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Judgment
S.H. Kapadia, J.—This reference has come before the Court at the instance of the assessee u/s 256(1) of the income tax Act, 1961. It concerns assessment year 1985-86. In this reference, the following question arises for determination:
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that no appeal was maintainable against the refusal to grant interest under sections 214 and 244(1A)?
Facts
While giving effect to the Order dated 31-12-1986 passed by CIT (Appeals), the Assessing Officer failed to grant interest on Rs. 6,13,234 paid by way of advance tax u/s 214 of the income tax Act. According to the assessee, they had paid excess advance tax and they were entitled to interest to the extent of the excess advance tax paid by them u/s 214. The assessee further claimed interest on Rs. 4,87,236 which they had paid on demand on 7-3-1986 u/s 244(1A) of the income tax Act which was not granted by the Assessing Officer while working out the Order passed by the Appellate Authority. Being aggrieved by the non-granting of interest by the Assessing Officer, the assessee had carried the matter in appeal which was dismissed as not maintainable u/s 246(1). This Order of the Appellate Authority was confirmed by the Tribunal on the ground that no appeal was maintainable against non-granting of interest u/s 214 or u/s 244(1A). Hence, the matter has come by way of reference to this Court at the instance of the assessee.
Issue
Whether appeal u/s 246(1)(c) was maintainable against refusal to grant interest u/s 214 and section 244(1A)? If not, whether appeal was maintainable u/s 246(1)(f)?
Arguments
Mr. Pardiwala, Learned Counsel appearing on behalf of the assessee contended that in view of the judgment of the Bombay High Court in Caltex Oil Refining (India) Ltd. Vs. Commissioner of Income Tax, , the appeal in the context of interest u/s 214 was maintainable u/s 246(1)(c). In the alternative, he contended that the order passed by the Assessing Officer on 18-2-1987 was a rectification order and, therefore, the said order not granting interest was appealable u/s 246(1)(f).
Mr. R.V. Desai, Learned Senior Counsel appearing on behalf of Department, on the other hand, submitted that in this matter the only ground of appeal preferred by the assessee was non-granting of interest u/s 214 and section 244(1A) and, therefore, the appeal filed by the assessee was not maintainable.
Findings
It is well-settled proposition that there is no inherent right of appeal. That, it is to be specifically conferred by the statute. It is equally well settled that if there is a provision conferring a right of appeal it should be construed in a reasonable and liberal manner. The power of ITO is to make assessment u/s 143 of the income tax Act. It is that assessment which is the subject-matter of appeal. The Appellate Authority, on appeal, has the power to confirm, reduce, increase or annul the assessment or to set aside the assessment and remit the matter back to ITO for making fresh assessment in accordance with directions given by the Appellate Authority. Clause (c) of section 246(1) is in two parts. The first part deals with an Order against an assessee where the assessee denies his liability to be assessed. The second part deals with an Order of assessment u/s 143(3) or section 144. In the second part, there is a restriction, namely, that an appeal against such order shall lie only where the assessee objects to the amount of income assessed or where the assessee objects to the amount of tax determined or where the assessee objects to the amount of loss computed or where the assessee objects to the status under which he is assessed. In the present case, we are concerned with the second part. Now, on the facts of this case, we find that the Department had not denied its liability to pay interest to the assessee on the excess amount of advance tax paid by him or on the refund. We are confining this judgment to the facts of this case. In the present case, the Assessing Officer has not denied the claim of the assessee for interest u/s 214 and u/s 244(1A). This fact is important because in the various judgments cited by the assessee, the Department has denied its liability to pay interest on the excess amount of advance tax paid by the assessee. In the circumstances, the judgments cited on behalf of the assessee have no application to the facts of the present case. In the case of Central Provinces Manganese Ore Co. Ltd. Vs. Commissioner of Income Tax, it has been held that section 246(1)(c) provides, inter alia, that an appeal against an order u/s 215 shall lie provided the assessee disputes the levy on the ground that he is not liable to the levy at all. That, levy of interest is a part of the process of assessment and it is open to the assessee to dispute the levy in appeal provided he limits himself to the ground that he is not liable to the levy at all. However, if the assessee does not dispute the amount of advance tax determined as payable by ITO then appeal u/s 246(1)(c) will not lie. Now, in the present case, the Assessing Officer has not denied the claim of the assessee for interest u/s 214 and section 244(1A). That, while working out the Order passed by the Appellate Authority, the Assessing Officer omitted to grant interest on the excess amount of advance tax paid and the refund. That, in the present case, there is no denial by the Department for payment of interest. That, through omission, the interest has not been ordered to be paid and, therefore, the Tribunal was right in coming to the conclusion that appeal u/s 246(1)(c) was not maintainable. In such cases revision or rectification could lie. The judgment cited by Mr. Pardiwala, Learned Counsel appearing on behalf of the assessee in the case of Bakelite Hylam Ltd. Vs. Commissioner of Income Tax, has no application as, in that case, there was a specific refusal on the part of the Department to grant interest. In our case, there is no such denial of the liability to pay interest. In the case of Commissioner of Income Tax Vs. Agricultural Finance Corporation Ltd., the assessee had filed an appeal before the Appellate Authority on several grounds and one of the grounds taken was that the Assessing Officer ought to have paid interest to the assessee on the amount of refund u/s 214 of the income tax Act. Since appeal in that case was not filed against non-payment of interest u/s 214 only and since there were other grounds and non-payment of interest formed one of the many grounds, the Bombay High Court took the view that appeal was maintainable u/s 246(1)(c). Therefore, that judgment also has no application to the facts of the present case. Similarly, in the case of Empire Industries Ltd. Vs. Commissioner of Income Tax, , the question as to whether the appeal was maintainable u/s 246(1)(c) against the Order of Assessing Officer not granting interest u/s 214 was expressly kept open. Therefore, the said judgment also does not help the assessee in support of its contentions. In the case of Caltex Oil Refining (India) Ltd. (supra) the Bombay High Court took the view that the power of ITO was to make assessment u/s 143 or section 144 of the income tax Act and that interest u/s 214 was the part of assessment and the said interest was deemed to be tax for the purposes of the Act including section 246(1)(c). However, that judgment has no application because it was concerning assessment year 1970-71 whereas, we are, in the present appeal, concerned with assessment year 1985-86 and from 1-4-1985 there is an amendment to section 214(1A) which was not before the Division Bench in the case of Caltex Oil Refining (India) Ltd. In the circumstances, the Judgment of the Bombay High Court in the case of Caltex Oil Refining (India) Ltd. (supra) also has no application to the facts of the present case. Therefore, we answer the first part of the issue in favour of the Department. We hold that the appeal of the assessee u/s 246(1)(c) for not ordering payment of interest under sections 214 and 244(1A) was not maintainable u/s 246(1)(c).
However, we find merit in the argument advanced on behalf of the assessee that appeal was maintainable u/s 246(1)(f). For the sake of convenience, we reproduce hereinbelow section 246(1)(f) which reads as follows:-
Subject to the provisions of sub-section (2), any assessee aggrieved by any of the orders of ITO may appeal against such order u/s 144 or section 155 having the effect of enhancing the assessment or reducing the refund or refusing to allow the claim made by the assessee under either section 154 or section 155.
In the case of Empire Industries Ltd. (supra), the assessee had paid advance tax of Rs. 24.47 lacs on regular assessment being completed u/s 143(3). The Assessing Officer raised the demand u/s 156 of the Act of Rs. 7.27 lacs including interest of Rs. 56,000. By Order dated 27-6-1974, the Appellate Authority allowed the appeal partly. While giving effect to the Appellate Order, the ITO determined the amount refundable to the assessee at Rs. 9.46 lacs. The amount was refunded but interest thereon u/s 214 of the Act was not paid. Being aggrieved, the assessee filed an appeal before the Appellate Authority and claimed that the ITO ought to have granted interest u/s 214. The Appellate Authority and the Tribunal held that the appeal was not competent. On reference, it was held by the Bombay High Court that income tax Officer''s Order had been passed u/s 154 and appeal therefrom was competent u/s 246(1)(f). This judgment, to the above extent, applies to the facts of our case. In the present case also, the Assessing Officer was concerned with giving effect to the Order dated 31-12-1986 passed by the Commissioner of income tax (Appeals) when he failed to grant interest u/s 214 and u/s 244(1A). This is very clear also from page 5 of the paperbook which refers to Order of Assessing Officer dated 18-2-1987 giving effect to the Order passed by the Appellate Authority dated 31-12-1986. Hence, the second part of the above issue is answered in favour of the assessee and against the Department. We accordingly hold that the appeal filed by the assessee with CIT (Appeals) being Appeal No. CIT(A)/XXII/ARIII/D/227/87-88 was maintainable u/s 246(1)(f).
Accordingly, we answer the above question as follows : Although the appeal filed by the assessee was not maintainable u/s 246(1)(c), the appeal was maintainable u/s 246(1)(f) in view of the judgment of the Bombay High Court in the case of Empire Industries Ltd. (supra).
Order
Accordingly, reference is disposed of with no order as to costs.