M/S LUCKY BISCUIT COMPANY V. COMMISSIONER OF INCOME TAX

CWJC/4016/1992

AI Insights

The case revolves around the dispute concerning the interest on the refund of excess advance tax paid by M/S Lucky Biscuit Company following a revised assessment by the Income Tax Department. Initially assessed as an unregistered partnership firm, the tax liability was later revised significantly upon reclassification as a registered partnership firm. The core legal issue was whether the petitioner was entitled to interest on the refunded amount under Section 214(1) or Section 244(1A) of the Income Tax Act. The court clarified that both sections, despite their different contexts, would result in the same interest rate of 9% per annum, and criticized the department for its failure to apply the correct legal provisions.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 751678 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 19-07-2010
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: HARSHWARDHAN PRASAD; ARCHANA SINHA
• Assessee Lawyers: KRISHNA PRASAD; R USHA
• Keywords: Assessment Year 1982-83; Excess advance tax; Income Tax; Interest on Refund; Reassessment
• Section: 226; 227; 244(1A); 214(1)

Judgement Text

" CIVIL WRIT JURISDICTION CASE No.4016 OF 1992 (In the matter of an application under Articles 226 and 227 of the Constitution of India) M/S LUCKY BISCUIT COMPANY, Hajiganj, Patna City, Patna, a Registered Firm, through its Partner, Shree Dwarka Nath Bareria, son of late Sri Raghunandan Prasad, Bareria, Hajipur, Patna City, District Patna ------------------------------------ PETITIONER Versus 1. COMMISSIONER OF INCOME TAX, Bihar, Central Revenue Buildings, Bailey Road, Patna-800001. 2. The Deputy Commissioner of Income Tax, Special Range, Patna, Alankar Place, 3rd Floor, Boring Road, Patna- 800001. --------------------------------- RESPONDENTS ----------- For The Petitioner :Mr.Krishna Nandan Prasad, Adv. Ms.R.Usha, Adv. For The Respondent :Mr.Harshwardhan Prasad, Adv. Mrs.Archana Sinha, Adv. P R E S E N T THE HON'BLE MR. JUSTICE NAVIN SINHA THE HON'BLE MR. JUSTICE JYOTI SARAN Navin Sinha & Jyoti Saran,JJ. Heard learned counsel for the parties. The controversy in this case relates to the financial year 1981-82 corresponding to the assessment year 1982-83. The petitioner was initially assessed as an unregistered partnership firm and an Income tax demand of Rs. 5,48,874/- was raised. The petitioner 2 questioned it in appeal when the appellate authority held that the assessment of the petitioner was required to be revised as a registered partnership firm. After this was done, the tax liability was revised to Rs. 1,68,378/-. The controversy now relates to the payment of interest upon the excess advance tax paid so refunded after the revised assessment. The two provisions of the Income Tax Act necessary for adjudication on the question of interest on excess advance tax paid are Section 244(1A) and 214(1) they read as follows :- 244. “……………….(1A) where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted:…….” “214 (1) The Central Government shall pay simple interest at (fifteen) 3 per cent per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under Sections 207 to 213 exceeds the amount of the (assessed tax) from the Ist day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year, during which it is payable by reason of the provisions of section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment:” Learned counsel for the petitioner sought to persuade the Court that under Section 2(8) of the Income Tax Act, ”Assessment” includes a reassessment. A conjoint reading of the same with Section 2(40) defining “Regular assessment” has to be interpreted to mean that assessment includes a reassessment. It was therefore urged that even in case of reassessment Section 214 of the Income Tax Act shall apply and the petitioner shall be entitled to rate of interest in accordance therewith on the refund of advance tax paid. Learned counsel for the Income Tax Department relied on Section 244(1A) to urge that the petitioner is entitled to interest on the advance tax refunded in accordance 4 therewith and not Section 214 of the Income Tax Act, as it was a case of revised assessment and not reassessment. We have no difficulty in holding that reassessment and revised assessment have different connotations. Reassessment may included cases where certain matters on record may have been overlooked. A revised assessment would be a case for fresh application based on subsequent materials and information not available earlier. Before we proceed to adjudicate the applicability of Section 214(1) or 244 (1A) we only need to notice that under both the provisions relevant for the financial/ assessment year in question, the rate of simple interest prescribed was 9%. It is not in controversy that the excess advance tax paid after reassessment has already refunded to the petitioner. The submission made on behalf of the petitioner with regard to the quantum of interest therefore losses its relevance in view of the fact that under both the provisions, interest to be paid by the Income Tax Department was 9% per annum. It is more than 5 apparent from the order of the Deputy Commissioner of Income Tax, Special Range, Patna dated 7/8.3.1989 that the authority was under no misconception of law with regard to the liability to pay interest on the amount to be refunded by the Income Tax Department. The authority was also under no misconception with regard to the statutory provisions under which the obligation of the Department lay. Unfortunately, for reasons that appear completely inexplicable from the records a hyper technical approach was adopted merely for reason of the reference to a wrong provision of law quoted by the petitioner as Section 214 of the Income Tax Act. We arrive at that finding for two reasons. Whether it be 214 (1) or 244(1A) of the Income Tax Act the liability for interest upon refund of excess advance tax was the same. The authority of the Income Tax Department was aware of the correct provision of law under which the refund after reassessment had to be made with interest.The source of the power being there,it was clearly an abuse of power in the authority to deny interest only because of a wrong provision of law was relied upon by the 6 petitioner under the same Act. We are satisfied that the present was a wholly frivolous litigation generated by the authority of the Income Tax department. As a result the department is ultimately being burdened by interest for the misdemeanor of the officer. A sense of answerability or accountability in the officer may well have burdened a lesser interest if the officer had discharged his duties in accordance with the statutory provisions of which he was fully aware and made a refund to the petitioner. There is nothing on the record to suggest that any such effort was made by the officer concerned of the Income Tax Department. No counter affidavit has been filed on behalf of the department. We therefore hold that the petitioner is entitled to simple interest on the entire amount of the excess advance tax paid by him at the rate of 9% per annum upto date in accordance with the provisions of Section 244(1A) as it then existed, to be paid to the petitioner within a maximum period of four months from the date of receipt/production of a copy of this order before the appropriate 7 authority of the Income Tax Department. We do hope and expect that the Income Tax Department shall appropriately awake to the nature of the frivolous litigation generated by its officers saddling the department with unnecessary excess interest liability and take appropriate action. Ultimately liability for the excess interest is to be borne by the department from public funds and government coffers suffer. It is those who saddled the department with this excess liability should bear the ultimate burden. The writ application is allowed. Patna High Court/ Dated 19th of July,2010/ Bibhash/N.A.F.R. ( Navin Sinha, J.) (Jyoti Saran, J.) "