LAXMIBEHN HEMDAS PATEL v. S. B. ROHTAGI — 1994 DIGILAW 187 (GUJ)

M. B. SHAH, N. N. MATHUR, J. ( 1 ) ). In this petition the petitioner has challenged the order dated February 9 1983 passed by the Commissioner of Income-tax Gujarat III Ahmedabad under Section 264 of the Income-tax Act 1961 (the Act for short ). By the impugned order the Commissioner of Income-tax arrived at the conclusion that the petitioner was not entitled to interest under Section 244 (1a) of the Act because she got refund as a result of an order passed under Section 154 of the Act and that the order passed under Section 154 of the Act would not be covered by the phrase other proceedings contemplated under Section 240 of the Act. ( 2 ) ). It is the say of the petitioner that consequent to the orders under Section 154 of the Act a refund of Rs. 11 376 became due to the petitioner for the assessment year 1975-76 and for the assessment year 1977-78 the petitioner got a refund amount of Rs. 2452. 00. Both these refunds were ordered to be adjusted against the outstanding demand of assessment year 1974-75. The petitioner claimed interest under Section 244 (1a) by her application dated 7th November 1981 on the amounts of refunds granted to her. That application was rejected by the ITO. The petitioner had filed two revision applications under Section 264 (1) of the Act against the orders passed by the Income-tax Officer rejecting her claim for interest under Section 244 (1a) of the Act on the amounts of refunds which arose as a result of the orders dated 30th September 1981 passed under Section 154 of the Act for the assessment years 1975-76 and 1977-78. As stated above the Commissioner of Income-tax rejected the said applications solely on the ground that the petitioner is not entitled to claim interest under Section 244 (1a) of the Act on the refunds granted under the rectification order passed under Section 154 of the Act. ( 3 ) ). At the time of hearing of the petition learned Counsel Mr. Mehta vehemently submitted that the order passed by the Commissioner of Income-tax is on the face of it illegal and contrary to the provisions of Section 244 (1a) of the Act. ( 3 ) ). At the time of hearing of the petition learned Counsel Mr. Mehta vehemently submitted that the order passed by the Commissioner of Income-tax is on the face of it illegal and contrary to the provisions of Section 244 (1a) of the Act. He further submitted that Section 244 (1a) of the Act is to be read together with sub-Section (1) of Section 244 and Section 240 of the Act. He further submitted that Section 240 specifically provides that where as a result of any order passed in appeal or other proceeding under the Act refund of any amount becomes due to the assessee the Income-tax Officer is required to refund the amount to the assessee without his/her having to make any claim in that behalf and Section 244 provides for payment of interest on such refund. ( 4 ) ). As against this learned Counsel Mr. Thakore submitted that in a case where a rectification order under Section 154 of the Act is passed Sections 240 and 244 would not be applicable particularly in view of the fact that the refund order is passed by the Income-tax Officer is under Section 154 (5) of the Act and it cannot be said to be an order passed in an appeal or other proceedings. ( 5 ) ). For appreciating the rival contentions raised by the learned Counsel for the parties it would be necessary to refer to the relevant provisions under Chapter XIX pertaining to refunds of excess tax or penalty paid by the assessee under the Income-tax Act. These provisions can broadly be divided into two groups (i) where the claim for refund is to be made Sections 235 239 and 243 provide procedure for it and (ii) other Sections; provide for the cases where no claim is required to be made and the concerned officer is required to refund the amount in pursuance of the order passed in appeal or in any other proceedings. The said Sections are Sections 240 241 and 244. Section 237 inter alia provides that if any person satisfies the Income-tax Officer that the amount of tax paid by him for any assessment year exceeds the amount with which he is properly chargeable for that year he shall be entitled to a refund of the excess. Section 238 provides as to who would be entitled to file an application for refund. Section 238 provides as to who would be entitled to file an application for refund. Section; 239 (i) inter-alia provides that every claim for refund shall be made in the prescribed form and verified in the prescribed manner. Sub-section (2) provides limitation within which an application for refund can be filed. Section 243 provides that in the cases where the Income-tax Officer does not grant refund as provided therein the Central Government shall pay the assessee the said amount with interest. In the present case we are not required to deal with these Sections. As against this Section 240 provides that where as a result of any order passed in appeal or other proceeding under the Act refund of any amount becomes due to the assessee the Income-tax Officer shall refund the amount to the assessee without his having to make any claim in that behalf. However Section 241 empowers the Income-tax Officer to withhold the refund in such case where an order giving rise to a refund is the subject-matter of an appeal or further proceedings. Section 244 provides for payment of interest on such refund. Section 240 and the relevant part of Section 244 with which we are concerned are as under: 240 Where as a result of any order passed in appeal or other proceeding under this Act refund of any amount becomes due to the assessee the Income-tax Officer shall except as otherwise provided in this Act refund the amount to the assessee without his having to make any claim in that behalf. 244 (1 ). Where a refund is due to the assessee in pursuance of an order referred to in Section 240 and the Income-tax Officer does not grant the refund within a period of three months from the end of the month in which such order is passed the Central Government shall pay to the assessee simple interest at twelve per cent per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted. (1a ). (1a ). Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee as a result of any amount having been paid by him after the 31st day of March 1975 in pursuance of any order of assessment penalty and such amount or any part thereof having been found in appeal or other proceedings under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty as the case may be under this Act the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to[a] the date on which the refund is granted: provided that x x x (Emphasis supplied ). ( 6 ) ). Considering the aforesaid provisions in our view the scope and ambit of Section 240 is very wide. It provides that as a result of any order passed in appeal or other proceeding under the Act any amount which becomes due to the assessee requires to be refunded to the assessee. In the context of Section 240 Section 244 provides for payment of interest on such refund. The phrase other proceedings used under Section 240 is of wide amplitude and would cover any order passed in the proceedings other than appeal under the Income-tax Act. Therefore the phrase the orders passed in other proceedings under the Income-tax Act would include the orders passed under Section 154 (rectification proceedings) the orders passed by the High Court or the Supreme Court under Section 260 (in reference) and the orders passed by the Commissioner of Income-tax in revision applications under Section 263 or 264 or on an application under Section 273a of the Act. In this view of the matter in our view there is no reason to restrict the meaning of the phrase other proceedings under the Income-tax Act used in Section 240 to only some orders by which refund of excess tax or penalty is granted and not to cover the orders passed under Section 154 of the Act. In this view of the matter in our view there is no reason to restrict the meaning of the phrase other proceedings under the Income-tax Act used in Section 240 to only some orders by which refund of excess tax or penalty is granted and not to cover the orders passed under Section 154 of the Act. Further Section 154 of the Act empowers the income-tax authority to rectify a mistake brought to its notice which is apparent from the record and on such rectification of an apparent mistake if the assessee is entitled to get the refund of tax paid in excess then there is no reason to hold that the assessee is not entitled to have it with interest as provided under Section 244 (1a ). ( 7 ) ). The Allahabad High Court in the case of Raj Kishore Prasad v. I. T. O. [1991] 188 ITR 765 observed that the words other proceeding under the Act used under Section 240 are wide enough to include the proceedings or orders passed under Section 263 of the Act giving rise to the claim of an assessee for refund. The Court negatives the contention of the revenue for restricting the meaning and scope of the phrase other proceedings only to references made under the Act. ( 8 ) ). In view of the aforesaid discussion in our view the impugned order passed by the Commissioner of Income-tax is on the face of it illegal. There is no reason to hold that if the refund is granted as a result of a rectification order passed under Section 154 of the Act the assessee is not entitled to get benefit under Section 244 (1a) of the Act. ( 9 ) ). In the result the petition is allowed. The impugned order dated 9th February 1983 (Annexure G) passed by the Commissioner of Income-tax is quashed and set aside. Respondent No. 2 is directed to pass an appropriate order under Section 264 of the Income-tax Act for granting interest on the refund granted to the petitioner for the assessment years 1975-76 and 1977-78. Rule made absolute to the aforesaid extent with no order as to costs. .