The case of Kapilaben Kanjibhai Patel Oral Vs ITO centers around the calculation of interest on income tax refund. The appellant filed two separate appeals before ITAT Ahmedabad against the orders passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the assessment years 1982-83 and 1983-84.
Analysis: The appellant filed a rectification application stating that certain mistakes were apparent on record regarding the grant of interest on the refund. The Assessing Officer passed an order under Section 154 of the Income Tax Act, determining the total income as nil. However, the appellant contended that the refund receivable was wrongly calculated and claimed additional compensation for delayed interest under Section 244A of the Act. The CIT(A) dismissed the appeal of the appellant.
During the proceedings, the ITAT noted that the provisions of Section 244A do not allow interest on interest. However, the appellant was not claiming interest on interest but rather seeking the refund and the interest entitlement up until the date of refund. The ITAT observed that the contentions of the appellant were not fully considered and the calculations provided by the appellant were not taken into account by the Assessing Officer or the CIT(A).
As a result, the ITAT decided to remand the matter back to the Assessing Officer for proper verification and calculation. The Assessing Officer is instructed to consider the appellant’s contentions and calculations in accordance with Section 244A of the Act. The appellant will be given an opportunity to be heard, ensuring the principles of natural justice are followed.
Conclusion: In the case of Kapilaben Kanjibhai Patel Oral Vs ITO, ITAT Ahmedabad partially allowed the appeals filed by the appellant. The ITAT remanded the matter back to the Assessing Officer for proper verification and calculation of interest on the income tax refund. The ITAT emphasized the need to consider the appellant’s contentions and calculations in accordance with the provisions of Section 244A.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
These two appeals are filed by the Assessee against two separate orders, both dated 17.10.2022, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Years 1982-83 & 1983-84.
2. As the assessee has raised identical issue in both the appeals, therefore, grounds of appeal in ITA No.183/Ahd/2023 for A.Y. 1982-83 are being reproduced as under :-
“1. In law and in facts and circumstances of the appellant case, the learned Commissioner of Income Tax (Appeals) has erred in points of law and facts.
2. In law and in facts and circumstances of the appellant case, the learned Commissioner of Income Tax (Appeals) has grossly erred in rejecting appellant’s claim of interest on refund.”
3. The assessee’s case, order giving effect to Tribunal’s order in ITA No.2252/Ahd/2023 dated 07.07.2006 was passed on 10.12.2017 determining total income at Rs.nil for Assessment Year (A.Y.) 1982-83. As per the said order, the assessee was granted refund of Rs.31,180/- which was issued on 15.11.2017. The assessee vide its rectification application dated 16.04.2018 requested to rectify the following mistakes apparent on record:-
i) Interest u/s. 244A of the IT Act was not granted on self assessment tax paid for Rs.52,910/- on 26.06.1982. Assessee requested now to grant interest u/s. 244A from June, 1982 to September, 2000 amounting to Rs.1,31,481/- and stated that order giving effect to CIT(A)’s order dated 11.02.2003 was not properly given.
ii) Assessee further stated that interest u/s.244A on regular tax paid of Rs.3,678/-was granted till September, 2000 instead of till November, 2017 i.e. the date of issue of refund; thus the said interest was short granted from October, 2000 to November, 2017 on Rs.3,678/- amounting to Rs.4,141/-.
iii) In the said application, assessee also requested for additional compensation for the grant of interest u/s.244A of the Act for the delayed period i.e. (a) interest u/s.244A of Rs.27,502/- from October 2000 to November 2017; (b) interest u/s.244A of Rs.27,502/- from December, 2017 till the date of issue of refund on Rs.4,141/-; (c) interest u/s.244A of the Act on Rs.1,31,481/- which was receivable on 15.11.2017 is not issued till date i.e. from December 2017 till the date of issue of refund on Rs.1,31,481/-
4. The Assessing Officer after taking cognisance of the rectification application passed order under Section 154 of the Income Tax Act, 1961 on 09.04.2019 thereby determining the total income at Rs. Nil.
5. Being aggrieved by the rectification order under Section 154 of the Act, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
6. There is a delay of 98 days in filing the present appeal for which the assessee has filed condonation of delay application. The reasons set out in the said application appear to be genuine and hence the delay is condoned.
7. The Ld. AR submitted that the assessee filed rectification application regarding mistake apparent on record against order dated 12.10.2017 giving effect to Tribunal’s order, firstly in respect of interest under Section 244A of the Act was short granted, secondly for additional compensation. The Assessing Officer determined the refund of Rs.1,35,727/- but the same was not issued. The Ld. AR further submitted that the said refund receivable was wrongly calculated and thus the assessee rightly claimed additional compensation on delayed grant interest under Section 244A of the Act. The Ld. AR submitted that refund receivable is to be calculated by determining the refund receivable including interest on refund as reduced by the refund already issued. The balance amount derived will be the net refund receivable. On this balance amount, interest receivable will be calculated. Thus, the same should be continued till total tax is paid as well as total refunds issued are considered. Thus, the Ld. AR pointed out Sl. No.13 of the table which is reproduced in CIT(A)’s order and submitted that refund was issued and adjusted on 27.09.2000 amounting to Rs.5,43,655/- was reduced as principal tax refund amounting to Rs.1,98,330/- and interest on refund at Rs.3,45,325/-resulting into balance refundable amount of Rs.1,62,663/- consisting of principal refund of Rs.3,678/- and interest at Rs.1,58,985/- as per the Department working. The Ld. AR pointed out as per assessee’s working, refund of Rs.5,43,655/- is to be first adjusted against interest receivable i.e Rs.5,04,310/- and balance refund i.e. Rs.39,345/- will be adjusted against the principal refund receivable. The Ld. AR submitted that the second refund of Rs.31,180/- was granted vide order dated 12.10.2017 giving effect to Tribunal’s order and the said refund was credited to bank account on 15.11.2017 and was reduced as principal tax refund Rs.3,678/- and interest on refund Rs.27,502/- resulting into balance refundable amount of Rs.1,35,627/- interest receivable as per the Department working. The third refund of Rs.1,35,627/- was granted vide order under section 154 of the Act dated 09.04.2019 passed under Section 154 and the said refund was credited to bank account on 15.04.2020. However, as per the assessee’s calculation, the amount of refund comes to Rs.3,45,530/- till April 2020 and hence refund was short granted by Rs.2,25,356/-including interest till November 2021. Thus, the ld. AR submitted that the CIT(A) erred in rejecting the assessee’s claim on interest refund.
8. The Ld. DR submitted that the Assessing Officer has rightly rejected the rectification application under Section 154 filed by the assessee and the refund granted by the Department at Rs.1,35,627/- was granted as per law. The Ld. DR further relied upon the Assessment Order and the order of the CIT(A).
9. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the interest that can be given to the assessee is as per the provisions of Section 244A of the Act. As per the observations of the CIT(A), the said Section does not contemplate paying of interest on interest, the Section 244A(1A) got inserted by Finance Act 2016 with effect from 01.06.2016 and is not applicable in the case of the assessee. But in the present case, the assessee is not claiming interest on interest but claiming the refund and the date on which the refund was granted and received up till that period the interest which the trust is entitled to. The contentions of the assessee was not taken into account fully and the calculation which has been done by the assessee as per Section 244A has not been taken into account either by the Assessing Officer as well as by the CIT(A). Therefore, it will be appropriate to remand back this matter to the file of the Assessing Officer for proper verification and calculation which was placed by the assessee before the Revenue authorities in consonance with Section 244A of the Act. The contentions of the assessee that the interest component should be taken first and thereafter the principal amount needs verification and the same should be verified by the Assessing Officer. The matter is, therefore, remanded back to the file of the Assessing Officer for proper adjudication as per the directions and observations given hereinabove. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice. Thus, ITA No.183/Ahd/2023 for A.Y. 1982-83 is partly allowed for statistical purpose.
10. As regards to ITA No.184/Ahd/2023 for A.Y. 1983-84, the same is also identical and here also the issue is remanded back to the file of Assessing Officer for proper verification of the contentions raised by the assessee before the Tribunal and in respect of the calculations given by the assessee. The Assessing Officer shall verify the same and adjudicate as per law. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice.
11. In the result, both the appeals filed by the assessee are partly allowed for statistical purpose.
Order pronounced in the open Court on this 14th June, 2023.