Commissioner of Income Tax vs Hope Textiles Ltd.

S.K. Kulshrestha, J.—This order shall also govern the disposal of I. T. A. Nos. / 171 of 2007 and 172 of 2007 as common questions have been raised by the revenue , u/s 260A of the Income Tax Act, 1961, (hereinafter referred to as "the Act"). The questions raised by the department read as follows:

(1) Whether the Income Tax Appellate Tribunal was justified in holding that Section 237 of the Income Tax Act was applicable in view of the fact that the assessing officer was not satisfied with the assessee''s claim ?

(2) Whether the Income Tax Appellate Tribunal was legally correct in holding that the order giving effect to the Central Board of Direct Taxes Instructions u/s 119(2)(c) was in fact like an order u/s 154 and thereafter relying on the judgment reported in Commissioner of Income Tax Vs. Perfect Pottery Co. Ltd., ?

(3) Whether the Income Tax Appellate Tribunal was not legally bound to accept the fact that the refund was issued u/s 244A(2) and that the years taken by the assessee was to be ignored for calculating interest on refund ?

(4) Whether on this legal issue and facts the Income Tax Appellate Tribunal was justified in holding that interest has to be paid to the assessee ?

Learned Counsel for the appellant contends that gratuity payment was not made by the assessee before the due date with the result the assessing officer made an addition of the amount claimed as gratuity payment. This addition was upheld by the Commissioner (Appeals) and the Income Tax Appellate Tribunal, but on the assessee approaching the Central Board of Direct Taxes u/s 119(2)(c) which authorises the Board to relax the requirement contained in any of the provisions of Chapter IV or Chapter VI-A if the Board considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases by general or special order, the Board, in view of the hardship caused to the assessee by the addition made by the assessing officer and retained by the Commissioner (Appeals) and the Income Tax Appellate Tribunal, condoned the delay in deposit of the requisite payment by the due date and directed the assessing officer to reframe the assessment accordingly. The assessing officer, therefore, deleted the addition and directed the refund of the amount of tax paid in excess of the liability of the assessee. The assessee, therefore, claimed refund on this amount under the provisions of Section 237 of the Act and interest thereon u/s 244A(1). Though the assessing officer declined the request of the assessee for payment of interest on the said excess amount refunded to the assessee, the Commissioner (Appeals) accepted the claim of the assessee and on appeal, the order of the Commissioner (Appeals) was maintained by the Income Tax Appellate Tribunal. It is against this order that these appeals have been filed by the revenue for the relevant assessment years.

We have perused the record placed before us and heard learned Counsel for the revenue. The revenue has not been able to assail the authority of the Central Board of Direct Taxes u/s 119(2)(c), with the result that the order passed by the Central Board of Direct Taxes had attained finality. Obviously, therefore, the addition made by the assessing officer was required to be deleted and on such deletion, the assessee became entitled to the refund of the amount u/s 237 and interest u/s 244A(1) of the Act. We find that the only ground on which the department relied for making addition of the sum of Rs. 10,55,762 paid towards gratuity was the delay in payment of the amount and that the amount has been paid beyond the period prescribed therefor. The Central Board of Direct Taxes has condoned the delay with the result it could not be said that the gratuity payment did not qualify for deduction from the income of the assessee. In this context, if the amount was refunded it was also necessary to pay interest u/s 244A(1). The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal have, therefore, not committed any error in directing payment of interest on the amount retained by the department till its refund as per the orders of the Central Board of Direct Taxes. We, therefore, do not find any merit or sub-stance in these appeals as the matter falls within the domain of facts only. Accordingly, the appeals are summarily dismissed. A copy of this order be placed in the connected appeals.