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CASE NO.: Appeal (civil)  3088 of 2006

PETITIONER: M/s. R.R.Holding P. Ltd

RESPONDENT: Commissioner of Income Tax,Delhi & Anr

DATE OF JUDGMENT: 21/07/2006

BENCH: ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No. 15613 of 2004)

ARIJIT PASAYAT, J.  

       Leave granted.

       Appellant calls in question legality of the order passed by  a Division Bench of the Delhi High Court dismissing the  appeal filed under Section 260(A) of the Income Tax Act, 1961  (in short the ’Act’), holding that no reference was necessary.         The High Court held that the Income Tax Appellate  Tribunal (in short the ’Tribunal’) examined the matter in detail  and came to hold as to what was the date of assessment.  This  was a question of fact which was not required to be examined  in an appeal under Section 260(A) of the Act.   The High Court  also noticed that the decision of this Court in Modi Industries  Limited & Ors. v. CIT & Another [1995 (216) ITR 759 (SC)] was  clearly applicable to the facts of the case.

       According to learned counsel for the appellant, High  Court failed to notice that the decision in Modi Industries’ case  (supra) has no application to the facts of the present case.   The true ambit of Section 244(1A) of the Act has not been kept  in view by the High Court. It is pointed out that in the  assessee Appellant’s own case for immediately succeeding  assessment order i.e. 1987-88 Tribunal held that Modi  Industries’ case (supra) was not applicable to almost identical  factual scenario. The department has questioned correctness  of the judgment and the High Court has admitted   the appeal  in ITA 88 of 2004.         In response, Mr. Mohan Prasaran, learned Additional  Solicitor General submitted that the issue is clearly covered by  the decision of this Court in Modi Industries’ case (supra) and  the High Court was, therefore, justified in its view.          We consider it unnecessary to examine whether in the  factual background, Section 244(1A) of the Act has any  application. It may be noted that the assessee had filed its  return for the assessment year in question on 20.6.1986  declaring a loss of Rs.4151/-.  It was mentioned in the return  that there was a brought forward loss of Rs.11,175/- from the  Assessment year 1985-86 and a total loss of Rs.15,326/-was  claimed to be carried forward. Subsequently, on 23.6.1987,  the assessee filed a revised return showing the same figure of  loss of Rs.4,151/- and the carried forward loss of Rs.11,175/-.   But it claimed tax refund of Rs.10,100/-, because of the tax  deduction at source on a sum of Rs.10,00,000/- advanced to  M/s. Blitz Publication Pvt. Ltd.   The order in terms of Section

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143(1) on the facts passed on 29.7.1987 accepted the returned  loss. While the assessment proceedings were in progress it  came to the notice of the Department that for the relevant  assessment year a Japanese Company is paying a sum of  Rs.1,61,52,472/- plus Rs.21,71,121/-by way of commission in  respect of purchases made by the Department of Electronics,  Government of India, from M/s Sumitomo Corporation, the  aforesaid Japanese Company. The amount was paid at London  in the account of M/s Allied Petro Agencies.  The information  was passed on by the Government of India to the Income Tax  Department.   

       In the meantime i.e. on 17.8.1987 a letter was written by  the assessee to the Commissioner of Income Tax, Delhi-III  wherein it admitted the commission income of Rs.1.61 crores  and odd and offered to pay tax thereon.  The assessing officer,  however, had already completed the assessment and since  commission income had not been included in the returned  income, notice under Section 148 of the Act was issued on  31.8.1987.  On that very day the assessee filed an application  with reference to the order made in terms of Section 143(1),  submitting that total income assessed on the basis of profit  and loss account, Balance Sheet and return filed was not  correct as it did not take note of income disclosed  subsequently to the Commissioner wherein it offered an  amount of Rs.1.61 crores for taxation. It was also submitted in  the said communication that taxes on the amount of Rs.1  crore and odd have been deposited on 19.8.1987 and a further  sum of Rs.17,144/- on 27.8.1987.  

The question that arises for consideration is what is the  date which is to be reckoned for the purpose of grant of  interest in terms of Section 244(1A) of the Act. We need not  examine this question because undisputedly for the  subsequent assessment order the Tribunal took a different  view and an appeal filed by Revenue against the Tribunal’s  order is under consideration of the High Court.   

The basic issue is whether Modi Industries’ case (supra)  has any application to the facts of the case.

       Section 244(1A) of the Act reads as follows: Interest on refund where no claim is needed.  "244.  xxx             xxx                     xxx (1A) Where the whole or any part of the refund  referred to in sub-section (1) is due to the  assessee, as a result of any amount having  been paid by him after the 31st day of March,  1975, in pursuance of any order of assessment  or penalty and such amount or any part  thereof having been found in appeal or other  proceeding under this Act to be in excess of  the amount which such assessee is liable to  pay as tax or penalty, as the case may be,  under this Act, the Central Government shall  pay to such assessee simple interest at the  rate specified in sub-section (1) on the amount  so found to be in excess from the date on  which such amount was paid to the date on  which the refund is granted : Provided that where the amount so found to be  in excess was paid in instalments, such  interest shall be payable on the amount of  each such instalment or any part of such  instalment, which was in excess, from the date

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on which such instalment was paid to the date  on which the refund is granted: Provided further that no interest under this  sub-section shall be payable for a period of one  month from the date of the passing of the  order in appeal or other proceeding:  Provided also that where any interest is  payable to an assessee under this sub-section,  no interest under sub-section (1) shall be  payable to him in respect of the amount so  found to be in excess."         The basic requirements are that: (a) there is a refund  due, (b) The whole or part of the refund referred to in Section  244(1) is due as a result of any amount having been made  after 31st March, 1975, (c) The payment must be paid  pursuance to any order of assessment or penalty, (d) Such  amount or any part thereof as paid is found in appeal or other  proceedings under the Act to be in excess of amount which  such assessee is liable to pay as tax or penalty.   

       The assessee has to establish that he fulfils all the above  conditions.              In view of the aforesaid position it is but appropriate that  the High Court should hear the matter afresh. Undisputedly a  question of law is involved which is required to be adjudicated  more particularly when for the subsequent year an appeal has  been admitted and the basic question to be considered has  been formulated.  In the instant case, appropriate question  relevant to the assessment year in question shall be  formulated.            Above being the position the impugned order of the High  Court is set aside and the matter is remitted to it for a fresh  consideration alongwith ITA No. 188 of 2004.

       The appeal is disposed of. No costs.