Shri. Ashwath, Bangalore V. DCIT, Bangalore

ITSSA 23/BANG/2010

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8278 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-05-2011
• Assessment Year: misc
• Appeal Filed On: 12-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: R KRISHNAMURTHY
• Keywords: Block assessment
• Section: 244A; 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER IT(SS) A NO. 23/BANG/2010 ASSESSMENT YEAR : BLOCK ASSESSMENT 1988-89 TO 1997- 98 SHRI ASHWATH, 842/2, SUGNANA MUTT LANE, NAGARATHPET CROSS, BANGALORE 560 002. : APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 7(1), BANGALORE. : RESPONDENT APPELLANT BY : SHRI R. KRISHNAMURTHY, ADVOCATE RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI, ADDL.CIT(DR) O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER OF LD. CIT (A) III, BANGALORE IN ITA NO. 30/ C 7( 1)/ CIT(A) III/ BNG/ 08-09 DATED: 23.4.2010 FOR THE BLOCK ASSESSMENT 1988-89 TO 1997-98. 2. THE ASSESSEE, AN INDIVIDUAL, HAS RAISED A LONE GROUND THAT THE HONBLE CIT(A) ERRED IN HOLDING THAT THE APPEL LANT IS NOT ENTITLED TO INTEREST ON INTEREST (SIC) INTEREST AND INTEREST ON INTEREST ON THE SUM OF RS.2,42,952/- REFUNDABLE TO HIM. ITA NO. 23/BANG/10 PAGE 2 OF 7 THE LD. AR STATED DURING THE COURSE OF HIS SUBMISSI ONS THAT THE ASSESSEE HAD BY MISTAKE STATED IN THE GROUND THAT THE CIT(A) HAD ERRED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO INTEREST ON I NTEREST, IN FACT THE CORRECT GROUND WAS THAT THE CIT(A) HAD ERRED IN HOLDING THA T THE APPELLANT IS NOT ENTITLED TO INTEREST AND INTEREST ON INTEREST ON TH E SUM OF RS.2,42,942/- REFUNDABLE TO HIM. 3. THE ISSUE, IN BRIEF, IS THAT THE ASSESSEE A ND HIS BROTHER SHRI RUDRACHAR WERE IN THE BUSINESS OF MANUFACTURE AND S ALE OF GOLD AND SILVER ARTICLES. THERE WAS AN OPERATION U/S 132 OF THE AC T ON 31.3.1997 IN THE LOCKER OF THE ASSESSEES BROTHER WHEREIN IT WAS UNE ARTHED A GOLD BAR AND FIXED RECEIPT OF RS.3 LAKHS. CONSEQUENTLY, PROCEED INGS U/S 158BC AND U/S 153BD OF THE ACT WERE INITIATED IN THE CASES OF THE ASSESSEES BROTHER AND THE ASSESSEE RESPECTIVELY. THEREAFTER, WHEN THE IS SUES WERE PLACED BEFORE THE HONBLE EARLIER BENCH, THE ASSESSMENT FRAMED IN RESPECT OF THE ASSESSEE WAS CANCELLED BEING WITHOUT JURISDICTION. CONSEQUENTLY, THE ASSESSEE HAD MADE A CLAIM THAT THE TAXES PAID FROM TIME TO TIME DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS ARE REFUNDAB LE. 3.1. WHILE GIVING EFFECT TO THE FINDING OF THE EARLIER BENCH, THE LD. AO VIDE HIS ORDER DT.14.11.2006 DETERMINED THE TOTAL R EFUND AT RS.18.61 LAKHS [TAXES OF RS.11.65 LAKHS + INTEREST U/S 244A OF RS. 6.96 LAKHS]. HOWEVER, IN HIS SUBSEQUENT ORDER U/S 154 OF THE ACT DT.31.3. 2007 SLASHED THE REFUND TO RS.7,28,571/-, HOLDING THAT THE ASSESSEE WAS NO T ENTITLED TO REFUND OF RS.4 LAKHS APPEARS TO HAVE BEEN PAID BY THE ASSESSE E ON 17.4.97 SINCE THE SAID SUM HAD BEEN ADJUSTED AGAINST THE TAXES DU E FROM THE ASSESSEES ITA NO. 23/BANG/10 PAGE 3 OF 7 BROTHER AND THAT GRANTING REFUND OF THE SAID SUM S O ADJUSTED WOULD AMOUNT TO DOUBLE DEDUCTION WHICH WAS NOT ADMISSIBLE IN LAW . 3.2. ALSO HELD THAT THE SUM OF RS.2,42,952/- PAID BY THE ASSESSEE IN CONNECTION WITH THE DECLARATION MADE UNDER VDIS SC HEME 1997 WAS NOT ELIGIBLE FOR REFUND IN VIEW OF THE PROHIBITION CONT AINED IN S.70 OF THE VDIS SCHEME, 1997. 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSU ES WITH THE LD. CIT (A) FOR RELIEF. AFTER TAKING COGNIZANCE OF THE ASSESSEES CONTENTIONS AS RECORDED IN HIS IMPUGNED ORDER, THE LD. CIT (A) HAD, OBSERVED T HUS WITH RESPECT TO THE CLAIM OF REFUND 7.0 IN RESPECT OF THE SUM OF RS.2,42,952/- IT IS ADMITTED BY THE A.O. THAT THE CLAIM IS REJECTED ON THE GROUND THAT SECTION 70 OF THE VDIS SCHEME 1997 COMES INTO PLAY. AS HELD IN VARIO US DECISIONS INCLUDING THAT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SMT. ATAMAJIT SINGH VS. CIT AS REPORTED IN 247 ITR 356 ( KAR.), IF THE DECLARATION IS REJECTED ON ANY GROUND THEN THE SUM PAID UNDER THE SAID SCHEME CANNOT BE CONSIDERED AS TAXES PAID UNDE R THE SAID SCHEME AND HENCE SECTION 70 HAS NO APPLICATION AT A LL. IN THE INSTANT CASE, IT IS ADMITTED POSITION THAT THE APPE LLANT WAS NOT EVEN PERMITTED TO FILE THE APPLICATION AND HENCE THE SAI D SUM WAS NOT PAID UNDER THE SCHEME AND SO THIS SUM HAS TO BE REF UNDED. AFTER HOLDING THAT THE AMOUNT PAID UNDER VDIS SCHEM E HAS TO BE REFUNDED SINCE THE AMOUNT PAID UNDER THE SCHEME CANNOT BE CO NSIDERED AS TAXES PAID AND HENCE SECTION 70 HAS NO APPLICATION AT ALL , FURTHER HELD WITH RESPECT TO THE ISSUE OF INTEREST AS FOLLOWS: 8.0. THE AR BASING HIMSELF ON THE APEX COURT DECI SION IN THE CASE OF SANDWICK ASIA 280 ITR 643 SUBMITS THAT THE APPEL LANT IS ALSO ENTITLED TO INTEREST ON INTEREST. IN THE INSTANT C ASE, THE FACTS AND CIRCUMSTANCES ARE DIFFERENT WHERE THE APPELLANT HAD PAID A SUM OF RS.2,42,952/- FOR THE VDIS SCHEME IN WHICH THE APPL ICATION WAS HELD NOT TO BE VALID AND, HENCE, THE CLAIM OF THE A PPELLANT FOR ITA NO. 23/BANG/10 PAGE 4 OF 7 INTEREST ON INTEREST, IN MY VIEW IS NOT VALID AS TH E DEFAULT LIES SQUARELY WITH THE APPELLANT FOR THE NON-ELIGIBILITY OF THE VDIS SCHEME. 5. AGITATED, THE ASSESSEE HAS COME UP WITH THE PRE SENT APPEAL. DURING THE COURSE OF HEARING, SHRI R.KRISHNAMOORTHY , THE LD. A R FORCEFULLY ARGUED THAT WHEN THE FIRST APPELLATE AUTHORITY WAS PLEASED TO UPHOLD THE CLAIM OF THE APPELLANT TO THE EXTENT OF REFUNDING O F RS.2,42,952/- SINCE IT WAS AN ADMITTED POSITION THAT THE APPELLANT WAS NOT EVEN PERMITTED TO FILE THE APPLICATION AND, HENCE, SAID SUM PAID WAS NOT P AID UNDER THE SCHEME, BUT, HE HAD FAILED TO APPRECIATE THE FACT THAT THE SAID SUM PAR TAKES THE CHARACTER OF SELF-ASSESSMENT TAX AND, THUS, THE EXC ESS PAID BESIDES REFUND INTEREST ON INTEREST ALSO BECOMES PAYABLE. TO STRE NGTHEN HIS ARGUMENT, THE LD. A R SOUGHT REFUGE IN THE RULING OF THE HON BLE SUPREME COURT IN THE CASE OF SANDVIK ASIA LTD. V. CIT & OTHERS REPORTED IN 280 ITR 643 (SC) AND CIT V. NARENDRA DOSHI 254 ITR 606 (SC) . 5.1. ON HER PART, SMT. JACINTA ZIMIK VASHAI, THE LD. D R WAS VERY STUBBORN IN HER RESOLVE THAT THE ASSESSEE WAS NOT E VEN PERMITTED TO FILE AN APPLICATION UNDER VDIS SCHEME AND A WRIT FILED AGAI NST SUCH REJECTION OF HIS APPLICATION WAS REJECTED BY THE HONBLE JURISDI CTIONAL HIGH COURT. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT THE ASSESS EE WAS NOT ENTITLED TO CLAIM INTEREST ON RS.2.42 LAKHS WHICH HAS BEEN RIGH TLY UPHELD BY THE LD. CIT (A). SHE HAD, THEREFORE, PLEADED THAT THE REQU EST OF THE ASSESSEE REQUIRES TO BE REJECTED OUTRIGHTLY. SHE ALSO REMIND ED THAT THE CASE RELIED BY THE CIT(A) SMT. ATAMJIT SINGH V. CIT (247 ITR 356) WHEREIN IT WAS HELD THAT THE PETITIONER LASTLY CONTENDED THAT AS HIS DECLAR ATION WAS DEEMED TO ITA NO. 23/BANG/10 PAGE 5 OF 7 HAVE NEVER BEEN MADE UNDER THE SCHEME, THE AMOUNT P AID ON MARCH 31, 1998, BY WAY OF TAX AND INTEREST (RS.1,66,950) SHOU LD BE REFUNDED. WHEN THE DECLARATION IS DEEMED TO HAVE NEVER BEEN MADE, THERE IS (NO?) NEED TO PAY THE TAX OR INTEREST, NOR HAS THE DEPARTMENT ANY RIGHT TO RETAIN SUCH AMOUNT. BUT, ANNEXURE C DATED JUNE 25, 1999, DOES NOT TREAT THE AMOUNT PAID AS FORFEITED NOR REFUSES TO REFUND THE AMOUNT. IF THE PETITIONER HAS PAID ANY AMOUNT AS TAX OR INTEREST ON THE DECLARED AMOUN T, IT IS OPEN FOR HIM TO MAKE AN APPLICATION FOR REFUND AS THE DECLARATION I S DEEMED NEVER TO HAVE BEEN MADE. AS AND WHEN SUCH APPLICATION IS FILED, THE RESPONDENT SHALL CONSIDER AND DISPOSE OF THE SAME IN ACCORDANCE WITH LAW. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, CAUTIOUSLY PERUSED THE RELEVANT CASE RECORDS AND ALSO CASE LAW S ON WHICH THE LD. AR HAD PLACED HIS FAITH. 6.1. IT IS AN UNDISPUTED FACT THAT THE ASSE SSEES ATTEMPT TO FILE AN APPLICATION UNDER VDIS SCHEME WAS SCUTTLED AT THE O UTSET AND, THUS, AS RIGHTLY POINTED OUT BY THE LD. CIT (A), THE ASSESSE E WAS ENTITLED TO GET THE REFUND OF RS.2,42,952/- WHICH WAS PAID ON 28.3.1998 IN CONNECTION WITH VDIS DECLARATION. DURING THE COURSE OF HEARING, TH E LD. AR HAD HEAVILY RELIED UPON THE CASE SANDVIK ASIA LTD. V. CIT & OTHERS REPORTED IN 280 ITR 643 (SC) AND CIT V. NARENDRA DOSHI 254 ITR 606 (SC) . ON A PERUSAL OF THE FINDING OF THE HONBLE APEX COURT IN THE CAS E OF SANDVIK ASIA LTD. V. CIT & OTHERS PAGE 671 PARA 63, IT WAS HELD THAT IN OUR VIEW, THE ACT RECOGNIZES THE PRINCIPLE THAT A PERSON SHOULD ONLY BE TAXED IN ACCORDANCE ITA NO. 23/BANG/10 PAGE 6 OF 7 WITH LAW AND HENCE WHERE EXCESS AMOUNTS OF TAX ARE COLLECTED FROM AN ASSESSEE OR ANY AMOUNTS ARE WRONGFULLY WITHHELD FRO M AN ASSESSEE WITHOUT AUTHORITY OF LAW THE REVENUE MUST COMPENSAT E THE ASSESSEE. FURTHER IN THE CASE OF CIT V. NARENDRA DOSHI , THE HONBLE APEX COURT HELD THAT THE REVENUE IS LIABLE TO PAY INTEREST ON THE AMOUNT OF INTEREST WHICH IT SHOULD HAVE PAID TO THE ASSESSEE, BUT HAD UNJUSTLY FAILED TO DO. 6.2 FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, I T IS EVIDENT THAT THE ASSESSEE HAD A RIGHT AS PER LAW TO OBTAIN THE REFUN D OF THE SUM PAID UNDER VDIS SCHEME FOR RS.2,42,952 AS HIS APPLICATION WAS REJECTED. IT WAS THE DUTY OF THE REVENUE TO REFUND THE AMOUNT INSTANTANE OUSLY AS AND WHEN THE CLAIM WAS MADE BY THE ASSESSEE. HOWEVER IN THE PRES ENT CASE THE REVENUE FAILED TO DO SO. IT CLEARLY SHOWS THAT THE REVENUE HAD WRONGFULLY WITHHELD THE AMOUNT FROM THE ASSESSEE WITHOUT ANY A UTHORITY OF LAW. IN THESE CIRCUMSTANCES, THE DECISION OF THE CASE SMT. ATAMJIT SINGH V. CIT WILL NOT COME TO THE RESCUE OF THE REVENUE FOR DENYING C OMPENSATION. IN SANDVIK ASIA LTD. CASE, AFTER EXAMINING THE ISSUE OF COMPENSATION IN SUCH CASES, IT WAS HELD THAT SIMPLE INTEREST @ 9% PER AN NUM FROM THE DATE OF DEFAULT (TO MAKE IT CLEAR FROM THE DATE OF CLAIM OF REFUND BY THE ASSESSEE) WILL SUFFICE WITHIN ONE MONTH FROM TODAY FAILING WH ICH THE DEPARTMENT SHALL PAY THE PENAL INTEREST AT 15% PER ANNUM FOR THE ABOVE SAID PERIOD. WE RESPECTFULLY FOLLOW THE DECISION OF THE HONBLE APEX COURT TO THE CASE IN HAND AND HOLD ACCORDINGLY. SINCE TH E COMPENSATION IN LIEU OF INTEREST FOR SUCH DEFAULT OF THE REVENUE IS SO DEAL T WITH BY US, THE QUESTION OF INTEREST ON INTEREST WILL NOT ARISE AS CLAIMED BY THE ASSESSEE AND THEREFORE DISMISSED. ITA NO. 23/BANG/10 PAGE 7 OF 7 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JUNE, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 17 TH JUNE, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.