ITA 2/2007 BEFORE HON’BLE MR. JUSTICE RANJAN GOGOI HON’BLE MR. JUSTICE B.P.KATAKEY Ranjan Gogoi, J This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ’the Act’) raises the following substantia l question of law: Whether on the facts and in the circumstances of the case, the Tribunal was jus tified and correct in allowing interest u/s 244-A of the Income-Tax Act, 1961 to the assessee for the period of delay in granting refund of tax where such delay is due to reasons attributable to the assessee ? 2. A summary of the somewhat elaborate facts will be necessary to b e noticed at the outset: For the assessment year 1991-92 the respondent- assessee filed i ts return of income on 31.12.92 showing transport subsidy received by it as taxa ble income. However, in the note below the computation of income it was mentione d by the assessee that transport subsidy is not a revenue receipt, it is a capi tal receipt . The assessee paid the income tax due on the returned income. There after, the return was processed and the assessment was completed on 16.5.94 unde r the provisions of Section 143 (3) of the Act. At no stage of the assessment pr oceeding any objection was raised by the respondent- assessee to the effect that the transport subsidy received by it is not taxable. However, against the asses sment order dated 16.5.94 the assessee filed an appeal raising inter alia the af oresaid issue which was decided in its favour by the learned Commissioner of Inc ome Tax (Appeals) by an order dated 27.10.94. Accordingly, it was directed that transport subsidy amounting to Rs. 98,79,266/- be deleted from the total income of the assessee as determined by the Assessing Officer. The learned Commissione r of Income Tax (Appeals) in deciding the aforesaid issue had followed an order dated 4.12.92 passed by the Income Tax Appellate Tribunal, Guwahati Bench in ITA No. 421/Ghy/88 involving the respondent- assessee. 3. Pursuant to the aforesaid order of the learned Commissioner of I ncome Tax (Appeals) the Assessing Officer passed an order dated 13.12.94 deletin g transport subsidy amounting to Rs. 98,79,266/- from the total income of the re spondent-assessee and, furthermore, allowing interest under Section 244A of the Act on the amount of refund that was found due to the assessee. The interest, it may be noticed, was allowed for a period of 33 months i.e. from 1.4.92 to 6.12. 94. 4. Thereafter, on 13.3.97, the Commissioner of Income Tax (Appeals) issued notice to the respondent-assessee under Section 263 of the Act proposing to exercise the power of suo motu revision on the ground that interest on the r efundable amount was wrongly allowed for the period 1.4.92 to 6.12.94. In the sa id notice it was mentioned that as in the return of income filed the taxable inc ome was not computed by the assessee after deducting the transport subsidy, it i s the assessee who was responsible for the delay in grant of refund and, therefo re, was not entitled to interest on the refunded amount. The aforesaid proceedin g under Section 263 of the Act was subsequently dropped by the learned Commissio ner and, instead, a rectification proceeding under Section 154 of the Act was in itiated against the respondent-assessee by notice dated 24.2.99. The said rectif ication proceeding was decided by the Assessing Officer by an order dated 9.3.99 modifying the period for which the interest was payable to the assessee on the refunded amount. The assessee being aggrieved filed an appeal before the learned Commissioner of Income Tax (Appeals) which was allowed by an order dated 20.5.2 002. The Revenue contested the aforesaid appellate order by filing an appeal be fore the learned Tribunal. The said appeal of the Revenue was disposed of by the learned Tribunal on 31.7.2003 by remanding the matter to the Assessing Officer for a fresh consideration. 5. Thereafter, by order dated 31.3.2003, the Assessing Officer took the view that as the assessee had raised the question of taxability of the amou nt of transport subsidy only at the appellate stage, the grant of refund was del ayed for reasons attributable to the assessee. Consequently, interest on the ref unded amount was held to be payable for a period of 8 months i.e. from 16.5.94 ( date of completion of the assessment) upto 13.12.94 i.e. the date of the order o f the Assessing Officer following the order dated 27.10.94 passed by the Commiss ioner of Income Tax (Appeals). 6. The assessee, being aggrieved, carried the matter in appeal befo re the learned Commissioner of Income Tax (Appeals) which authority, by order da ted 4.11.2004, reversed the view taken by the Assessing Officer. In further appe al before the learned Tribunal, at the instance of the Revenue, the view taken b y the learned Commissioner of Income Tax (Appeals) was affirmed. Aggrieved, the present appeal has been filed by the Revenue which has been admitted on the ques tion of law noticed hereinabove. 7. We have heard Mr U Bhuyan, learned counsel for the appellant and Dr. AK Saraf, learned senior counsel appearing for the respondent-assessee. 8. Mr Bhuyan, learned counsel for the appellant has contended that in the present case the respondent-assessee had voluntarily included the amount received on account of transport subsidy as taxable income. On the said basis th e assessment was made. At no point of time in the course of the assessment proce eding the assessee had taken the stand that the amount received on account of tr ansport subsidy is not taxable. The aforesaid issue was raised by the assessee o nly in the appeal filed before the learned Commissioner of Income Tax (Appeals) which was disposed of by the order dated 27.10.94. Thereafter, on 13.12.94 the a mount of transport subsidy earlier included in the taxable income of the assesse e was deleted and orders were passed for refund. Pointing out the provisions of Section 244A (2) of the Act, Mr Bhuyan has contended that the payment of refund was made at the particular point of time only because of the conduct of the asse ssee in not raising the said issue at any earlier point of time. The payment of refund, therefore, got delayed for reasons attributable to the assessee. The ass essee, consequently, is not entitled for interest for the period for which he wa s at fault. 9. Controverting the submissions advanced on behalf of the appellan t, Dr. Saraf, learned counsel for the respondent-assessee has contended that the provisions of Chapter-XIX of the Act make it abundantly clear that grant of ref und is not contingent on any application of the assessee and such refund under S ection 240 of the Act is consequential to any order passed in an appeal or other proceedings under the Act. No claim for refund is required to be lodged. Dr. Sa raf has further contended that the provisions of Section 244A (2) of the Act wil l have no application to the present case inasmuch as the present being a case w here the refund is consequential to the appellate order, no proceeding for refun d can be visualized so as to hold the assessee responsible for any delay in fina lization of such a proceeding. Relying on a decision of the Apex Court in Sandvi k Asia Ltd. -vs- Commissioner of Income-Tax & Ors. [(2006) 280 ITR 643 (SC)], Dr . Saraf has urged that there is a compensatory element in the interest that is a wardable under Section 244A of the Act and that such interest seeks to mitigate the hardship caused to the assessee on account of wrongful levy and collection o f tax. A decision of the Punjab & Haryana High Court in National Horticulture Bo ard -vs- Union of India, [(2002) Vol. 253 ITR 12] has also been relied upon to c ontend that interest on refund is automatic and consequential and does not depen d on initiation of a proceeding for refund or on raising a claim for refund, as may be. 10. We have considered the rival submissions advanced on behalf of t he parties. The relevant provisions of the Act, keeping in mind the assessment y ear involved, would be Section 244A and our consideration will necessarily have to be confined to the said provision of the Act. There can be no manner of doubt that in view of the provisions contained in Section 240 of the Act, in the pres ent case, the entitlement of the respondent-assessee to refund is not dependent on making of any claim for refund. In other words, the entitlement for refund is consequential to the appellate order dated 27.10.94 passed in the present case. Section 244A of the Act contemplates grant of interest at the rate specified th erein from the first day of April of the assessment year to the date on which re fund is granted in case of payment of tax as contemplated by sub-clause (a) of s ub-Section (1) or payment of interest from the date of payment of tax or penalty to the date of grant of refund in all other cases dealt with by sub-clause (b) of sub-Section (1). Under sub-Section (2) of Section 244A if the proceedings re sulting in the refund are delayed for reasons attributable to the assessee no i nterest is to be awarded for the period of such delay for which the assessee is responsible. The expression proceedings resulting in revision appears in sub-S ection (2) of Section 244A notwithstanding the fact that under Section 240 refun d following an appellate order is automatic and does not depend on a claim being lodged to the said effect or a refund proceeding being initiated. The use of th e said expression in the above context is both significant and conspicuous. To read the same only to situations covered by Sections 238 and 239 of the Act whic h contemplates a claim for refund to be made in the situations specified therein would be against the scheme under the Act. The expression proceeding referre d to in sub-Section (2), more reasonably, would mean any proceeding as a result of which refund has become due. Viewed from the aforesaid perspective the expres sion proceeding in sub-Section (2) may take within its ambit an appeal proceed ing consequential to which refund may have become due. Our above view would find some support from the decision of the Punjab & Haryana High Court in National H orticulture Board (supra). In the said case the assessment was completed on Octo ber 2, 1998. The writ petitioner, National Horticulture Board moved an applicati on seeking exemption from income tax under the provisions of Section 10 (23C)(iv ) of the Act on February 9, 1999. The exemption was granted by the Notification dated 6.4.99. Based on the said Notification granting exemption an application f or rectification of the order of assessment was filed on 9.4.99 with a consequen tial prayer for refund of the tax already deposited. The said rectification appl ication was allowed on 23.4.99. Refund was accordingly granted. The claim of the assessee in that case was for interest on the refunded amount from February 9, 1999 (date of filing of the application seeking exemption from income tax) to Ap ril 23, 1999 (date of allowing the application for rectification after the exemp tion Notification was issued). The Punjab & Haryana High Court in the above fact s took the view that there was delay on the part of the assessee in claiming ref und on 9.4.99. Accordingly, interest upto the said date i.e. 9.4.99 was held to be not allowable though interest between 9.4.99 till the date of payment of the refund was held to be payable. 11. In the present case, the assessee itself declared the amount of transport subsidy received by it to be taxable and voluntarily paid the tax. No claim to the contrary was raised in the course of the assessment proceeding. It is only in the appeal filed that the issue was raised and by the appellate order dated 27.10.94 the assessee’s contentions were upheld. Consequently, the order deleting the transport subsidy amount from the total income and for consequentia l refund was passed by the Assessing Officer on 13.12.94. In the above circumsta nces, it cannot but be held that the assessee was responsible for some delay in grant of refund. Refund being consequential to the order of the learned Commissi oner of Income Tax (Appeals) dated 27.10.94 by which the assessment order dated 16.5.94 became liable to modification, it will be correct to hold that the asses see will be entitled to interest on the refunded amount w.e.f. 16.5.94 till date of payment of the refundable amount. 12. Consequently, this appeal is allowed and the order of the learne d Tribunal is reversed in the light of what has been stated above.