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Judgment
C.N. Ramachandran Nair, J.—Petitioner, a Government of Kerala undertaking, is challenging Ext. P12 demand notice issued u/s 156 of the IT Act, 1961, hereinafter called the "Act", demanding excess interest paid by the Government to the company as computed by the Chief CIT, pursuant to Ext. P4 order of the Tribunal. Petitioner has paid advance tax of Rs. 1,05,00,000 for the asst. yr. 1998-99. Though petitioner filed IT return for the very same year, it was not accompanied by audit report in terms of Section 44AB of the IT Act, and so much so, the return was treated as invalid one. However, the AO issued Ext. P1 assessment order whereunder petitioner was granted refund of the entire advance tax paid by it with interest u/s 244A of the Act amounting to Rs. 47,25,000. However, the AO later found that delay in completing the proceedings resulting in refund for substantial period was attributable to the assessee and so much so, granting of interest for the full period from 1st April, 1989 to 30th Sept., 1991 was not justified. He, therefore, issued Ext. P2 proceedings holding that assessee is not entitled to any interest from Government u/s 244A for the period commencing from 1st Jan., 1990 to 30th Sept., 1991. The refund originally granted to the petitioner was reduced and the eligible amount was refixed at Rs. 14,17,500. The assessee was, therefore, called upon to refund Rs. 33,07,500 being the ineligible interest paid by Government to it on the advance tax paid. The assessee filed appeal against Ext. P2 which was dismissed by the CIT(A) holding that the officer rightly disallowed part of interest in proceedings completed u/s 154 of the Act. The assessee then filed appeal against the order of the CIT(A) and the Tribunal vide Ext. P4 order disposed of the appeal. Since the scope of the order of the Tribunal is an issue raised in the OP the operative portion of the Tribunal''s order is extracted hereunder for easy reference :
When the assessee questions the period of delay to be attributable to it, the AO had no authority to decide the matter and he ought to have referred it to be decided by the Chief CIT or CIT as provided in Sub-section (2) of Section 244A. The decision taken by the AO in this case cannot be upheld in view of the provisions of Section 244A(2) which require the question to be decided by the Chief CIT or CIT only. In the circumstances of the case, we find it necessary to set aside the order passed by the AO to enable him to proceed in accordance with the provisions of law. We accordingly set aside the order u/s 154 and direct the AO to deal with the matter afresh in terms of Section 244A(2).
Based on the order of the Tribunal, the Chief CIT considered the matter and he issued Ext. P11 u/s 244A(2) of the Act. It is based on Ext. P11 that the officer has recomputed the eligible interest to the petitioner and demanded the excess amount paid to it, by the Government vide Ext. P13. Petitioner is not challenging either Ext. P4 order issued by the Tribunal or Ext. P11 order issued by the Chief CIT u/s 244A(2) of the Act based on the directions and observations of the Tribunal in Ext. P4. The challenge is only against Ext. P12 which is a demand notice issued u/s 156 of the IT Act demanding the amount computed by the AO. under Ext. P13 based on Ext. P11 order of the Chief CIT.
I have heard Sri C. Kochunni Nair, senior counsel appearing for the petitioner, and Sri P.K. Ravindranatha Menon, senior counsel appearing for the respondent.
The only contention raised by the petitioner is that refund of excess interest granted u/s 244A(1) can be demanded only in accordance with Section 244A(3) of the Act. According to counsel for the assessee, since the Tribunal has allowed the assessee''s appeal vide Ext. P4, the order u/s 154 initially issued by the AO does not survive and the present demand should not be taken as a demand u/s 154 of the Act and so much so, the amount cannot be demanded or recovered from the petitioner. Counsel further contended that Ext. P12 demand issued u/s 156 of the Act is not pursuant to any proceeding referred to in Section 244A(3) of the Act, and so much so, it is unenforceable against the petitioner. Counsel for the assessee relied on the decision of the Gujarat High Court in Cibatul Ltd. Vs. Inspecting Assistant Commissioner of Income Tax, -and that of the Rajasthan High Court in Commissioner of Income Tax Vs. Udaipur Distillery Co. Ltd., wherein it was held that interest granted u/s 244A(1) cannot be withdrawn. Senior standing counsel appearing for the respondents has referred to the order of the Tribunal and submitted that the order of the Tribunal is only a remand order, and Tribunal directed the Chief CIT to decide the matter in accordance with statutory provision, namely, Section 244A(2) of the Act, and accordingly, Chief CIT has rightly decided the matter vide Ext. P11. He has pointed out that petitioner has not chosen to contest the order of the Tribunal or the fresh adjudication order issued by the Chief CIT vide Ext. P11 order and so much so petitioner has no right to contest consequential orders issued by the AO along with demand notice.
Since the whole issue depends upon the scope of the Tribunal''s order, I have to necessarily refer to order of the Tribunal. On going through the order of the Tribunal, particularly the operative portion extracted above, I find the Tribunal has not held that the proceedings initiated by the AO u/s 154 are invalid or without jurisdiction. All what the Tribunal has found is that disallowance of interest for the delay in completion of proceedings resulting in refund should be decided by the CIT or the Chief GIT as required u/s 244A(2) of the Act. So much so, the Tribunal found that the AO went wrpng in assuming jurisdiction by himself and deciding the period for which the assessee is ineligible for interest u/s 244A(2) of the Act. The Tribunal, therefore, allowed the appeal and directed decision to be taken by the right statutory authority, which is the Chief CIT or CIT u/s 244A(2) of the Act. It has to be noted that the assessee has not specifically raised a contention about the jurisdiction of the officer to invoke powers u/s 154 of the Act to withdraw ineligible interest originally granted to it u/s 244A(1) of the Act. Even in the first appellate order, namely, Ext. P2, produced by the petitioner, petitioner is not seen to have raised any contention about the jurisdictional error in issuing Ext. P2. In fact Ext. P1 order issued by the AO granting interest to the petitioner for the full period without reference to Section 244A(2) of the Act which requires mandatory reference to the CIT or the Chief CIT for deciding the period for which the assessee is ineligible for interest is patently a wrong order which is liable to be rectified u/s 154 of the Act, which provides for rectification of mistakes apparent on the face of the record. Therefore, the officer rightly invoked powers u/s 154 of the Act. However, when the officer committed a mistake in deciding the issue by himself instead of referring the issue to be decided by the Chief CIT or the CIT, in terms of Section 244A(2) of the Act, all what the Tribunal has done is to correct this mistake and direct the matter to be referred to the Chief CIT of CIT as the case may be for decision u/s 244A(2) of the Act. The contention of the petitioner that the Tribunal has allowed its appeal and nothing survives thereafter cannot be accepted because on going through the Tribunal''s order, it is clear that the Tribunal allowed the appeal only for statistical purpose as expressly stated in the order itself, inasmuch as proceedings initiated u/s 154 are upheld, but simultaneously held that the officer himself is incompetent to decide the matter and it has to be decided by CIT or Chief CIT u/s 244A(2) of the Act. This being the scope of Ext. P4 order of the Tribunal, the assessee cannot contend that fresh adjudication order issued by the Chief CIT vide Ext,. P11 and the consequential order issued by the AO vide Ext. P13 are not u/s 154 of the Act. Exts. P11 and P13 are only continuation of the rectification proceedings initiated by the AO u/s 154 of the Act and adjudication by the Chief CIT u/s 244A(2) of the Act forms part of the rectification proceedings originally initiated vide Ext. P2. The decisions relied on by the petitioner are rendered prior to introduction of Section 244A(3) of the Act. As of now, excess interest paid u/s 244A(1) can be demanded u/s 154 of the Act as provided u/s 244A(3) of the Act. Since I find Ext. P12 demand is pursuant to Ext. P13, order which is a rectification order issued u/s 154 of the Act, the challenge against the demand is unsustainable. I find the assessee has no dispute on merits inasmuch as it has no contest against Ext. P11 by which the Chief CIT has refixed the eligible interest to it u/s 244A(2) of the Act. For the foregoing reasons I find no substance in the technical, objection raised by the petitioner against the demand notice. OP is, therefore, devoid of any merit and is dismissed.