Commissioner of Income Tax and Another vs Islamic Academy Education

N. Kumar, J.—This appeal is by the Revenue challenging the order passed by the Tribunal which has upheld the appeal of the Assessee and dismissed the appeal filed by the Revenue.

The Assessee-Respondent filed a return of income for the period 2004-05 declaring nil income in the status of trust. On 21st Sept., 2005, a search was conducted in the premises of the Assessee u/s 132 of the IT Act, 1961 (for short, the Act). Subsequently, notice u/s 153A of the Act was issued. On 27th Feb., 2006, Assessee filed a return in response to the said notice declaring the total income of Rs. 2,51,41,336 in the status of association of persons (AOP). As per the return of income filed by the Assessee, the Assessee was liable to pay self-assessment tax of Rs. 1,02,63,449. However, the Assessee failed to pay the said tax. He requested the authorities to adjust the said amount of tax out of the seized cash from the trust office and also from the Chairman''s residence during the course of search. Accordingly it was adjusted. On 24th Dec., 2007, the assessment order came to be passed in which the assessing authority determined the income of the Assessee at Rs. 61,16,710 in the status of AOP. In terms of the assessment order, the Assessee was entitled for refund of Rs. 74,67,137 as there was excess payment.

On 22nd Jan., 2008, an order came to be passed u/s 154 enhancing the interest u/s 244 of the Act at Rs. 8,79,152 as a result of recalculation of the interest u/s 234A of the Act.

Assessee filed an appeal challenging the income determined by the assessing authority. The same was allowed. However, interest u/s 244A was not granted to the Assessee while giving effect to the CIT''s order. On 5th Jan., 2009, a notice came to be issued to the Assessee u/s 154 of the Act contending that interest u/s 244A of the Act on cash seized was wrongly allowed while granting refund. The Assessee contested the matter by filing the reply. On 3rd Feb., 2009, the order came to be passed u/s 154 holding that Assessee is not entitled for interest on tax adjusted out of seized cash. The Assessee filed appeal before the CIT(A), challenging the said order. Appeal was partly allowed.

The Revenue preferred an appeal before the Tribunal. The Assessee also preferred an appeal challenging the very initiation of proceedings u/s 154. After hearing both the appeals, the Tribunal held that an order u/s 154 cannot be made on the debatable issue of facts and law. The AO can have jurisdiction u/s 154 only in a case where the mistake is clear, distinct and apparent from the record. Such factual aspect was not available in the record and therefore, the AO could not have withdrawn the interest u/s 244A by holding that the seized cash was adjusted against self-assessment tax u/s 140A(1) and accordingly the appeal filed by the Assessee was allowed. It was also held that record shows that the amount which was seized was adjusted towards the existing liability at the request of the Assessee. The said amount was not paid as self-assessment tax and therefore, it was held the Assessee was entitled for refund with interest. Therefore, the appeal filed by the Revenue was dismissed.

Learned Counsel appearing for the Revenue, assailing the impugned order passed by the Tribunal, firstly contends the interest is payable on refund only in cases which are mentioned in Section 244A and as the payment was made in the instant case towards the liability of tax by adjustment of the seized cash during seizure, though the Assessee was entitled for refund of excess amount paid, he was not entitled to interest thereon. Secondly it was contended that the finding of the Tribunal that the AO had no jurisdiction to go into debatable issue of facts and law u/s 154 is erroneous and therefore, he contends that the impugned order requires to be set aside and substantial questions of law do arise for consideration in this appeal.

We do not see merit in the said contention. The facts disclose the tax was not paid as self-assessment tax in pursuance of notice issued by the authorities. The Assessee filed a return after such seizure. According to the return filed, he was liable to pay income tax at Rs. 1,02,63,449. He requested the authorities to adjust the tax amount due out of the amount seized from the office of the trust and the chairman of the trust. However, subsequently, the assessment order came to be passed reducing the liability and that is how the Assessee was entitled to refund.

It is in that context, the question for consideration is whether the said refund is to be done with interest as contemplated u/s 244A?

Section 244A specifically provides for payment of the amount of refund. Sub-clauses (a) and (b) provide for two situations. Admittedly, the case of the assessee does not fall under Sub-clause (a). Therefore, Sub-clause (b) is attracted and therefore, the order passed by the Tribunal holding that the interest is payable, is strictly in accordance with law and does not call for any interference. Hence, the interest amount is held to be paid. The other issue which is raised in this appeal is purely academic and we do not go into the said question in this appeal and leave it to be decided in appropriate cases.

We do not see any justification to entertain this appeal. Accordingly the appeal is rejected as no substantial question of law is involved.