M.B Shah, J.:— This petition is filed against the order dated December 30, 1985 (annexure “F”), passed by the Commissioner of Income-tax, Surat, under section 264 of the Income-tax Act, 1961 (“the Act” for short), rejecting the petitioner's refund applications against the Income-tax Officer's refusal in granting interest under section 244(1A) of the Act on the amount of penalty, which is waived under section 273A of the Act.
2. By order dated August 25, 1982, the Commissioner of Income-tax waived the penalty imposed under sections 271(1)(a), 273(a) and 273(c) of the Act for the assessment years 1974–75 and 1975–76. In view of the aforesaid order, the petitioner filed an application before the Income-tax Officer, Surat, praying that the amount as remitted by the Commissioner be refunded with interest under section 244(1A) read with rule 119(a). It was also prayed that the interest amount which the petitioner has paid on some delayed payments be also refunded with interest.
3. The Income-tax Officer refunded the amount without paying any interest as provided under section 244(1A) of the Act. The petitioner therefore preferred revision applications under section 264 of the Act. Those revision applications were rejected by the Commissioner of Income-tax solely on the ground that the relief under section 273A is not the relief from the unjustified levy of tax or penalty and, therefore, the provisions of section 244(1A) would not apply on the refund arising due to waiver under section 273A of the Act.
4. Mr. Mehta, learned counsel for the petitioner, has not pressed his contention with regard to payment of interest over the interest amount refunded to the petitioner. His only contention is that the Commissioner of Income-tax ought to have allowed the application of the petitioner for grant of interest under section 244(1A) on the penalty amount refunded to him in pursuance of the order passed under section 273A of the Act; As against this, Mr. Thakore, learned counsel for the respondent, submits that the order passed by the Commissioner of Income-tax does not call for any interference.
5. For appreciating the rival contentions raised by learned counsel for the parties, it would be necessary to refer to the relevant provisions under Chapter XIX pertaining to refunds of excess tax or penalty paid by the assessee under the Income-tax Act. These provisions can broadly be divided into two groups—(i) where the claim for refund is to be made, sections 237, 239 and 243 provide the procedure for it and (ii) other sections provide for cases where no claim is required to be made and the concerned officer is required to refund the amount in pursuance of an order passed in appeal or in any other proceedings. The said sections are sections 240, 241 and 244. Section 237, inter alia, provides that, if any person satisfies the Income-tax Officer that the amount of tax paid by him for any assessment year exceeds the amount with which he is properly chargeable for that year, he shall be entitled to a refund of the excess. Section 238 provides as to who would be entitled to file an application for refund. Section 239(1), inter alia, provides that every claim for refund shall be made in the prescribed form and verified in the prescribed manner. Sub-section (2) provides the limitation within which an application for refund can be filed. Section 243 provides that in the cases where the Income-tax Officer does not grant refund as provided therein, the Central Government shall pay the assessee the said amount with interest. In the present case, we are not required to deal with these sections. As against this, section 240 provides that where, as a result of any order passed in appeal or other proceedings under the Act, refund of any amount becomes due to the assessee, the Income-tax Officer shall refund the amount to the assessee without his having to make any claim in that behalf. However, section 243 empowers the Income-tax Officer to withhold the refund in a case where an order giving rise to a refund is the subject-matter of an appeal or further proceedings. Section 244 provides for payment of interest on such refund. Section 240 and the relevant part of section 244, with which we are concerned, are as under:
“240. Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Income-tax Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf.
244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Income-tax Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at twelve per cent, per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted.
(1A) Where the whole or any part of the refund referred to in subsection (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…”
(emphasis* supplied)
6. Considering the aforesaid provisions, in our view, the scope and ambit of section 240 is very wide. It provides that as a result of any order passed in appeal or other proceeding under the Act, any amount which becomes due to the assessee requires to be refunded to the assessee. In the context of section 240, section 244 provides for payment of interest on such refund. The phrase “other proceedings” used under section 240 is of wide amplitude and would cover any order passed in proceedings other than an appeal under the Income-tax Act. Therefore, the phrase “orders passed in other proceedings under the Income-tax Act” would include orders passed under section 154 (rectification proceedings), orders passed by the High Court or the Supreme Court under section 260 (in reference) and orders passed by the Commissioner of Income-tax in revision applications under section 263 or 264 Or on an application under section 273A of the Act. In this view of the matter, in our view, there is no reason to restrict the meaning of the phrase “other proceedings” under the Income-tax Act used in section 240 to only some orders by which refund of excess tax or penalty is granted and not to cover orders passed under section 273A of the Act. Sub-section (1A) of section 244 also, inter alia, provides that where the whole or any part of the refund referred to in sub-section (1) is due to the assessee in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in other proceedings under this Act to be in excess of the amount which such assessee is liable to pay as penalty, then the Government is required to pay to such assessee simple interest as specified therein. In this view of the matter, there is no reason to hold that in case where penalty is waived or reduced under section 273A of the Act, the assessee is not entitled to have the said amount with interest as provided under section 244(1A) of the Act.
7. The Allahabad High Court in the case of Raj Kishore Prasad v. ITO, [1991] 188 ITR 765, observed that the words “other proceedings under the Act” used under section 240, are wide enough to include proceedings or orders passed under section 263 of the Act giving rise to the claim of an assessee for refund. The court negatived the contention of the Revenue for restricting the meaning and scope of the phrase “other proceedings” only to references made under the Act.
8. In view of the aforesaid discussion, in our view, the impugned order passed by the Commissioner of Income-tax is on the face of it illegal. Hence, the impugned order requires to be quashed and set aside.
9. In the result, this petition is allowed. The impugned order dated December 30, 1985 (annexure “F”), is quashed and set aside. The Commissioner of Income-tax is directed to decide the application of the petitioner on the merits and to pass an appropriate order granting interest as provided under section 244(1A) of the Act. Rule made absolute with no order as to costs.