In the High Court of Punjab and Haryana, Chandigarh CWP No. 10808 of 1988 Date of Decision: November 16, 2009 Dr. Harbhajan Singh …Petitioner Versus The Income Tax Officer, ‘A’ Ward, Phagwara and another …Respondents CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JASWANT SINGH Present: Mr. Rohit Sud, Advocate, for the petitioner. Mr. Vivek Sethi, Advocate, for the respondents 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? M.M. KUMAR, J. The assessment for the assessment year 1974-75 of the petitioner-assessee was completed on 19.3.1977 and a demand of Rs. 5,92,454/- was created. The aforesaid amount was appropriated by the department on that very date out of the seized money belonging to the assessee. Likewise, in respect of assessment year 1975-76, the assessment was completed on 17.3.1978, a demand of Rs. 5,19,645/- was created and money was appropriated on the same very date from the seized amount belonging to the assessee, which was lying with the department. The assessee filed an appeal under Section 254(1) of the CWP No. 10808 of 1988 Income-tax Act, 1961 (for brevity, ‘the Act’) in respect of both the assessment years. The Appellate Authority relied upon its order dated 11.9.1978, annulled the assessment in respect of both the assessment years on 17.4.1979. As a consequence, the entire tax became refundable to the assessee along with interest due under Section 244 of the Act. However, the amount appropriated and realised from the assessee, which was found refundable, was adjusted on 22.2.1982 in respect of subsequent assessment years of 1976-77 and 1977-78. It is in the light of the aforesaid facts that the assessee claimed his entitlement to interest in respect of assessment year 1974-75 under Section 244(1A) of the Act from the date of assessment upto the period when it was adjusted in respect of subsequent assessment year (11.9.1978 to 22.2.1982). In respect of assessment year 1975-76, interest has been claimed from 17.4.1979 to 22.2.1982. A further claim has also been made that the amount, which remained unadjusted should also bear interest from the date of adjustment till the date of payment as per the provisions of Section 244(2) of the Act. 2. Written statement filed by the respondents does not dispute the aforesaid factual position. However, reliance has been placed on Section 132B(4)(b) of the Act to raise an argument that interest is chargeable from the date immediately following the expiry of the period of six months from the date of the order under Sub-section (5) of Section 132 of the Act to the date of regular assessment. It is, however, undisputed that regular assessment was completed on 19.3.1977 in respect of assessment year 1974-75 and on 17.3.1978 in respect of assessment year 1975-76. 2 CWP No. 10808 of 1988 3. Mr. Rohit Sud, learned counsel for the assessee has argued that the issue of interest raised in the instant petition is no longer res integra and in similar circumstances a Division Bench of this Court has allowed interest in the case of Commissioner of Income Tax v. Leader Engineering Works, (1989) 178 ITR 529 (P&H). He has drawn our attention to para 4 of the judgment to substantiate his argument. He has also placed reliance on another Division Bench judgment of this Court rendered in the case of Commissioner of Income Tax v. Hansa Agencies (P) Ltd., (1998) 234 ITR 271 (P&H), where the aforesaid view has been followed and applied and argued that the assessee is entitled to interest on entire refund including pre-assessment tax paid and found in excess of regular demand after giving effect to appellate order from the date when original assessment was framed excluding the period of one month from the date of passing of order in appeal. 4. At this stage, learned counsel for the petitioner states that he would not press another issue with regard to refund of tax wrongly charged by the department on the sum of Rs. 50,000/- in respect of assessment year 1977-78 as there is some dispute on facts. 5. Mr. Vivek Sethi, learned counsel for the respondents has made an attempt to distinguish the aforesaid judgments by arguing that no relief under Section 244(1A) of the Act has been given by any of the two Division Benches and to that extent the matter cannot be considered to be covered. His submission appears to be that the judgments delivered by two Division Benches in Leader Engineering Works (supra) and Hansa Agencies (P) Ltd. (supra) are confined only to the relief of giving interest under Section 244(1A) of the Act. 3 CWP No. 10808 of 1988 6. After hearing learned counsel for the parties we are of the considered view that the issue of interest under Section 244(1A) of the Act is covered in favour of the assessee and against the revenue by both the Division Bench judgments. In Hansa Agencies (P) Ltd. (supra), the question of grant of interest under Section 244(1A) of the Act directly fell for consideration. In order to appreciate the issue, the aforesaid provision may be set out in extenso, which reads thus:- “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 fifteen 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) 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 or 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 4 CWP No. 10808 of 1988 amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted: Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted : Provided further that no interest under this sub- section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding: Provided also that where any interest is payable to an assessee under this sub-section, no interest under sub- section (1) shall be payable to him in respect of the amount so found to be in excess. (2) Where a refund is withheld under the provisions of Section 241, the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of three months from the end of the month in which the order referred to in section 241 is passed to the date the refund is granted.” 7. The aforesaid provisions were interpreted by the Division Bench of this Court in Hansa Agencies (P) Ltd. (supra) by placing 5 CWP No. 10808 of 1988 reliance on a judgment of Hon’ble the Supreme Court rendered in the case of Modi Industries Ltd. v. CIT, (1995) 216 ITR 759 (SC) and the same reads as under:- “(ii) If any tax is paid pursuant to an assessment order after 31st March, 1975 (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by the ITO as payment of tax in discharge of the assessee’s tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount under S. 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source must be treated as payment of income-tax pursuant to an order of assessment on and from the date when these amounts were set-off against the tax demand raised in the assessment order, in other words, the date of the assessment order.” 8. In view of the above, the relief claimed by the assessee for payment of interest under Section 244(1A) of the Act is liable to be allowed. Accordingly, the assessee is held entitled to interest in respect of assessment year 1974-75 with effect from 11.9.1978 to 22.2.1982 and in respect of assessment year 1975-76 interest is allowed from 17.4.1979 to 22.2.1982 with a rider that the assessee would not be entitled to interest for a period of one month from the date of passing of 6 CWP No. 10808 of 1988 the order in appeal as is provided by the proviso to Section 244(1A) of the Act. 9. The other claim pertains to payment of interest in respect of unadjusted amount from the date of adjustment of the amount till the date of its actual payment i.e. from 22.2.1982 till the date of payment. A bare perusal of sub-section (2) of Section 244 of the Act would show that if refund claim of the petitioner is withheld under Section 241 beyond a period of three months then the assessee becomes entitled to payment of simple interest at the rate of 15% per annum on the amount of refund till the date of payment. It is not disputed that the refund of unadjusted amount belonging to the petitioner has been withheld since 22.2.1982. The amount was payable within a period of three months failing which it was to bear statutory interest as is provided by Section 244(2) of the Act. Accordingly, the aforesaid claim made by the assessee is also allowed and he is held entitled to interest on the refund claim with effect from the expiry of three months from 22.2.1982. The needful shall be done within a period of three months from the date of receipt of copy of this order. (M.M. KUMAR) JUDGE (JASWANT SINGH) November 16, 2009 JUDGE manoj/Pkapoor 7