ANZ Grindlays Bank PLC vs Commissioner of Income Tax

Y.R. Meena, J.—By this reference application u/s 256(2) of the Income Tax Act, 1961, the Tribunal has referred the following questions (question No. 2 is a revised question) for our opinion :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that charging of interest u/s 220(2) of the Income Tax Act, 1961, is not an appealable order ?

Whether, on the facts and in the circumstances of the case and on a correct interpretation of the relevant provisions of Section 214 of the Income Tax Act, 1961, as it stood at the relevant time the Tribunal was justified in holding that the Assessing Officer was correct and the Commissioner of Income Tax (Appeals) was also justified in confirming the action of the Assessing Officer in withdrawing the interest paid to the assessee u/s 214 of the Income Tax Act which was already refunded to the assessee ?

Whether, the Tribunal is justified in upholding the charge of interest u/s 220(2) of the Income Tax Act, 1961, amounting to Rs. 42,97,063 and in upholding the order of the Commissioner of Income Tax (Appeals) ?

Whether, on the facts and in the circumstances of the case and on a correct interpretation of the relevant provisions of Section 214 of the Income Tax Act, 1961, as it stood at the relevant time as also of those of Section 244(1A) of the Act, the Tribunal is justified in upholding the charge of interest u/s 220(2) of the Income Tax Act, 1961, on the said interest for the period commencing from October 26, 1982 to May 31, 1986?

Whether, on the facts and in the circumstances of the case and on a correct interpretation of the relevant provisions of Section 244(1A) of the Income Tax Act, 1961, the Tribunal was justified in holding that interest paid to the assessee on the basis of the earlier orders of the Tribunal can be withdrawn and/or recovered back from the assessee after the last order of the Tribunal was passed ?"

After this reference counsel for the assessee has revised question No. 2. Counsel for the Revenue has no objection in case the revised question be answered. Accordingly, we will consider revised question No. 2 as referred in the affidavit on behalf of the applicant dated July 6, 1999.

The assessee is a banking company carrying on banking business. The assessment year concerned is 1979-80 and the relevant accounting period ending on December 31, 1978.

On July 27,1979, the assessee has filed the return showing an income of Rs. 15,52,70,800. An income was assessed at Rs. 17,09,94,660 on which the tax payable is Rs. 12,53,80,762. After giving credit for Rs. 5,85,35,478 on account of tax deducted at source and Rs. 5,84,85,909 paid by way of advance tax aggregating to Rs. 11,70,21,387, the Assessing Officer determined Rs. 83,59,375 as the balance tax payable to which he added Rs. 28,06,515 u/s 141A of the Act. The total tax payable was thus determined at Rs. 1,11,65,890. On September 21, 1982, the assessment order with notice of demand was served upon the assessee. Against that order the assessee preferred an appeal. In appeal before the Commissioner of Income Tax (Appeals), the Commissioner of Income Tax (Appeals) has granted substantial relief against the assessment order of the Income Tax Officer. Against that order of the Commissioner of Income Tax (Appeals) the assessee as well as the Revenue both preferred appeals before the Income Tax Tribunal.

While the appeals were pending before the Tribunal, the Assessing Officer gave effect to the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 1979-80 whereby he computed the total income of the assessee at Rs. 15,74,09,888 and determined Rs. 11,53,95,957 as the Income Tax and surcharge payable thereon.

After taking into consideration the amount already refunded u/s 141A of the Act for the assessment year 1979-80, Rs. 69,523 was determined to be payable by the assessee, by an order dated January 2, 1984. Thereafter, there was an order u/s 154 of the Act passed by the Assessing Officer and under that order he determined the Income Tax and surcharge payable by the assessee at Rs. 11,50,96,225. After that order there was a refund of Rs. 30,36,704 which became due and payable to the assessee. Some amount was already refunded and that amount was adjusted and the balance amount refundable was Rs. 2,30,189. The appeal filed by the assessee was decided on June 12, 1985. The Tribunal partly allowed the appeal of the assessee and by giving effect to that order the total income was revised at Rs. 15,66,32,740 whereupon the Income Tax and surcharge was determined at Rs. 11,48,24,752. Therefore, there was further refund of Rs, 5,01,682 which became due and payable to the assessee. On the basis of that refund due, the Assessing Officer has computed the interest at Rs. 2,41,630 as interest payable to the assessee u/s 214 of the Act and Rs. 1,61,792 as interest payable to the assessee u/s 244(1A) of the Act.

There was some mistake in the order of the Tribunal. That mistake was rectified on a miscellaneous application. In giving effect to the order of the Tribunal on the miscellaneous application the total income was revised at Rs. 15,60,07,170 and the total amount of Income Tax and surcharge payable thereon were determined at Rs. 11,43,64,958. Thus, finally on the basis of the order of the Tribunal in the assessee''s appeal on a refund and excess advance tax he determined Rs. 2,92,207 and Rs. 3,58,150 as interest u/s 214 and Section 244(1A) of the Act, respectively, payable to the assessee by the Department.

In appeal filed by the Department, the Tribunal has passed the order on April 24, 1986, whereby the total income was revised at Rs. 16,96,48,160 as against the previous total income of Rs. 15,60,07,174 determined on the basis of the Tribunal''s order in the assessee''s appeal and Income Tax and surcharge thereon were determined at Rs. 12,43,76,385 after giving credit for tax deducted at source and advance tax paid. After giving effect to the order of the Tribunal in the departmental appeal and after taking into account the tax on amounts refunded to the assessee u/s 141A of the Act and also after adjusting the amount on account of refund for the assessment year 1982-83, the Assessing Officer charged interest u/s 220(2) of the Act amounting to Rs. 42,97,063 which was calculated with effect from October 26, 1982, up to May 31, 1986.

The aggregate amount payable by the assessee is at Rs. 1,49,57,346.

Against that order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals).

The Commissioner of Income Tax (Appeals) has dismissed the appeal of the assessee on the ground that the order is not appealable.

In appeal before the Tribunal, the Tribunal has considered the provisions of Sections 214, 220(2) and 244(1A) of the Act under which the interest has been calculated. But finally, the Tribunal has also dismissed the appeal of the assessee on the ground that against an order u/s 220(2) of the Income Tax Act, no appeal lies as the order u/s 220(2) of the Act is not appealable.

In reference before us, learned counsel for the assessee submits that the order giving effect to the order of the Tribunal is appealable as the order giving effect to the order of the Tribunal is as good as the order u/s 143(3) of the Act. He placed reliance on the judgment of this court in Kooka Sidhwa and Co., Calcutta Vs. The Commissioner of Income Tax, W.B., and also the judgments of the Supreme Court in Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, and CESC Ltd. Vs. Commissioner of Income Tax,

Learned counsel for the Revenue, Mr. Agarwal, submits that there is no provision u/s 246(c) of the Act for appeal against the order u/s 220(2) of the Act. Admittedly, the order u/s 220(2) of the Act is not appealable under the provisions of Section 246(c) of the Act.

Learned counsel for the assessee submits that the order passed by the Assessing Officer giving effect to the order of the Tribunal is an assessment and any assessment order is appealable.

In the case of Kooka Sidhwa and Co., Calcutta Vs. The Commissioner of Income Tax, W.B., , this court has taken the view that the order of the Income Tax Officer giving effect to the Tribunal''s direction is appealable in case the Income Tax Officer amends or revises its assessment order.

In the case of Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, the apex court has considered the issue and meaning of "regular assessment" referred to u/s 214 of the Act. Their Lordships held that "regular assessment" referred to u/s 214 means original assessment made u/s 214 of the Act. But learned counsel submits that while giving effect to the appellate order, the order of the Assessing Officer is relatable to Section 143(3) of the Act.

In the case of CESC Ltd. Vs. Commissioner of Income Tax, the apex court reiterated its earlier view and held that "regular assessment" for the purpose of Section 214 means the first assessment and interest payable by the Government is up to the first order of the assessment and any order passed in consequence of the finding or direction given by the higher authority will not be a "regular assessment". But the order giving effect to the appellate order will be an assessment made pursuant to the direction given by the higher authority.

Learned counsel for the Revenue, Mr. Agarwal, submits that the order u/s 220(2) is not appealable. He placed reliance on the decision of the Madras High Court in the case of Commissioner of Income Tax Vs. Suresh Gokuldas, . In that case, there was a notice of demand for interest u/s 220(2) of the Act. The Madras High Court held that a notice of demand issued u/s 156 could not be considered to be an order so as to enable the Assessing Officer to correct any mistake occurring in the said notice. Therefore, no appeal lay to the first appellate authority.

He placed reliance on the decision of Princess Usha Trust Vs. Commissioner of Income Tax, where the court held that the levy of interest was not a part of the process of assessment. By denying liability to pay interest u/s 220(2) of the Act the assessee cannot be held to be denying its liability to be assessed under the Act. Section 246(c) of the Act was, therefore, not attracted and the Tribunal was justified in holding that the assessee had no right to prefer an appeal from the order levying interest u/s 220(2) of the Act. There is no dispute on the fact that the assessee has challenged the order of the Assessing Officer giving effect to the order of the Tribunal in an appeal filed by the Revenue.

Against the order of the Commissioner of Income Tax (Appeals), an appeal was also filed by the assessee. Against the assessment order, the Commissioner of Income Tax (Appeals) has given substantial relief and even in an appeal before the Tribunal filed by the assessee, the assessee further got some relief. The Revenue has also filed an appeal against the order of the Commissioner of Income Tax (Appeals) in the Tribunal, and, after giving effect to the order of the Tribunal in the assessee''s appeal and also the order of the Tribunal on the Revenue''s appeal, the net result is that Rs. 90,49,951 as tax is outstanding against the assessee.

The case of the assessee is that while the assessee has challenged the order of the Assessing Officer giving effect to the order of the Tribunal, that is an assessment and the appeal lies against that order.

It is true that this court has taken the view in Kooka Sidhwa and Co., Calcutta Vs. The Commissioner of Income Tax, W.B., and the apex court in Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, that while giving effect to the order of the Appellate Tribunal, the order of the Assessing Officer is relatable to the assessment order u/s 143(3) of the Act. But while giving effect to the appellate order modifies the assessment order u/s 143(3) and becomes a part of that order, can that order be treated as assessment order u/s 143(3) and any order which is not appealable under the statute can become appealable. In our view, obviously, the order which cannot be appealed against under the statute cannot be made appealable otherwise by inference or by calculating the interest u/s 220(2) of the Act, on the basis of net tax payable after giving effect to the appeal order. There is no direct decision of the apex court that any order u/s 220(2) is appealable.

Admittedly, the provisions of Section 246 do not provide any appeal against the order u/s 220(2) and interest on the outstanding tax payable by the assessee. Secondly, the order u/s 220(2) of the Act does not form part of the order u/s 143(3) like the interest under Sections 214 and 217 of the Act. In fact while calculating the interest u/s 220(2) of the Act the Assessing Officer has no discretion or option, but to simply calculate the interest, at a particular rate on the outstanding tax payable by assessee.

The assessee has also challenged that order on the ground that interest already paid under Sections 214 and 214(1A) of the Act, the Assessing Officer cannot withdraw or recover that interest from the assessee while giving effect to the order of the Tribunal in the appeal filed by the Department.

We perused the order of the Tribunal in the appeal by the assessee against the order of the Assessing Officer whereby he has given effect to the order of the Tribunal on the departmental appeal.

Learned counsel further challenged the order of the Assessing Officer on the ground that interest is not payable by the assessee u/s 220(2) of the Act. He denies that liability to pay interest, therefore, the order charging interest u/s 220(2) is appealable. He placed reliance on the decision of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. Vs. Commissioner of Income Tax, .

In Central Provinces Manganese Ore Co. Ltd. Vs. Commissioner of Income Tax, the issue before their Lordships was whether the order charging interest u/s 139(8) or Section 215 of the Income Tax Act is appealable. Their Lordships held that the levy of interest u/s 139(8) of the Act or interest u/s 215 of the Act is part of the process of assessment. Therefore, when there is an appeal against the assessment order, there can be an appeal against the order charging interest u/s 139(8) or u/s 215 of the Act. At page 967, their Lordships further observed that if the assessee denies his liability to be assessed under the Act, he has a right to appeal to the Appellate Assistant Commissioner against the order of assessment, where penal interest is levied u/s 215 of the Act by the order of assessment.

Interest u/s 220(2) of the Act is not part of the assessment. The interest u/s 220(2) of the Act, in the case in hand, has been calculated by the Assessing Officer while giving effect to the orders of the Tribunal in an appeal by the assessee and an appeal by the Revenue and, admittedly, after giving effect to both the appeals, the net result is that there is outstanding tax payable by the assessee to the tune of Rs. 90,49,951. While giving effect to the appellate order, the Assessing Officer simply has to recompute the taxable income or carry out the direction. He has no discretion to ignore the appeal order. If any mistake is committed in giving effect to the order that mistake can be rectified u/s 154 or 155 of the Act.

In our considered view, the order charging interest u/s 220(2) of the Act is neither a part of the assessment order nor is there any appeal provided u/s 246 of the Act. Therefore, we fully agree with the view taken by the Tribunal that the order charging interest u/s 220(2) of the Act is not an appealable order.

The next grievance of the assessee is that while the interest under Sections 214 and 244(1A) of the Act has been paid to the assessee, that cannot be withdrawn.

With regard to the question whether the interest paid u/s 214 of the Act to the assessee can be withdrawn or can be recovered or can be adjusted, Sub-section (1A) of Section 214 of the Act provides that where on completion of the regular assessment the amount on which the interest so paid under Sub-section (1) has been reduced, the interest shall be reduced accordingly, and the excess, if any paid, shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply. Admittedly, the net result after regular assessment as well as after giving effect to the orders of the Tribunal for the assessment year 1978-79 is that the assessee has not paid the tax deducted at source or advance tax more than the tax assessed. Therefore, in any case, if the interest has been paid, which is not payable u/s 214 of the Act, that can be recovered.

Learned counsel appearing for the assessee submits that after giving effect to the order of the Commissioner of Income Tax (Appeals) as well as the order of the Tribunal in the assessee''s appeal, the tax paid by the assessee is more than the tax assessed. Therefore, the interest u/s 214 of the Act, which has been paid, should not be recovered. With respect, we are not in agreement with learned counsel for the assessee, Sri Pal. Admittedly, the net result is outstanding tax to the tune of Rs. 90,49,951 after giving effect to the orders of the Tribunal. In the assessment order the income is assessed at Rs. 17,09,94,660 and the tax payable is Rs. 12,53,80,762, the T. D. S. advance tax comes to Rs. 11,70,21,387, Therefore, neither on the basis of the "regular assessment" nor on the basis of giving effect to the orders of the Tribunal, the tax payable was more than the tax paid. Therefore, there was no interest due u/s 214 of the Act and when there was no interest due u/s 214 of the Act, on the contrary there was outstanding tax to the tune of Rs. 90,49,951, therefore, the assessee is liable to pay the interest on the outstanding tax u/s 220(2) of the Act.

When there is no appeal prescribed against the orders charging interest u/s 220(2) of the Act and the assessee is liable to pay the interest on the outstanding lax ; the Income Tax Officer has simply calculated the interest u/s 220(2) of the Act giving adjustments in respect of the interest u/s 214 of the Act and interest u/s 244(1A) of the Act. In the case in hand, the order of the Assessing Officer giving effect to the order of the Tribunal, he simply has calculated the tax on the basis of the orders of the Tribunal and calculated the interest on the outstanding tax finally assessed. In our view, that is not an appealable order. The interest under Sections 214 and 244(1A) of the Act which was not due at all, or payable by the Revenue to the assessee, has rightly been adjusted.

In view of the undisputed facts, in our view, no appeal lies. In the order charging interest u/s 220(2) on the basis of the decision of the Tribunal in the appeals of the assessee and the Revenue, it is a simple calculation of the interest u/s 220(2) of the Act. That order charging interest u/s 220(2) of the Act admittedly is not appealable under the provisions of Section 246 of the Act also.

In the result, we answer all the questions being Nos. 1 to 5 in the affirmative, i.e., in favour of the Revenue and against the assessee.

Ranjankumar Mazumdar, J.

I agree.