By TIOL News Service

AHMEDABAD, OCT 16, 2018: THE ISSUE BEFORE THE BENCH IS - Whether even in case of enormous delay on the part of AO to give effect to appellate or revisional orders giving relief to the assessee, no claim for additional interest u/s 244A (1A) can be granted retrospectively to the assessee. AND THE VERDICT IS YES.

Facts of the case

Some addition was made in the hand of assessee-trust in the process of scrutiny assessment and accordingly, the tax was assessed for around Rs 97 lakhs as against around Rs 50 lakhs shown by the assessee. In the pendency of appeal of the assessee before the CIT(A), the Department recovered such tax by adjusting part of the assessee's refund in relation to previous AY. However, the CIT(A) disposed of the assessee's appeal giving substantial relief. Accordingly, the assessee sought refund of the tax already recovered, which, by virtue of the order of the CIT(A) became refundable. But, the Department did not granted such refund for the reason that it had filed appeal against the order of CIT(A) before the Tribunal. However, such appeal was dismissed by the Tribunal and thereafter, the Department filed further appeal before the High Court. The appeal was admitted and was pending hearing before the Court.

Between 2012 and 2016, the assessee made several representations to the Department seeking refund of the excess tax. But after no response, finally wrote to the CBDT and complained about the Department not giving effect to the appellate order passed by the CIT(A). But all the efforts of the assessee had gone in vain. However, after the High Court issued notice, the AO passed an order and along with statutory interest u/s 244A, on the principal sum required to be refunded, he ordered total payment of around Rs. 1.22 Cr.

The assessee did not dispute computation of principal sum to be refunded, nor disputes the computation of interest payable under Section 244A. But according to the assessee, there was enormous delay on the part of the department in refunding the excess tax adjusted by the Department, which took nine years in giving effect to the CIT(A) order. The second grievance of the assessee was that no interest under the newly inserted sub-section [1A] of Section 244A had been granted. Also a subsidiary issue raised by the assessee was that in large number of cases of the assessee and other group assesses, the Department had withheld refunds for years together. Necessary directions should be issued so that individual petitions for such purpose are not required to be filed.

The High Court held that,

++ prior to the relevant amendments made in the Act and introduced w.e.f 1st June 2016, there was neither a limit prescription for passing orders giving effect to appellate or revisional orders in which relief-partially or fully may have been given to the assessee nor was there any adverse impact on the revenue if such action was delayed; except for paying statutory interest under sub-sec. [1] of Section 244A of the Act. sub-section [5] of Section 153 introduced time limits for passing such orders. Such time limits were also prescribed in graded manner. Ordinarily, the Assessing Officer would have three months to pass orders giving effect to appellate or revisional orders. If the Commissioner was satisfied that it was not possible for the Assessing Officer to do so within such time, he could extend the time by further six months but no more. In cases where the order required verification of any issue by way of submission of document by the assessee or any other person, or where an opportunity of being heard is to be provided to an assessee, the time limit from the outset would be longer. This laying down of the time limit per se would be of no consequence unless non adherence to the time would result into some adverse consequences to the Revenue. It is therefore that sub-section [1A] of Section 244A provides for additional interest at the rate of three per cent per annum upon the Assessing Officer failing to pass an order giving effect to the appellate or revisional order within the time frame. These provisions thus are in the nature of deterrence to the Assessing Officer's inaction. Simultaneously, the assessee would be compensated for delay by way of additional interest;

++ these provisions are thus remedial in nature and meant to address the issue of inordinate delay in giving effect to the appellate or revisional orders made in favour of the assesses. However, minute examination of these provisions would show that the same were not meant to have retrospective effect. The computation provision for granting such interest provides for two terminal points-the beginning point is the end of the period beginning from the date following the date of expiry of time allowed under section (5) of Section 153 and the end point of computing the interest would be the date on which refund is granted. Applying such provisions for the past period would immediately throw a question as to from which date such interest liability would arise. For the past period, there being no provision in sub-section (5) of Section 153 laying time limits, the computation of beginning of the period for granting interest would be unworkable. Claim of interest for the past period cannot be accepted for want of any machinery provided by the legislature to calculate such interest. The legislature therefore by necessary implications did not desire to give any retrospective effect to these provisions. The claim for additional interest therefore cannot be granted for the periods when the provisions of Section 244A [1A] and 153 [3] as they stand now were not in statute book at all;

++ there would however be a caveat to this proposition and it is this. There may be cases where the appellate or revisional order may have been passed long before 1st June 2016. Till the relevant provisions of Section 244 [1A] and 153 [5] were added by the legislature on 1st June 2016, the Assessing Officer may not have passed the consequential order. Even after such amendments, he may not have passed the order within the time provided ion such amendments. Even in such a case, if the amended provision of sub-section [1A] of Section 244 of the Act is not applied for the period past 1st June 2016, the same would give rise to two class of cases-[i] where the appellate or revisional order is passed after 1st June 2016 and the other where such order is passed before such date. In the former, all the provisions of sub-section [1A] of Section 244A as well as sub-section (5) of Section 153 of the Act would apply. In the latter, if harmonious construction approach is not adopted, the Assessing Officer could contend that he is under no obligation to pass order giving effect to the appellate or revisional order, nor would the Revenue be liable to pay additional interest even after the time available to the Assessing Officer for passing such order has expired. The legislature could not be expected to have brought about such a situation. Any such interpretation would also restrict the prospective effect of these provisions. In such circumstances, the harmonious construction of the statutory provisions would require that if any order giving effect to the appellate or the revisional order is not passed by the Assessing Officer within the time permitted under section 153 [5], after the amendments were made in the statute book, even though the appellate or revisional order was passed before 1st June 2016, the liability to pay additional interest under sub-section [1A] of Section 244A would arise upon completion of such period as if the starting point for computing such period for passing the order was 1st June 2016. To this limited extent, the assessee would be entitled to additional interest for limited period, but not for the entire period starting from the original order of Commissioner dated 5th March 2009.

(See 2018-TIOL-2188-HC-AHM-IT)