Per Shri T. V. Rajagopala Rao, Judicial Member - This is an appeal filed by the assessee against the order of the Commissioner Cochin passed under section 263 of the Income-tax Act, 1961 (the Act) dated 22-7-1983 and it relates to the assessment year 1976-77. The brief facts of the case are as follows. The assessee is a private limited company engaged in the manufacture of aluminium conductors. The assessment was completed for 1976-77 on 12-9-1976 on a total income of Rs. 2,89,480 on which the income-tax payable was Rs. 1,71,872. However, as an advance tax of Rs. 1,32,300 was already paid by the assessee-company, a demand of Rs. 39,572 only was raised against the assessee. The demanded amount was paid on 18-12-1976. The assessee-company went in appeal before the AAC against certain additions made in the assessment order. The AAC allowed the appeal of the assessee by his orders dated 29-9-1977. The ITO gave effect to the AACs orders on 15-10-1977. According to the orders of the ITO dated 15-10-1977 income-tax payable by the assessee was reduced to Rs. 1,16,609. Consequent upon it a refund of Rs. 55,263 was issued to the assessee. A further refund of Rs. 3,436 was also issued by another order of the ITO dated 25-6-1979. The department carried the matter to this Tribunal as against the AACs order dated 29-9-1977. The appeal was allowed by the Tribunal, the order of the AAC was set aside and that of the ITO was restored. This Tribunal passed its orders on 9-2-1981, consequential orders were passed by the ITO giving effect to this Tribunals order on 3-7-1981 whereunder a demand of Rs. 77,787 was made in which Rs. 14,088 represent interest under section 220(2) of the Act was included. The assessee-company filed a petition under section 154 of the Act before the ITO on 23-7-1981 stating that no interest under section 220(2) was payable by it and, hence, the inclusion of Rs. 14,088 in the demand issued by the orders of the ITO dated 3-7-1981 was incorrect and constituted an error apparent on the face of the record. The ITO allowed the application and deleted the entire interest of Rs. 14,088 and restricted the demand only to Rs. 58,699. The Commissioner revised the order of the ITO dated 30-7-1981 passed under section 154. In the revisionary orders dated 22-7-1983 which constituted the subject-matter of this appeal, two Kerala High Court decisions were brought to the notice of the learned Commissioner, one in the case of A. V. Thomas & Co. Ltd. v. ITO : 138ITR275(Ker) and the second in K. P. Abdual Kareem Hajee v. ITO : 141ITR120(Ker) . Purporting to have considered the matter in detail, the learned Commissioner in the ultimate para of the impugned order, namely para 7, held as follow :
'I have considered the matter in detail. The very fact that the Kerala High Court has pronounced two differing judgments on the issue is sufficient to show that the issue involved is highly debatable. The ITO acted absurdly and erroneously in invoking section 154 to delete the interest already charged. There was no mistake, of law or, of fact, which would be apparent from the assessees records, enabling the Income-tax Officer to invoke section 154. The assessees application dated 23-7-1981 requesting the Income-tax Officer to delete the interest charged under section 220(2) was misconceived, and the Income-tax Officers order accepting it under section 154 was quite erroneous. I, therefore, set aside the order of the Income-tax Officer dated 30-7-1981, restoring the Income-tax Officers order dated 3-7-1981.'
The impugned order, thus, passed by the learned Commissioner under section 154 whereby he had set aside the order of refund of Rs. 14,088 granted to the assessee was set aside, constituted the subject-matter of appeal before us.
2. We have heard Shri Velu Pillai, the learned counsel for the assessee and Shri V. R. Sudhakaran Pillai, the learned departmental representative Shri Velu Pillai relied upon the decisions of the Kerala High Court in A. V. Thomas & Co. Ltd.s case (supra) and also the latest decision of the same High Court in ITO v. A. V. Thomas & Co.  44 CTR (Ker.) 77. On the other hand, the learned departmental representative relied upon the decision of the Kerala High Court in K. P. Abdul Kareem Hajees case (supra) as well as the CBDTs Circular No. 334 dated 3-4-1982 [see Taxmanns Direct Taxes Circulars, Vol. 1, 1985 edn., p. 1257]. After going through the decision of the Kerala High Court, we are of the opinion that the facts in A. V. Thomas & Co. Ltd.s case (supra) as well as A. V. Thomas & Cos. case (supra) are almost identical with the facts on hand. On the other hand, the fact in K. P. Abdul Kareem Hajees case (supra) are quite distinguishable. In fact, the main distinguishing feature between the facts of a case similar to the one before us and the facts obtaining in the case of K. P. Abdul Kareem Hajee (supra) were pointed out by the Kerala High Court itself in A. V. Thomas & Co.s case (supra) as follow.
'The counsel relied on the decision reported in A. K. Haji v. ITO : 141ITR120(Ker) . The facts of this case are substantially different from the facts of the present case. The crucial difference is that in : 141ITR120(Ker) there was no occasion or a refund of tax. The assessee did not pay the tax as demanded under section 156 of the Act. In such a case, the department is fully justified in making the demand for payment of interest. This Court rightly held so .....' (p. 81).
Therefore, it can seen that in K. P. Abdul Kareem Hajees case (supra) though a demand was raised no payment was paid under the demand whereas in this case, whenever a demand was raised the amount thereunder was duly paid by the assessee. In view of the latest decision of the Kerala High Court in A. V. Thomas & Co.s. case (supra) which distinguishes the earlier decision in K. P. Abdul Kareem Hajees case (supra), we here to hold that the order of the learned Commissioner passed under section 263 which is assailed before us in bad under law and, therefore, has to be set aside. As regards the arguments that the CBDTs Circular No. 334 dated 3-4-1982 levy of interest under section 220(2) was permissible when the original assessment is set aside, we can do no better than citing the decision of the Kerala High Court in CIT v. Malayala Manorama & Co Ltd. : 143ITR29(Ker) which expressed the following about the said circular :
'... The court will have to put its own construction upon the provisions of the Act regardless of the practice of the department and the directions for the guidance of the officials .....' (p. 29)
In view of all of the above, we set aside the order of the Commissioner and restore the order of the ITO dated 30-7-1981 passed under section 154.
3. In the result, the appeal is allowed.