUND MONEY RECEIVED AND RETAINED WI THOUT RIGHT IMPLIES AND CARRIES WITH IT THE RIGHT TO INTE REST. WHENEVER MONEY HAS BEEN RECEIVED BY A PARTY WHICH EX AE QUO ET BONO OUGHT TO BE REFUNDED, THE RIGHT TO INTEREST FOLLOW S, AS A MATTER OF COURSE INTEREST IS A KIND OF COMPENSATI ON FOR USE AND RETENTION OF MONEY COLLECTED UNAUTHORISEDLY BY THE DEPARTMENT. A GENERAL RIGHT EXISTS IN THE STATE TO RETAIN ANY TAX COLLECTED FOR ITS PURPOSE, AND A CORRESPONDING OBLIGATION EXISTS TO REFUND TO INDIVIDUALS ANY SUM PAID BY THE M AS TAXES WHICH ARE FOUND TO HAVE BEEN WRONGFULLY EXTRACTED O R ARE BELIEVED TO BE, FOR ANY REASON, INEQUITABLE. THE ST ATUTORY OBLIGATION TO REFUND CARRIES WITH IT THE RIGHT TO I NTEREST ALSO. IT WAS FINALLY HELD THAT WHEN THE COLLECTION IS ILLEGA L, THERE IS A CORRESPONDING OBLIGATION ON THE REVENUE TO REF UND SUCH AMOUNT WITH INTEREST IN AS MUCH AS IT HAD RETAINED AND ENJOYED THE MONEY DEPOSITED. 3.9. IN VIEW OF FACTS OF THIS CASE AND CLEAR GUIDANCE A ND INSTRUCTION GIVEN BY THE COURTS TIME TO TIME, WE FI ND THAT THERE WAS NO PROPER JUSTIFICATION ON THE PART OF THE REVE NUE TO RAJASHEKHAR SWAMINATHAN 8 WITHHOLD THE AMOUNT OF REFUND BEYOND THE DATE OF IS SUANCE OF INTIMATION/ORDER U/S 143(1). WE CAN APPRECIATE THAT UPTO THE DATE OF PASSING ORDER/INTIMATION U/S 143(1), NO INT EREST SHALL BE PAYABLE BY THE DEPARTMENT TO THE ASSESSEE BECAUS E OF CLEAR PROVISIONS OF LAW ON THE STATUTE IN THIS REGARD, BU T FOR THE PERIOD OF DELAY IN ISSUING THE REFUND AFTER THE DAT E OF PASSING OF THE ORDER U/S 143(1), THE ASSESSEE IS ENTITLED F OR INTEREST AND REVENUE IS LIABLE TO PAY IT TO THE ASSESSEE. TH US, WE DIRECT THE AO TO GRANT THE INTEREST U/S 244A FOR THE PERIO D FALLING BETWEEN THE DATE OF PASSING OF ORDER U/S 143(1) AND ACTUAL DATE OF GRANTING OF REFUND, AT THE RATE OF INTEREST AS WOULD HAVE BEEN APPLICABLE IF THE REFUND AMOUNT WOULD HAVE BEE N FOR AN AMOUNT MORE THAN 10% OF THE GROSS TAX. THUS, THE AP PEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR DIRECTIONS AS CONTAINED ABOVE. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY, 2016. SD/- (JOGINDER SINGH) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER ! MUMBAI; % DATED: 27/07 /2016 CTX? P.S/. . . #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. '() / THE APPELLANT 2. *+() / THE RESPONDENT. 3. , , - ( ' ) / THE CIT, MUMBAI. RAJASHEKHAR SWAMINATHAN 9 4. , , - / CIT(A)- , MUMBAI 5. 01 *2 , , '# 23 , ! / DR, ITAT, MUMBAI 6. 45 6! / GUARD FILE. / BY ORDER, +0' * //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ! / ITAT, MUMBAI