Brief of the Case
Calcutta High Court held that clause (1)(b) of Section 244A is residual in nature which prescribes interest on refund from the date of payment of tax in cases which are not covered by Section 244A(1)(a). Necessarily, it will cover interest on refund of excess self-assessment tax paid by the assessee. The explanation to section 244A (1)(b) would have no application since the tax in question was not paid consequent to any notice of demand u/s. 156, rather it was paid self assessment tax u/s 140A. Hence according to mandate of section 244A(1)(b), interest is payable on refund of excess self assessment tax, from the date of payment of such tax to the date when the refund is granted.
Facts of the Case
The assessee paid tax in respect of the relevant assessment years including self-assessment tax u/s.140A of the Act. Subsequently, the assessment u/s. 143(3) was completed for both the assessment years 1992-93and 1993-94 and certain additions were made. The assessee preferred an appeal before the CIT (A) who allowed certain relief resulting in an order for refund. While giving effect to the said order of the learned CIT (A), an order for refund along with interest was allowed to the assessee for both the years under consideration.
Subsequently, the assessing officer issued a notice u/s.154 and the interest previously allowed u/s.244A (1)(b) on the refund of excess self assessment tax was withdrawn. In his order u/s.154 the assessing officer held that interest u/s.244A(1)(a) is not payable on refund of excess self assessment tax whereas s.244A(1)(b) is not attracted in view of the explanation appended thereto.
Contention of the Assesse
The ld counsel of the Assessee submitted that the interest is payable on the refund of the excess self assessment tax under Clause (b) of Sub-Section (1) of Section 244A which should be construed liberally and in favour of the assessee. He relied on the case of Union of India –Vs- Tata Chemicals Ltd. reported in (2014) 6 SCC 335. Section 244A(1)(a) provides for interest on refunds out of Advance tax and tax deducted at source while Section 244A(1)(b) is residual in nature and provides for interest on refund in other cases including excess tax paid on self assessment u/s.140A. He relied on the CBDT Circular No. 549 dated 31 October 1989.
He further submitted that both the Tribunal and the CIT (A) have rightly set aside the order of the assessing officer by holding that the issue was debatable and outside the scope of Section 154. He contended that there is no clear mandate in Section 244A by which the assessing officer can deny interest to the assessee on the excess amount paid u/s.140A of the Act. Thus according to him there was no “mistake apparent from the record” which could have been rectified in exercise of power u/s 154.
Contention of the Revenue
The ld counsel of the revenue submitted that Clause (a) of subsection (1) of section 244A is applicable only to the circumstances enumerated under the clause and the case of the assessee does not fall in the four corners of the said provision. Also Clause (b) of subsection (1) of Section 244A is not attracted in view of the explanation appended to the said clause. The explanation, clearly mentions that such excess tax must have been paid only after the department had computed the income and issued a demand notice u/s.156. Hence the revenue is not obliged to pay any interest on the refund of excess self assessment tax as the statute does not provide for any such interest. He relied on CIT v. Engineers India Ltd. reported in  373 ITR 377 (Delhi).
He further submitted that the Act envisages the circumstances where interest may be granted on refund of excess tax and interest cannot be granted otherwise than in accordance with the statutory scheme. Hence there can be no debate as regards the question whether in a given situation interest can be granted on a refund of excess self assessment tax. Thus the learned tribunal has erred in holding that the issue is debatable and beyond the scope of s.154.
Held by CIT (A)
The CIT(A) reversed the order of the assessing officer by an order dated 20th November 2002 relying upon a judgment of Delhi High Court in the case of CIT Vs MMTC Ltd. reported in 246 ITR 725 and held that the provisions of Section 154 could not be applied to the present case.
Held by ITAT
The ITAT upheld the order of CIT (A)
Held by High Court
High Court held that in the case of Union of India Vs Tata Chemicals Ltd. reported in (2014) 6 SCC 335 while dealing the issue whether the deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source u/s. 195, the supreme court held that the amount paid was held by the Government till a direction was issued by the appellate authority to refund the same, therefore, it should carry interest as a matter of course. Furthermore, it was held that interest was in the nature of compensation for use and retention of money collected unauthorisedly by the department. The Apex Court further held that refund due and payable to the assessee is debt owed and payable by the revenue. Furthermore, it was held that merely because there is no express statutory provision for payment of interest on refund of excess amount collected by the Revenue, the Government cannot evade its obligation to refund the money with accrued interest for the period of undue retention. The Apex court also held that explanation to Clause (b) of Sub-section (1) of Section 244A will not be applicable where payment is not made pursuant to any notice u/s.156. Furthermore, Clause (b) of Section 244A(1) is residual in nature and prescribes interest on refund from the date of payment of tax in cases which are not covered by Clause (a) of Section 244A (1).
Further the Bombay High Court in Stockholding Corporation of India Vs N.C. Tewari, CIT reported in (2015) 373 ITR 282 (Bom.) has elaborately dealt with the question of interest on refund of excess self assessment tax and held that where the self-assessment tax paid by the assessee u/s. 140A is refunded, the assessee should be, on principle entitled to interest thereon since the self assessment tax falls within the expression “refund of any amount”. The computation of interest on self-assessment tax has to be in terms of Section 244A(1)(b), i.e., from the date of payment of such amount up to the date on which refund is actually granted. Even otherwise, it is trite law that wherever the assessee is entitled to refund, there is statutory liability on the Revenue to pay the interest on such refund on general principles to pay the interest on sums wrongfully retained (Sandvik Asia Ltd. (2006) 2 SCC 508). The same views were taken in the case of CIT III –Vs- Sutlej Industries Ltd reported in (2010) 325 ITR 331.
Further, the right of the assessee to receive interest on refund is statutorily recognized by Sub-Section (1) of Section 244A when it provides that:- “Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely.” The aforesaid right is, we admit, subject to provisions of Section 244A. Section 244A does not deny payment of interest in case of refund of amount paid under Section 140A. On the contrary Clause-(b) being a residuary clause necessarily includes payment made u/s. 140A.
Also in the instant case the CIT(A) found that the income tax liability as assessed earlier was erroneous and hence he directed that the excess amount of tax including self assessment tax be refunded to the assessee. In these circumstances the principle of restitution would be squarely attracted and the revenue is also statutorily bound to pay interest u/s.244A(1)(b) to the assessee. The apex court in South Eastern Coalfield – Vs- State of M. P. reported in 2003 (8) SCC 648 has categorically held that once the doctrine of restitution is attracted, the interest is often a normal relief given. Restitution sometimes refers to “disgorging of something which has been taken” and sometimes refers to “compensation for injury done”. Law does not favour unjust enrichment nor does it favour unjust impoverishment.
As per discussion above, we are of the opinion that Clause (b) of Sub-Section 1 of Section 244A is residual in nature and provides for interest on refund of excess self-assessment tax paid by the assessee. Furthermore the explanation to section 244A(1)(b) would have no application since the tax in question was not paid consequent to any notice of demand u/s. 156, rather it was paid u/s 140A. Hence according to mandate of section 244A (1)(b) interest is payable on refund of excess self assessment tax from the date of payment of such tax to the date when the refund is granted. Also U/s. 154 of the Act only a “mistake apparent from the record” is rectifiable. Thus the precondition to invoke section 154 is the presence of a mistake and that the same must be apparent from the record. The power to rectify a mistake u/s.154, however, does not extend to revision or review of the order. Accordingly, in the instant case there was no mistake apparent from the record which could be rectified u/s. 154.
Accordingly appeal disposed of.