Commissioner of Income Tax, Kanpur vs Swadesh Cotton Mills Co. Ltd.

The income tax Appellate Tribunal, Delhi has referred the following question of law u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as the Act) for opinion of this Court.

"Whether on the facts and in the circumstances of the case, the ITAT is justified in holing that clause (b) of proviso to section 240 of the income tax Act, 1961 is not applicable in the case of the assessee for the assessment year 1974-75, in the facts and circumstances of the case in hand?"

The reference relates to the assessment year 1974-75.

Briefly stated the facts giving rise of the present reference are as follows.

The assessee-company is engaged in the manufacture of textile. Return of income for the assessment year 1974-75 was also filed u/s 139(1) of the Act by 31-7-197. The assessee-company had applied for extension of time, which was allowed upto 7-11-1974. Return of income showing total income of Rs. 55,82,360 was filed on 6-12-1974. Thereafter, the assessee-company had also filed a revised return reducing the return income of Rs. 53,60,580 on 22-3-1977. Assessment in this case was completed u/s 144 of the Act vide order dated 10-11-1989 on an income of Rs. 62,00,000. Being dissatisfied with the assessment order, the assessee filed an appeal. The Commissioner of income tax (Appeals) vide order dated 26-2-1990 set aside the assessment. The assessee fled second appeal against the order before the income tax Appellate Tribunal, Allahabad taking a ground that the assessment order dated 10-11-1989 was barred by limitation. The Tribunal vide its order dated 22-3-1991 held that the assessment order framed by the Assessing Officer was illegal and barred by limitation and therefore, was non est in the ten eyes of law. Consequent to the above order of the Tribunal, the Assistant Commissioner of income tax while giving effect to the said order u/s 254 of the Act worked out a refund of Rs. 31,94,970 and interest amounting of Rs. 7,60,505 payable u/s 244(1A) making the total refundable amount of Rs. 39,55,494. The said order was scrutinized by the Commissioner of income tax while exercising his powers u/s 263 of the Act and he was of the opinion that the order granting refund was erroneous and prejudicial to the interest of the revenue. Consequently, he set aside the order passed by the Assessing Officer and directed him to pass a fresh order in accordance with law. The assessee being aggrieved against the said order u/s 263 of the Ac preferred an appeal before the Tribunal. The Tribunal vide its order dated 11-2-1994 cancelled the said order passed by the Commissioner of income tax and restored the order of the Assessing Officer allowing complete refund of the amount deposited by eh assessee company. The Tribunal further directed the Assessing Officer to proceed accordingly without taking into consideration the amended provisions of section 240 of the Act which were effective only from 1-4-1989 on the ground that the refund of the assessee became due on 1-4-1977 when the said amended provisions had no application.

We have heard Sri A.N. Mahajan, learned standing counsel for the revenue and Sri R.S. Agarwal, learned counsel for the respondent assessee. We find that the controversy raised here has been set at rest by the decision of the Apex Court in the case of CIT v. Shelly Products [2003] 261 ITR 367 1 wherein it has been held the proviso (b) to section 240 of the Act is declaratory and even under the unamended section 240 of the Act the assessee is only entitled to the refund of tax paid in excess of the tax chargeable on the total income returned by the assessee. Thus the question referred to us is answered in the negative i.e. in favour of the revenue and against the assessee. There shall be no order as to costs.