By TIOL News Service

KOLKATA, FEB 15, 2016: THE issue is - Whether interest under sec. 244A is payable on refund of excess self assessment tax from the date of payment of such tax to the date when the refund is granted. YES is the answer.

Facts of the case

The assessee paid tax in respect of the relevant assessment years including self-assessment tax u/s.140A. Subsequently, the assessment u/s.143(3) was completed for both the assessment years 1992-93 and 1993-94 and certain additions were made. CIT(A) allowed certain relief resulting in an order for refund. While giving effect to the said order of CIT(A), an order for refund along with interest was allowed to the assessee for both the years under consideration. Subsequently, the assessing officer issued a notice u/s.154 and the interest previously allowed u/s.244A(1)(b) on the refund of excess self assessment tax was withdrawn. In his order u/s.154 the assessing officer held that interest u/s.244A(1)(a) is not payable on refund of excess self assessment tax whereas s.244A(1)(b) is not attracted in view of the explanation appended thereto. He relied on the explanation to Clause (b) which provides that the "date of payment of tax or penalty" u/s.244A(1)(b) means the date on and from which the amount of tax or penalty specified in the notice of demand issued u/s.156 is paid in excess of such demand. The assessing officer therefore, held that "since any tax paid after issue of notice of demand does not include self-assessment tax, the interest is not payable on excess payment u/s. 140A. CIT(A) reversed the order of the assessing officer and held that the provisions of Section 154 could not be applied to the present case. ITAT upheld the order of CIT(A).

Having heard the parties, the Court held that,

++ the right of the assessee to receive interest on refund is statutorily recognized by Sub-Section (1) of Section 244A. Section 244A does not deny payment of interest in case of refund of amount paid under Section 140A. On the contrary Clause-(b) being a residuary clause necessarily includes payment made u/s. 140A. CIT(A) found that the income tax liability as assessed earlier was erroneous and hence he directed that the excess amount of tax including self assessment tax be refunded to the assessee. In these circumstances the principle of restitution would be squarely attracted and the revenue is also statutorily bound to pay interest u/s.244A(1)(b) to the assessee. The apex court in South Eastern Coalfield - Vs- State of M. P. reported in 2003 (8) SCC 648 has categorically held that once the doctrine of restitution is attracted, the interest is often a normal relief given. Restitution sometimes refers to "disgorging of something which has been taken" and sometimes refers to "compensation for injury done". Law does not favour unjust enrichment nor does it favour unjust impoverishment;

++ clause (b) of Sub-Section 1 of Section 244A is residual in nature and provides for interest on refund of excess self-assessment tax paid by the assessee. Furthermore the explanation to section 244A(1)(b) would have no application since the tax in question was not paid consequent to any notice of demand u/s. 156, rather it was paid u/s 140A. Hence according to mandate of section 244A(1)(b) interest is payable on refund of excess self assessment tax from the date of payment of such tax to the date when the refund is granted;

++ u/s 154 of the Act only a "mistake apparent from the record" is rectifiable. Thus the precondition to invoke section 154 is the presence of a mistake and that the same must be apparent from the record. The power to rectify a mistake u/s.154, however, does not extend to revision or review of the order. Therefore a mistake which can be rectified u/s.154 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration. The rectification of an order does not imply that the original order is replaced by a completely new order. In the instant case the assessing officer has attempted to substitute the original order which is not permissible u/s.154;

++ an error, which is by no means self-evident, cannot be called an apparent error. Nevertheless a mistake capable of being rectified u/s. 154 is not limited to clerical or arithmetical mistakes only. However it does not include any mistake which may be discovered by a complicated process of investigation, argument or proof;

++ a decision on a debatable point of law or a disputed question of fact is not a mistake apparent from the record. The ordinary meaning of the word "apparent" is that it should be something, which appears to be so ex facie that it does not admit scope for any argument or debate. It, therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts which remains to be investigated cannot be corrected by way of rectification;

++ it cannot be said that interest u/s.244A can be allowed only in cases where excess payments of tax is made consequent to a notice of demand u/s.156. The language of the Act is clear and there is no ambiguity in it. Hence the assessee is clearly entitled to claim interest u/s.244A on refund of excess self assessment tax;

++ there was no mistake apparent from the record which could be rectified u/s. 154 of the Act;

++ the assessing officer directed to compute the interest payable from the date of payment of tax on the basis of self-assessment till the date of grant of refund.

(See 2016-TIOL-260-HC-KOL-IT)