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Abhay L. Khatau (Huf) Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1984)10ITD863(Mum.)
AppellantAbhay L. Khatau (Huf)
Respondentincome-tax Officer
Excerpt:
.....& co. ltd. has been rejected by the supreme court as reported in [1983] 144 itr (st.) 11. the bombay high court is also stated to have rejected the application of the department under section 256(2) of the act in the case of cit v. mrs. shirinbai p. pundole, [1981] 129 itr 448. anticipating that, for merits, the department would rely on the decision of the bombay high court in the case of cit v.carona sahu co. ltd. [1984] 146 itr 452, shri munim submits that in view of the supreme court rejecting the special leave petition as above, the said bombay high court's decision may not apply. the alternative contention is that the position as regards the interest under section 244(1a) is different and that the same will have to be allowed in any case.4. the departmental representative has,.....
Judgment:
1. This is an appeal by the assessee against the order of the Commissioner passed under Section 263 of the Income-tax Act, 1961 ('the Act'), whereby the ITO has been directed to recover the interest wrongly allowed to the assessee under Sections 214 and 244(1A) of the Act while giving effect to the order of the Commissioner (Appeals). The assessee is a HUF. The proceedings relate to its assessment for the assessment year 1974-75. The assessment was originally completed on 20-9-1977 determining the total income at Rs. 2,87,360. The assessment was revised under Section 155 as well as under Section 154 of the Act.

However, this is not relevant for the purpose of this appeal. The Commissioner (Appeals) decided the assessee's appeal by his order dated 18-3-1980. The effect was given to the appellate order of the Commissioner (Appeals) by the ITO vide his order dated 31-3-1980. As a result of latter order of the ITO, the assessee's total income stands determined at Rs. 45,042 only. This has resulted in a refund of Rs. 1,34,460. The ITO has allowed interest of Rs. 28,331 under Section 214 and of Rs. 2,960 under Section 244(1A).

2. Being, prima facie, of the view that the interest allowed by the ITO under both the sections was not in accordance with law, the Commissioner issued a notice requiring the assessee to show cause why the interest allowed be not withdrawn. After considering the written submissions and after hearing its counsel, the Commissioner has passed the impugned order under Section 263 of the Act. He has held that the order of the ITO allowing interest to the assessee both under Sections 214 and 244(1A) is erroneous and prejudicial to the interests of the revenue. Accordingly, he has directed the ITO to give effect to his order and recover the interest wrongly allowed to the assessee.

3. It is pointed out by Shri I.M. Munim, the learned counsel for the assessee, that the ITO had not passed any order as such allowing interest under Section 214 or under Section 244(1A) and that the interest has been determined as payable on the basis of calculation on the Form ITNS-150. According to the learned counsel, the Commissioner has jurisdiction to revise an order and unless there is an order passed by the ITO, the Commissioner will have no jurisdiction to revise a non-existent order. In this context, reliance is placed on the order of Jaipur Bench of the Tribunal in the case of U.B. & Co. 14 TTJ 320.

Further, it is contended that the order of the ITO stands merged in that of the Commissioner (Appeals) and, therefore, the Commissioner has no jurisdiction under Section 263. It is submitted that the Hon'ble Supreme Court has held in a number of cases, including CIT v. Vegetable Products Ltd. [1973] 88 ITR 192, that where two views are reasonably possible, the one in favour of the taxpayer should be adopted. On merits, it is pointed out that the Calcutta High Court has, in its decisions in the cases of Chloride India Ltd. v. CIT [1977] 106 ITR 38 and General Fibre Dealers v. ITO [1979] 116 ITR 40 and the Madras High Court in its decisions in the cases of CIT v. Rajalakshmi Mills Ltd. [1980] 125 ITR 141 and Rayon Traders (P.) Ltd. v. ITO [1980] 126 ITR 135 have held that an assessee is entitled to interest on refunds due as a result of appellate orders. Our attention is also invited to the fact that special leave petition filed on behalf of the revenue in the case of John Falming & Co. Ltd. has been rejected by the Supreme Court as reported in [1983] 144 ITR (St.) 11. The Bombay High Court is also stated to have rejected the application of the department under Section 256(2) of the Act in the case of CIT v. Mrs. Shirinbai P. Pundole, [1981] 129 ITR 448. Anticipating that, for merits, the department would rely on the decision of the Bombay High Court in the case of CIT v.Carona Sahu Co. Ltd. [1984] 146 ITR 452, Shri Munim submits that in view of the Supreme Court rejecting the special leave petition as above, the said Bombay High Court's decision may not apply. The alternative contention is that the position as regards the interest under Section 244(1A) is different and that the same will have to be allowed in any case.

4. The departmental representative has, on the other hand, strongly relied on the order of the Commissioner. Our attention, in particular, is invited to the decision of the Calcutta High Court in the case of Ganga Properties v. ITO [1979] 118 ITR 447 and the decision of the Mysore High Court in the case of Bangalore Transport Co. v. CIT [1964] Tax XVII (3)-342. It is stated that there is no merger involved in the case before us and that an order does not necessarily mean an order in writing. When the calculation is made of interest due in ITNS-150 and refund order signed by the ITO is issued, it cannot be said that there is no order passed by the ITO. The rejection of the special leave petition, it is stated, does not mean that the law has been laid down by the Supreme Court in terms of article 141 of the Constitution of India, particularly when there is a Bombay High Court's decision squarely covering the issue. It is not permissible to draw an inference from the fact of rejection of the special leave petition and not apply the Bombay High Court's decision.

5. We have heard the parties. The interest has been allowed to the assessee for the first time on 31-3-1980, i.e., when the ITO has given effect to the order of the Commissioner (Appeals). It is this order, which is the subject-matter of appeal. This order has, admittedly, not been a subject-matter of appeal. In the circumstances, the question of its merger so as to exclude the jurisdiction of the Commissioner does not arise. We also do not agree with the counsel for the assessee that it is a case of no order and, therefore, the Commissioner will have no jurisdiction under Section 263 to revise the order. The word 'order' has not been defined in the Act. According to Stroud's Judicial Dictionary, 'order' is a judicial ministerial direction or conclusion on matters outside the record ; a 'judgment' is a decision obtained in an action and every other decision is an 'order' (per Esher M.R. Onslow v. Inland Revenue Commissioner, Q.B.D. 556, infra). In this view of the matter, we are inclined to hold that even though there is no specific order, there are obviously directions to allow interest and interest has actually been allowed. This act on the part of the ITO can be treated as an order for the purpose of Section 263.

6. On merits, we find that the Bombay High Court's decision in the case of Carona Sahu Co. Ltd. (supra) is a Full Bench decision and is clearly against the assessee. This decision is dated 21-10-1983, while the High Court's decision in the case of John Falming & Co. Ltd. (supra) rejecting the department's application under Section 256(2) is dated 19-2-1979 and the special leave petition has been rejected by the Hon'ble Supreme Court on 9-7-1983. In this view of the matter, we do not agree with the counsel for the assessee that we should not follow the above Bombay High Court Full Bench decision which is on all fours.

In our this view, we are indirectly supported by a Bombay High Court's decision in the case of Kisinchand Chellaram v. CIT [1978] 114 ITR 654, where it is observed at page 663 that the High Court's order discharging the rule nisi on an identical issue in the assessee's own case does not prevent the Court to consider this question when the matter is argued at length by both the sides. Accordingly, we uphold the order of the Commissioner, directing the ITO to withdraw the interest wrongly allowed under Section 214.

7. The position regarding allowance of interest under Section 244(1A) is materially different. The Bombay High Court's above decision does not cover the issue. On going through the provisions of Section 244(1A), we find that the interest under Section 244(1A) was rightly allowed to the assessee. Accordingly, we modify the order of the Commissioner and direct the ITO to withdraw the interest allowed to the assessee under Section 214 only.


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