Commissioner of Income Tax vs Perfect Pottery Co. Ltd.

G.G. Sohani, Actg. C.J.

By this reference u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur, has referred the following question of law to this court for its opinion:

"Whether, on the facts and in the circumstances of the case and on a proper interpretation of Clause (f) of Sub-section (1) of Section 246 of the Income Tax Act, 1961, the Appellate Tribunal was justified in holding that against the order of the Income Tax Officer u/s 154 refusing to allow interest u/s 214 on the refund due, an appeal lies?"

The facts giving rise to this reference briefly are as follows : The assessee is a company incorporated under the Companies Act, 1956. The assessment of the assessee for the assessment year 1969-70 was rectified by the Income Tax Officer u/s 154 of the Act to give effect to the order passed by the Appellate Assistant Commissioner enhancing the loss for the assessment year 1967-68. However, while passing that order, the Income Tax Officer did not allow interest u/s 214 of the Act on the amount of refund due to the assessee. The assessee thereupon preferred an appeal before the Commissioner of Income Tax (Appeals). That appeal was dismissed on the ground that the appeal was not maintainable. The assessee then preferred a further appeal before the Tribunal. The Tribunal held that the order u/s 154 of the Act, whereby interest was not granted on the amount of refund due, amounted to reducing the refund payable to the assessee, or in the alternative, refusing the claim of interest on the refund due and, therefore, against such an order passed by the Income Tax Officer u/s 154 of the Act, an appeal lay. The Tribunal, accordingly, allowed the appeal and directed the Commissioner of Income Tax (Appeals) to decide the appeal afresh on merits. Aggrieved by the order passed by the Tribunal, the Revenue sought a reference and it is at the instance of the Revenue that the aforesaid question of law has been referred to this court for its opinion.

Having heard learned counsel for the parties, we have come to the conclusion that this reference must be answered in the affirmative, in favour of the assessee and against the Revenue. Under the provisions of Section 246(1)(f) of the Act, an order u/s 154 having the effect of reducing a refund is appealable. In the instant case, the Income Tax Officer rectified the order of assessment, but while granting the refund, he did not allow interest on the amount of refund. The order passed by the Income Tax Officer u/s 154 of the Act had, therefore, the effect of reducing the amount of refund payable to the assessee and was, therefore, rightly held by the Tribunal to be appealable. In Commissioner of Income Tax Vs. S.C. Shah, , a similar order was construed to be an order u/s 154 of the Act which was appealable. We respectfully agree with that decision. Learned counsel for the Revenue was unable to point out any decision to the contrary.

For all these reasons., our answer to the question referred to this court is in the affirmative, in favour of the assessee and against the Revenue. In the circumstances of the case, the parties shall bear their own costs of this reference.