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inspecting Assistant Vs. Garware Paints Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1984)7ITD445(Mum.)
Appellantinspecting Assistant
RespondentGarware Paints Ltd.
Excerpt:
.....the calcutta high court decision in the case of chloride india ltd. v. cit [1977] 106 itr 38, the bombay high court decision in the case of binod mills co. ltd. v. s.a. kadre, epto [1980] 122 itr 778 and the madras high court decision in the case of rayon traders (p.) ltd. v. ito [1980] 126 itr 135 and held that the courts had taken an unanimous view that an order passed by the assessing authority to give effect to the appellate order was in the nature of regular assessment.he, therefore, directed the assessing authority to allow interest under section 214 on the excess advance tax paid for these years up to the date of the orders giving effect to the tribunal order.2. the revenue is, therefore, in appeal against the orders of the commissioner (appeals) on the ground that the.....
Judgment:
1. The advance tax paid by the assessee for the three years under consideration was in excess of the tax liability of the assessee as determined consequent on the order of the Tribunal for the assessment year 1971-72. In the proceedings under Section 154 of the Income-tax Act ('the Act'), the assessee claimed interest under Section 214 of the Act in respect of such excess advance tax for these years. The assessing authority declined to grant the interest beyond the date of the original assessment under Section 143(3) of the Act on the ground that there was no provision in the Act to grant interest under Section 214 on the refund due to the assessee on account of the appellate orders. He, therefore, rejected the assessee's claim, accordingly. On appeals being filed by the assessee, the Commissioner (Appeals) referred to the Calcutta High Court decision in the case of Chloride India Ltd. v. CIT [1977] 106 ITR 38, the Bombay High Court decision in the case of Binod Mills Co. Ltd. v. S.A. Kadre, EPTO [1980] 122 ITR 778 and the Madras High Court decision in the case of Rayon Traders (P.) Ltd. v. ITO [1980] 126 ITR 135 and held that the Courts had taken an unanimous view that an order passed by the assessing authority to give effect to the appellate order was in the nature of regular assessment.

He, therefore, directed the assessing authority to allow interest under Section 214 on the excess advance tax paid for these years up to the date of the orders giving effect to the Tribunal order.

2. The revenue is, therefore, in appeal against the orders of the Commissioner (Appeals) on the ground that the Commissioner (Appeals) erred in directing the IAC to allow interest under Section 214 on the advance tax refund arising out of appellate orders or rectification orders under Section 154 from the 1st day of the assessment year till the date of issue of refund ignoring the fact that no appeal was provided in respect of application under Section 214. In this connection, it is pointed out on behalf of the revenue that the proceeding0s in progress before the assessing authority were under Section 154. Now whether the assessee was eligible for the interest under Section 214 up to the date of the original assessment order under Section 143(3) or up to the date of the grant of the actual refund as per the directions in the appellate orders was a highly controversial issue. In this connection, the learned departmental representative invited our attention to the Punjab and Haryana High Court decision in the case of CIT v. Ambala Electric Supply Co. Ltd. [1982] 142 ITR 872 where the entire case law on the subject was discussed. The various High Courts were equally divided on the question whether the assessee was eligible for interest up to the date of the final order granting the refund as indicated in the aforesaid Punjab and Haryana High Court decision. It was a highly controversial issue whether an assessee can claim such an interest under Section 214. The assessee had called upon the assessing authority to grant relief to it under Section 154. As explained by the learned Judges of the Supreme Court in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50, such a controversial issue cannot be dealt with under Section 154. In the circumstances the learned departmental representative proceeded to argue that the order of the Commissioner (Appeals) allowing the assessee's claim should be reversed and the assessing authority's order should be restored.

3. On behalf of the assessee, it was submitted that the learned Judges of the Bombay High Court had held in the case of CIT v. S.C. Shah [1982] 137 ITR 287 that an ITO's order denying interest under Section 244 of the Act was an appealable order. Further, it was submitted on behalf of the assessee that in the case of Binod Mills Co. Ltd. (supra) the learned Judges of the Bombay High Court had proceeded to explain the meaning of the term 'regular assessment' appearing in Section 14A(7) of the Excess Profits Tax Act, 1940, which was similar in terms of Section 214. The Bombay High Court in this case had held that the term 'regular assessment' referred not only to the initial order of assessment, but also covered the assessment order passed by the appellate authorities. The Madras High Court in the case of Rayon Traders (P.) Ltd. (supra) had, in identical circumstances, held that the assessee was eligible for interest up to the date of the grant of actual refund. Further reference is made to the Bombay High Court decision in the case of Associated Cement Cos. Ltd. v. CIT wherein the learned Judges of the Bombay High Court had approved, without any reservation, the Madras High Court decision in the case of Rayon Traders (P.) Ltd. (supra) to the effect that Section 214 would apply to a case where the refund was simultaneous with the regular assessment but if the refund was delayed, the assessee would be entitled to interest up to the date of refund under Section 214(2). They also approved the ruling of the Madras High Court to the effect that whenever an assessee paid advance tax in excess of the tax found to be due, he would be entitled to interest under Section 214(2) read with Section 219 of the Act up to the date of refund if the refund was made or had to be made after the regular assessment. Referring to the arguments on behalf of the revenue to the applicability of Section 154 to a similar situation, the learned counsel has referred to the Allahabad High Court decision in the case of Omega Sports & Radio Works v. CIT [1982] 134 ITR 28, to the effect that the law laid down by a State High Court was the final word on the subject so far as all the judicial authorities within the State were concerned. A passing reference was also made to the Tribunal decision in the case of Indian Card Clothing Co. Ltd. v. ITO [1983] 5 ITD 38 (Bom.) decided on 28-2-1983.

4. On behalf of the revenue, on rejoinder, it was pointed out that the decision in the case of Binod Mills Co. Ltd. (supra), relied upon by the learned counsel for the assessee, was delivered on 3-7-1981.

Therefore, as explained by the learned Judges of the Calcutta High Court in the case of Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710, the principles of retrospective legislation was not applicable to the decisions of the Supreme Court declaring the law or interpreting the provision in a statute. If the Supreme Court decisions could not be retrospective in operation for holding any action taken by any authority to be erroneous, the State High Court decision could much less be treated to be retrospective in operation. Reference was also made to the Bombay High Court decision in the case of Blue Star Engg.

Co. (Bombay) (P.) Ltd. v. CIT [1969] 73 ITR 283.

5. We have carefully considered the facts and circumstances of the case and the arguments on either side. The facts briefly restated are that in consequence of certain reductions in an appeal, the assessee was eligible for certain refund of advance tax paid. The assessee claimed interest in respect of this excess advance tax to be refunded to it, under Section 214.

The assessee's claim was made for all the three years in the proceedings under Section 154 in progress before the assessing authority, viz., the IAC. Two questions arise before us for determination. Firstly, whether the assessee was eligible for the interest up to the date of the order granting the actual refund consequent upon the appellate authority's order and secondly, if the original authority, viz., the ITO/IAC did not grant such a refund up to the date of the consequential order, whether it was a mistake apparent from record amenable to rectification under Section 154. For this purpose, we shall have first to interpret the meaning of the term 'regular assessment' appearing in Section 214. The interest is payable up to the date of the regular assessment as stated in that section. For this purpose, we have the Bombay High Court decision in the case of Binod Mills Co. Ltd. (supra), which lays down in unambiguous terms what a 'regular assessment' means in similar circumstances. According to the learned Judges of the Bombay High Court 'regular assessment'means not only the initial order of assessment, but also the order passed to give effect to the orders of the appellate authority. In this connection, we may profitably reproduce the following quotation from the Judgment of Viscount Buckmaster in the House of Lord's case of Barms v. Aberdeen Steam Trawling & Fishing Co. Ltd. [1933] AC 402 (HL) : It has long been a well established principle to be applied in the consideration of the Act of Parliament that where a word of doubtful meaning has received a clear judicial interpretation, the subsequent statute which incorporates the same word or the same phrase in a similar context, must be construed so that the word or phrase is interpreted according to the meaning that has previously been assigned to it.

Apart from that, on the question of the eligibility of the assessee for interest under Section 214 up to the date of the consequential order giving effect to the orders of the appellate authority, we have the Bombay High Court decision in the case of Associated Cement Cos. Ltd. (supra) wherein they have unreservedly approved the Madras High Court decision in the case of Rayon Traders (P.) Ltd. (supra) holding that the assessee was eligible for interest up to such an extended date.

6. On the linked question whether the failure on the part of the ITO/IAC to grant interest in the consequential order up to the date of such an order was a 'mistake' apparent from record, which was amenable to rectification under Section 154, we have the Allahabad High Court decision in the case of Omega Sports & Radio Works (supra), which has explained the law on the subject to the effect that a mistake apparent from the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there can be two opinions. If there is a decision on a particular point by the High Court of a State, it is binding on the income-tax authorities in that State and merely because there is some judicial divergence of opinion on that point between some High Courts, it cannot be said that there is still scope for a debate on the points and that, therefore, Section 154 is not attracted to the case. In the circumstances, in our opinion, our decision in the appeals is obvious.

The refusal on the part of the assessing authority to grant interest under Section 214 on the excess advance payment of tax up to the date of the consequential order giving effect to the Tribunal order was a 'mistake' apparent from record. The assessing authority should have rectified the same under Section 154. His order refusing to do the same was erroneous. In the circumstances, the orders of the Commissioner directing the assessing authority to grant interest to the assessee under Section 214 is upheld.7. In the result, the appeals filed by the revenue fail and are hereby dismissed.


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