Leave granted.

The issue that arise for our consideration and decision in this batch of appeals is, whether the revenue is legally responsible under Section 244A of the Income Tax Act, 1961 (for short, the Act) for payment of interest on the refund of tax made to the resident deductor under Section 240 of the Act.

At the outset, it is relevant to notice that the assessment years in all these appeals are on and after 01.04.1989, that is after the admittance of Section 244A of the Act by Direct Tax Laws (Amendment) Act, 1987 (4 of 1988) with effect from 01.04.1989, whereby provision for interest on refunds on any amount due to the assessee under the Act was introduced.

FACTS:- We would refer to the facts in Civil Appeal Number 6301 of 2011.

The respondent is a company incorporated under the provisions of Companies Act, 1956.

It is engaged in the manufacture of nitrogenous fertilizer.

During the assessment year 1997-98, the respondent-company had commissioned its naptha desulphurization plant and to oversee the operation of the said plant it had sought the assistance of two technicians from M section Haldor Topsoe, Denmark.

M section Haldor Topsoe had raised an invoice aggregating to US 43,290,06/- as service charges for services of the technicians (US 38,500/-) and reimbursements of expenses (US 4,790/-).

The resident deductor had approached the Income Tax Officer under Section 195 (2) of the Act inter alia requesting him to provide information determination as to what percentage of tax should be withheld from the amounts payable to the foreign company, namely, M section Haldor Topsoe, Denmark.

On the request so made, the Assessing Officer Income Tax Officer had determined and passed Special order under Section 195 (2) of the Act directing the resident deductor to deduct withhold tax at the rate of 20 before remitting aforesaid amounts to M s.

Haldor Topsoe.

Accordingly, the resident deductor had deducted tax of Rs.1,98,878/- on the entire amount of US 43,290.00/- and credited the same in favour of the Revenue.

After such deposit, the resident deductor had preferred an appeal before the Commissioner of Income Tax (Appeals) against the aforesaid order passed by the Assessing Officer Income Tax Officer under Section 195 (2) of the Act.

The appellate authority while allowing the appeal so filed by the resident deductor, had concluded, that, the reimbursement of expenses is not a part of the income for deduction of tax at source under Section 195 of the Act and accordingly, directed the refund of the tax that was deducted and paid over to the Revenue on the amount of US 4790.06/- representing reimbursement of expenses by order dated 12.07.2002.

After disposal of the appeal, the resident deductor had claimed the refund of tax on US 4790/- (amounting to Rs.22,005/-) with the interest thereon as provided under Section 244A(1) of the Act by its letter dated 09.12.2002.

The Assessing Officer Income Tax Officer while declining the claim made, has observed, that, Section 244A provides for interest only on refunds due to the assessee under the Act and not to the deductor and since the refund in the instant case is in view of the circulars viz. Circular No. 769 and 790 issued by the Central Board of Direct Taxes (for short the Board) and not under the statutory provisions of the Act, no interest would accrue on the refunds under Section 244A of the Act.

Therefore, the Assessing Officer Income Tax Officer while granting refund of the tax paid on the aforesaid amount has refused to entertain the claim for interest on the amount so refunded by order dated 29.07.2003.

Since the Assessing Officer Income Tax Officer had declined to grant the interest on the amount so refunded, the resident deductor had carried the matter by way of an appeal before the Commissioner of Income Tax (Appeals).

The First Appellate Authority by its order dated 28.03.2005 has approved the orders passed by the Assessing Officer Income Tax Officer and declined the claim of the deductor resident on two counts : (a) that the refund in the instant case would fall under two circulars viz. Circular No. 769 and 790 issued by the Board which specifically provide that the benefit of interest under Section 244A of the Act on such refunds would not be available to the deductor resident and (b) that a conjoint reading of Section 156 and the explanation appended to Section 244A (1)(b) of the Act would indicate that the amount refunded to the deductor resident cannot be equated to the refund of the amount(s) envisaged under Section 244A(1)(b) of the Act, wherein only the interest on refund of excess payment made under Section 156 of the Act pursuant to a notice of demand issued on account of post-assessment tax is contemplated and not the interest on refund of tax deposited under self-assessment as in the instant case.

The deductor resident, aggrieved by the aforesaid order, had carried the matter before the Income Tax Appellate Tribunal (for short, the Tribunal).

The Tribunal while reversing the judgment and order passed by the Commissioner of Income Tax (Appeals) has opined, that, the tax was paid by the deductor resident pursuant to an order passed under Section 195 (2) of the Act and the refund was ordered under Section 240 of the Act, therefore, the provisions of Section 244A(1)(b) are clearly attracted and the revenue is accountable for payment of interest on the aforesaid refund amount.

Accordingly, the Tribunal has allowed the appeal of the deductor resident and directed the Assessing Officer Income Tax Officer to acknowledge the claim and allow the interest as provided under Section 244A(1)(b) of the Act on the aforesaid amount of refund, by order dated 28.06.2008.

The Revenue being of the view that they are treated unfairly by the Tribunal had carried the matter by way of Income Tax Appeal before the High Court.

The High Court has refused to accept the appeal filed by the Revenue by the impugned judgment and order, dated 18.06.2009.

That is how the Revenue is before us in these appeals.

We have heard the learned counsel appearing for the Revenue and the respondent-assessee in these appeals and also carefully perused the orders passed by the forums below.

RELEVANT PROVISIONS:- To appreciate the view point of the learned counsel for the Revenue, we require to notice certain provisions of the Act prior to the insertion of Section 244A of the Act.

The sections that require to be noticed are Sections 156, 195(2), 240 and 244 of the Act.

A perusal of these sections essentially would indicate the procedure whereby the tax amount is paid and the refund of excess amount is claimed by the assessee.

The relevant part of the said sections is sequentially reproduced: Section 156.

Notice of demand When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable.

Section 195.

Other sums- Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act (not being income chargeable under the head Salaries) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income- tax thereon at the rates in force: Provided that in the case of interest payable by the Government or a public section bank within the meaning of clause (23D) of Section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of chaque or draft or by any other mode: Provided further that no such deduction shall be made in respect of any dividends referred to in Section 115-O. Explanation.- For the purpose of this section, where any interest or other sum as aforesaid is credited to any account, whether called Interest payable account or Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

Where the person responsible for paying any such sum chargeable under this Act other than salary to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable.

Section 240.

Refund on appeal, etc.

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 Assessing 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.

Section 244.

Interest on refund where no claim is needed Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing 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 fifteen 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 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 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 subsection, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess.

(2) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment years.

Section 156 of the Act talks about payment of tax, interest, penalty, fine or any other sum payable in consequence of any order passed under the Act on service of notice of demand issued by the assessing officer to the assessee specifying the said amounts.

Section 195(1) casts an obligation upon every person in this Country to deduct tax at the prevailing rates from out of any sum which is remitted to a non resident Foreign Company.

Sub Section (2) of Section 195 provides that where a person responsible for paying any such sum chargeable under the Act to a non resident Foreign Company considers that the whole of such sum would not be the income chargeable in the case of recipient, he may make an application to the assessing officer income tax officer to determine, by general or special order, the appropriate proportion of such sum so chargeable.

The assessing officer is expected to determine such sum tax which are deductible out of remittance to be sent to the recipient and only after deduction and payment of such sum tax, the balance amount is to be remitted to the non-resident.

We clarify here that it is the statutory obligation of the person responsible for paying such sum to deduct tax thereon before making payment, if such application is not filed.

Section 240 of the Act provides for refund on appeal etc.

The Section envisages that if an amount becomes due to the assessee by virtue of an order passed in appeal, reference, revision, rectification or amendment proceedings, the assessing officer is bound to refund the amount to the assessee without the assessee being required to make any claim in that behalf.

The expression other proceedings under the Act used in Section 240 of the Act, are wide enough to include any order passed in proceedings other than the appeals under the Act.

Section 244 of the Act provides for interest on refunds where no claim is made or required to be made by the assessee.

The said section envisages that where a refund is due to the assessee in pursuance of an order passed under Section 240 of the Act, and the assessing 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 a simple interest of 15 per annum on the amount of refund due from the date immediately following the expiry of the period of three months as aforesaid to the date on which the refund is granted.

Since there was disconcert in the minds of both the assessee and the Revenue regarding the cases where payment of interest was required to be made to the assessee by the Revenue, the Parliament has thought it fit to insert a new Section 244A in the place of Sections 214, 243 and 244 in respect of assessments for the assessment year 1989-90 and onwards.

The Section is extracted: 244A. Interest on refunds.

Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:- Where the refund is out of any tax paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted.

Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 115WE or sub-section (1) of section 143 or on regular assessment (b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of tax or penalty to the date on which the refund is granted.

EXPLANATION.- For the purpose of this clause, date of payment of tax or penalty means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.

(2) (3) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment year (emphasis supplied) The objects and reasons for introduction of the aforesaid Section is clarified by the Board in its Circular Number 549, dated 31.10.1989.

Relevant paragraphs of which are as under: 11.2 Insertion of a new section 244A in lieu of sections 214, 243 and 244,- Under the provisions of section 214, interest was payable to the assessess on any excess advance tax paid by him in a financial year from the 1st day of April next following the said financial year to the date of regular assessment.

In case the refund was not granted within three months from the date of the month in which the regular assessment was completed, section 243 provided for further payment of interest.

Under section 244, interest was payable to the assessee for delay in payment of refund as a result of an order passed in appeal, etc.

, from the date following after the expiry of three months from the end of the month in which such order was passed to the date on which refund was granted.

The rate of interest under all the three sections was 15 per cent annum.

These provisions, apart from being complicated left certain gaps for which interest was not paid by the Department to the assessee for money remaining with the Government.

To remove this inequity, as also to simplify the provisions in this regard, the Amending Act, 1987, has inserted a new Section 244A in the Income Tax Act, applicable from the assessment year 1989-90 and onwards which contains all the provisions for payment of interest by the Department for delay in the grant of refunds.

The rate of interest has been increased from the earlier 15 per cent annum to 1.5 per month or part of a month, comprised in the period of delay in the grant of refund.

The Amending Act, 1987, has also amended sections 214, 243 and 244 to provide that the provisions of these sections shall not apply to the assessment year 1989-90 or any subsequent assessment years.

(emphasis supplied) SUBMISSIONS:- Shri Arijit Prasad, learned counsel appearing for the Revenue would submit, that, if the tax is paid under Section 195(2) of the Act, then while refunding the amounts so paid, the Revenue need not be burdened with payment of interest on the amount so refunded.

He would submit that while Section 244A(1)(a) specifically provides for the four instances under specific provisions where the interest would be payable on the refund of tax paid, Section 244A(1)(b) does not provide for any specific instance but mentions any other cases and the explanation appended to the said Section requires payment of refund to be made in cases where notice of demand was issued under Section 156 of the Act and since no demand notice was issued to the assessee under Section 156 of the Act the assessee would not be covered even by the aforesaid provision and hence, no interest is payable to the assessee by the Revenue.

It is further submitted that interest under Section 244A is to be granted in case where refund of any amount becomes due to an assessee under this Act and the refund of tax deducted at source made to the deductor resident is not under any statutory provisions of the Act, the deductor resident is not entitled for interest on the amount of tax deducted and deposited with the revenue.

Per contra, learned senior counsel appearing for the resident deductor would submit that since the payment made under Section 195(2) is payment made under the Act pursuant to an order passed by the assessing officer which in turn would be sheltered under the provisions of Section 156 of the Act, by virtue of clause(b) of sub-Section(1) of Section 244A of the Act, the Revenue is obliged to refund the tax with interest.

DISCUSSION:- It is cardinal principle of interpretation of Statutes that the words of a Statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning unless such construction leads to some absurdity or unless there is something in the context or in the object of the Statute to the contrary.

The golden rule is that the words of a Statute must prima facie be given their ordinary meaning.

It is yet another rule of construction that when the words of a Statute are clear, plain and unambiguous, then the Courts are bound to give effect to that meaning irrespective of the consequences.

It is said that the words themselves best declare the intention of the law giver.

The Courts have adhered to the principle that efforts should be made to give meaning to each and every word used by the legislature and it is not a sound principle of construction to brush aside words in a Statute as being inapposite surpluses, if they can have proper application in circumstances conceivable within the contemplation of the Statute (See Gurudevdatta VKSSS Maryadit v. State of Maharashtra 2001 4 SCC 534).

It is also well settled principle that the courts must interpret the provisions of the Statute upon ascertaining the object of the legislation through the medium or authoritative forms in which it is expressed.

It is well settled that the Court should, while interpreting the provisions of the Statute, assign its ordinary meaning.

This Court in Shyam Sunder vs Ram Kumar (2001) 8 SCC 24 has observed that in relation to beneficent construction, the basic rules of interpretation are not to be applied where (i) the result would be re- legislation of a provision by addition, substitution or alteration of words and violence would be done to the spirit of legislation, (ii) where the words of a Provision are capable of being given only one meaning and (iii) where there is no ambiguity in a provision, however, the Court may apply the rule of beneficent construction in order to advance the object of the Act.

Before the insertion of Section 244A as a composite Section by the Direct Tax Laws (Amendment) Act, 1987, the liability to pay interest on refund of pre-paid taxes was contained in Sections 214, 243 read with Section 244 (1A) of the Act.

The Parliament has introduced a new Section in the place of Sections 214, 243 and 244 in respect of assessment for the assessment year 1989-90 and onwards.

The language of the Section is precise, clear and unambiguous.

Sub-Section (1) of Section 244A speaks of interest on refund of the amounts due to an assessee under the Act.

The assessee is entitled for the said amount of refund with interest thereon as calculated in accordance with clause (a) (b) of sub-Section (1) of Section 244A. In calculating the interest payable, the section provides for different dates from which the interest is to be calculated.

Clause(a) of sub-Section(1) of Section 244A talks of payment of interest on the amount of tax paid under Section 155WJ, tax collected at source under section 206C, taxes paid by way of advance tax, taxes treated as paid under Section 199 during the financial year immediately preceding the assessment year.

Under this clause, the interest shall be payable for the period starting from the first day of the assessment year to the date of the grant of refund.

No interest is payable if the excess payment is less than 10 of the tax determined under Section 143(1) of the Act or on regular assessment.

Clause(b) of Sub-Section(1) of Section 244A opens with the words in any other case that means in any case other than the amounts paid under Clause(a) of Sub-section(1) of Section 244A. Under this clause, the rate of interest is to be calculated at the rate of one and a half per cent per month or a part of a month comprised in the period or the periods from the date or, as the case may be, either the dates of payment of the tax or the penalty to the date on which the refund is granted.

An explanation is appended to clause(b) of the aforesaid sub-Section to explain the meaning of the expression date of payment of tax or penalty.

It clarifies that the date of payment of tax or penalty would mean the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.

Having glanced through the relevant sections and the settled legal principles of interpretation of Statute, let us revert back to the factual situation placed before us in this appeal.

In the present case, the resident deductor had approached the assessing authority inter alia requesting him to determine the tax that requires to be deducted at source before the payment is made to a non- resident foreign company.

On such a request the assessing officer had passed an order under Section 195(2) of the Act directing the resident/ deductor to deduct tax at a particular rate.

The resident deductor had appealed against the said order, but had deposited the tax as directed by the assessing officer Income Tax Officer by the aforesaid order in accordance with the provisions of Section 200 of the Act.

When the resident deductor succeeded in the appeal, a direction was issued by the appellate authority for refund of tax so paid.

In observance of the same, the assessing authority had granted the refund of the tax amount under Section 240 of the Act, but declined to grant interest on the said refund amount.

The conclusion arrived at by the assessing officer was accepted by the first appellate authority on the ground, inter alia, that the conjoint reading of Section 156 and the explanation appended to Section 244A(1)(b) of the Act would indicate that the amount refunded to the resident/ deductor cannot be equated to the refund contemplated under Section 244A(1)(b) of the Act, whereunder only the interest on refund of excess payment made under Section 156 of the Act on account of post-assessment tax is contemplated and not the interest on refund of tax deposited under self- assessment.

However, the Tribunal has rejected the aforesaid rationale of the assessing authority as well as the first appellate authority and granted the claim of the resident deductor.

The High Court has endorsed the view of the Tribunal and dismissed the appeals filed the Revenue.

The refund becomes due when tax deducted at source, advance tax paid, self assessment tax paid and tax paid on regular assessment exceeds tax chargeable for the year as a result of an order passed in appeal or other proceedings under the Act.

When refund is of any advance tax (including tax deducted collected at source), interest is payable for the period starting from the first day of the assessment year to the date of grant of refund.

No interest is, however, payable if the excess payment is less than 10 percent of tax determined under Section 143(1) or on regular assessment.

No interest is payable for the period for which the proceedings resulting in the refund are delayed for the reasons attributable to the assessee (wholly or partly).

The rate of interest and entitlement to interest on excess tax are determined by the statutory provisions of the Act.

Interest payment is a statutory obligation and non- discretionary in nature to the assessee.

In tune with the aforesaid general principle, Section 244A is drafted and enacted.

The language employed in Section 244A of the Act is clear and plain.

It grants substantive right of interest and is not procedural.

The principles for grant of interest are the same as under the provisions of Section 244 applicable to assessments before 01.04.1989, albeit with clarity of application as contained in Section 244A. The Department has also issued Circular clarifying the purpose and object of introducing Section 244A of the Act to replace Sections 214, 243 and 244 of the Act.

It is clarified therein, that, since there was some lacunae in the earlier provisions with regard to non-payment of interest by the revenue to the assessee for the money remaining with the Government, the said section is introduced for payment of interest by the Department for delay in grant of refunds.

A general right exists in the State to refund any tax collected for its purpose, and a corresponding right exists to refund to individuals any sum paid by them as taxes which are found to have been wrongfully exacted or are believed to be, for any reason, inequitable.

The statutory obligation to refund carried with it the right to interest also.

This is true in the case of assessee under the Act.

The question before us is, whether the resident deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source under Section 195 of the Act.

We would begin our discussion by referring to circular Number 790, dated 20.04.2000, issued by the Board.

Omitting what is not necessary, the material portion of the circular is extracted: Refund to the person making payment under Section 195 is being allowed as income does not accrue to the non-resident.

The amount paid into the Government account in such cases, is no longer tax.

In view of this, no interest under section 244A is admissible on refunds to be granted in accordance with this Circular or on the refunds already granted in accordance with Circular Number 769.

What the deductor resident primarily contend is that, what has been deposited by him is a tax, may be for and on behalf of non-resident/ foreign company and when the beneficial circular provides for refund of tax to the deductor under certain circumstances, the refund of tax should carry interest.

The circular issued by Central Board of Direct Taxes (the Board for short) is binding on the department.

Binding nature of the circular is explained by this Court in the case of UCO Bank v. CIT 237 ITR 889, wherein this Court has observed that the circulars issued by the Board in exercise of its powers under Section 119 of the Act would be binding on the income tax authorities even if they deviate from the provisions of the Act, so long as they seek to mitigate the rigour of a particular Section for the benefit of the assessee.

Therefore, we cannot be taking exception to the reasoning and conclusion reached by the authorities under the Act.

However, the Tribunal and the High Court, have granted interest on the amount of tax deposited by the resident deductor from the date of payment on the ground, firstly, the refund of tax is directed by the first appellate authority in the appeal filed by the deductor resident under Section 240 of the Act and secondly, the Revenue for having retained the sum by way of tax has to compensate the person who had deposited the tax.

Section 240 of the Act provides for refund of any amount that becomes due to an assessee as a result of an order in appeal or any other proceedings under the Act.

The phrase other proceedings under the Act is of wide amplitude.

This Court has observed, that, the other proceedings under the Act would include orders passed under Section 154 (rectification proceedings), orders passed by the High Court or Supreme Court under Section 260 (in reference), or order passed by the Commissioner in revision applications under Section 263 or in an application under Section 273A. A tax refund is a refund of taxes when the tax liability is less than the tax paid.

As per the old section an assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order passed under the Act, including the order passed in an appeal.

In the present fact scenario, the deductor assessee had paid taxes pursuant to a special order passed by the assessing officer Income Tax Officer.

In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid.

The amount paid by the resident deductor was retained by the Government till a direction was issued by the appellate authority to refund the same.

When the said amount is refunded it should carry interest in the matter of course.

As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department.

When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited.

Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded.

There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident foreign company.

Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute.

Refund due and payable to the assessee is debt-owed and payable by the Revenue.

The Government, therebeing no express statutory provision for payment of interest on the refund of excess amount tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies.

The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances.

The obligation to refund money received and retained without right implies and carries with it the right to interest.

Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course.

In the present case, it is not in doubt that the payment of tax made by resident depositor is in excess and the department chooses to refund the excess payment of tax to the depositor.

We have held the interest requires to be paid on such refunds.

The catechize is from what date interest is payable, since the present case does not fall either under clause (a) or (b) of Section 244A of the Act.

In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the assessment year.

Simultaneously, since the said payment is not made pursuant to a notice issued under Section 156 of the Act, Explanation to clause (b) has no application.

In such cases, as the opening words of clause (b) specifically referred to as in any other case, the interest is payable from the date of payment of tax.

The sequel of our discussion is the resident deductor is entitled not only the refund of tax deposited under Section 195(2) of the Act, but has to be refunded with interest from the date of payment of such tax.

In the result, the appeals fail.

Accordingly, the appeals are dismissed.

No order as to costs.

J. L. DATTU) J. A. BOBDE) NEW DELHI FEBRUARY 26, 2014.

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RANJAN GOGOI, J. SLP(C) NO.

11621 OF 2009 Leave granted.

The appellant - Revenue seeks to challenge the order of the High Court dated 7th August, 2008 dismissing the appeal filed by it under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) and affirming the order of the Income Tax Appellate Tribunal, Mumbai Bench (Tribunal for short) dated 28th August, 2007 whereby the order dated 20th March, 2006 passed by the Commissioner of Income Tax-1, Mumbai I.T. for short) under Section 263 of the Act was reversed.

The assessment year in question is 2001-2002 and the assessment order is dated 30th March, 2004.

After the assessment as above was finalized, a show cause notice dated 7th November, 2005 under Section 263 of the Act was issued by the learned C.I.T. detailing as many as eleven (11) issues grounds on which the assessment order was proposed to be revised under Section 263 of the Act.

The respondent - assessee filed his reply to the said show cause notice on consideration of which by order dated 20th March, 2006 the learned C.I.T. set aside the order of assessment dated 30th March, 2004 and directed a fresh assessment to be made.

Aggrieved, the respondent assessee challenged the said order before the learned Tribunal which was allowed by the order dated 28th August, 2007.

Aggrieved by the order dated 28th August, 2007 of the learned Tribunal, the Revenue filed an appeal under Section 260A of the Act before the High Court of Bombay.

The aforesaid appeal i.e. ITA Number293 of 2008 was summarily dismissed by the High Court by the impugned order dated 7th August, 2008 holding that as the C.I.T. had gone beyond the scope of the show cause notice dated 7th November, 2005 and had dealt with the issues not covered mentioned in the said notice the revisional order dated 20th March, 2006 was in violation of the principles of natural justice.

So far as the question as to whether the Assessing Officer had made sufficient enquiries about the assessees claim of expenses made in the re-revised return of income is concerned, which question was formulated as question No.2 for the High Courts consideration, the High Court took the view that the said question raised pure questions of fact and, therefore, ought not to be examined under Section 260A of the Act.

The appeal of the Revenue was consequently dismissed.

Aggrieved, this appeal has been filed upon grant of leave under Article 136 of the Constitution of India.

We have heard Shri Ranjit Kumar, learned Solicitor General appearing for the appellant Revenue and Shri Shyam Divan, learned Senior Counsel appearing for the respondent assessee.

The assessment in question was set aside by the learned C.I.T. by the order dated 20th March, 2006 on the principal ground that requisite and due enquiries were not made by the Assessing Officer prior to finalization of the assessment by order dated 30th March, 2004.

In this connection, the learned C.I.T. on consideration of the facts of the case and the record of the proceedings came to the conclusion that in the course of the assessment proceedings despite several opportunities the assessee did not submit the requisite books of account and documents and deliberately dragged the matter leading to one adjournment after the other.

Eventually, the Assessing Officer, to avoid the bar of limitation, had no option but to hurriedly finalize the assessment proceedings which on due and proper scrutiny disclosed that the necessary enquiries were not made.

On the said basis the learned C.I.T. came to the conclusion that the assessment order in question was erroneous and prejudicial to the interests of the Revenue warranting exercise of power under Section 263 of the Act.

Consequently, the assessment for the year 2001-2002 was set aside and a fresh assessment was ordered.

At this stage, it must be noticed that in the order dated 20th March, 2006 the learned C.I.T. arrived at findings and conclusions in respect of issues which were not specifically mentioned in the show cause notice dated 7th November, 2005.

In fact, on as many as seven eight (07/08) issues mentioned in the said show cause notice the learned C.I.T. did not record any finding whereas conclusions adverse to the assessee were recorded on issues not specifically mentioned in the said notice before proceeding to hold that the assessment needs to be set aside.

However, three (03) of the issues, details of which are noticed herein below, are common to the show cause notice as well as the revisional order of the learned C.I.T. On appeal, the learned Tribunal took the view that the learned I.T. exercising powers under Section 263 of the Act could not have gone beyond the issues mentioned in the show cause notice dated 7th November, 2005.

The learned Tribunal, therefore, thought it proper to take the view that in respect of the issues not mentioned in the show cause notice the findings as recorded in the revisional order dated 20th March, 2006 have to be understood to be in breach of the principles of natural justice.

The learned Tribunal also specifically considered the three (03) common issues mentioned above and on such consideration arrived at the conclusion that the reasons disclosed by the learned C.I.T. in the order dated 20th March, 2006 for holding the assessment to be liable for cancellation on that basis are not tenable.

Accordingly, the learned Tribunal allowed the appeal of the assessee and reversed the order of the suo motu revision dated 20th March, 2006.

At this stage, it may be appropriate to reproduce hereunder the provisions of Section 263 of the Act to appreciate the arguments advanced and to understand the contours of the suo motu revisional power vested in the learned C.I.T. by the aforesaid provision of the Act.

263 - Revision of orders prejudicial to revenue.-(1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

Explanation Under the Act different shades of power have been conferred on different authorities to deal with orders of assessment passed by the primary authority.

While Section 147 confers power on the Assessing Authority itself to proceed against income escaping assessment, Section 154 of the Act empowers such authority to correct a mistake apparent on the face of the record.

The power of appeal and revision is contained in Chapter XX of the Act which includes Section 263 that confer suo motu power of revision in the learned C.I.T. The different shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act.

In this regard, it must be specifically noticed that against an order of assessment, so far as the Revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under Section 147 and or to revise the assessment order under Section 263 of the Act.

The scope of the power jurisdiction under the different provisions of the Act would naturally be different.

The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant Sections noticed above.

While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power to question an order of assessment by means of an appeal.

Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre-condition for exercise of jurisdiction under Section 263 of the Act.

Both are twin conditions that have to be conjointly present.

Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard.

It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause.

In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee.

Rather, what is required under the said provision is an opportunity of hearing to the assessee.

The two requirements are different the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed.

Such a notice is not required.

What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee.

Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice.

Reference in this regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal vs Commissioner of Income Tax, West Bengal and others1 and in The C.I.T., West Bengal, II, Calcutta vs M s Electro House2.

Paragraph 4 of the decision in The C.I.T., West Bengal, II, Calcutta vs M s Electro House (supra) being illumination of the issue indicated above may be usefully reproduced hereunder: This section unlike Section 34 does not prescribe any notice to be given.

It only requires the Commissioner to give an opportunity to the assessee of being heard.

The section does not speak of any notice.

It is unfortunate that the High Court failed to notice the difference in language between Sections 33-B and 34.

For the assumption of jurisdiction to proceed under Section 34, the notice as prescribed in that section is a condition precedent.

But no such notice is contemplated by Section 33-B. The jurisdiction of the Commissioner to proceed under Section 33-B is not dependent on the fulfilment of any condition precedent.

All that he is required to do before reaching his decision and not before commencing the enquiry, he must give the assessee an opportunity of being heard and make or cause to make such enquiry as he deems necessary.

Those requirements have nothing to do with the jurisdiction of the Commissioner.

They pertain to the region of natural justice.

Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner.

At present we are not called upon to consider whether the order made by the Commissioner is vitiated because of the contravention of any of the principles of natural justice.

The scope of these appeals is very narrow.

All that we have to see is whether before assuming jurisdiction the Commissioner was required to issue a notice and if he was so required what that notice should have contained? Our answer to that question has already been made clear.

In our judgment no notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under Section 33-B. Therefore the question what that notice should contain does not arise for consideration.

It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under Section 33-B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under Section 33-B. This Court in Gita Devi Aggarwal v. CIT, West Bengal ruled that Section 33- B does not in express terms require a notice to be served on the assessee as in the case of Section 34.

Section 33-B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied to a proceeding under Section 33-B. (Page 827-828).

Note: Section 33-B and Section 34 of the Income Tax Act, 1922 corresponds to Section 263 and Section 147 of the Income Tax Act, 1961 It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary.

But there is nothing in the section (Section 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the C.I.T. to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact.

This is not the purport of Section 263.

Of course, there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision.

In the present case, there is no dispute that in the order dated 20th March, 2006 passed by the learned C.I.T. under Section 263 of the Act findings have been recorded on issues that are not specifically mentioned in the show cause notice dated 7th November, 2005 though there are three (03) issues mentioned in the show cause notice dated 7th November, 2005 which had specifically been dealt with in the order dated 20th March, 2006.

The learned Tribunal in its order dated 28th August, 2007 put the aforesaid two features of the case into two different compartments.

Insofar as the first question i.e. findings contained in the order of the learned C.I.T. dated 20th March, 2006 beyond the issues mentioned in the show cause notice is concerned the learned Tribunal taking note of the aforesaid admitted position held as follows: In the case on hand, the CIT has assumed jurisdiction by issuing show cause notice u s 263 but while passing the final order he relied on various other grounds for coming to the final conclusion.

This itself makes the revision order bad in law and also violative of principles of natural justice and thus not maintainable.

If, during the course of revision proceedings the CIT was of the opinion that the order of the AO was erroneous on some other grounds also or on any additional grounds not mentioned in the show cause notice, he ought to have given another show cause notice to the assessee on those grounds and given him a reasonable opportunity of hearing before coming to the conclusion and passing the final revision order.

In the case on hand, the CIT has not done so.

Thus, the order u s 263 is violative of principles of natural justice as far as the reasons, which formed the basis for the revision but were not part of the show cause notice issued u s 263 are concerned.

The order of the CIT passed u s 263 is therefore liable to be quashed in so far as those grounds are concerned.

The above ground which had led the learned Tribunal to interfere with the order of the learned C.I.T. seems to be contrary to the settled position in law, as indicated above and the two decisions of this Court in Gita Devi Aggarwal (supra) and M s Electro House (supra).

The learned Tribunal in its order dated 28th August, 2007 had not recorded any finding that in course of the suo motu revisional proceedings, hearing of which was spread over many days and attended to by the authorized representative of the assessee, opportunity of hearing was not afforded to the assessee and that the assessee was denied an opportunity to contest the facts on the basis of which the learned C.I.T. had come to his conclusions as recorded in the order dated 20th March, 2006.

Despite the absence of any such finding in the order of the learned Tribunal, before holding the same to be legally unsustainable the Court will have to be satisfied that in the course of the revisional proceeding the assessee, actually and really, did not have the opportunity to contest the facts on the basis of which the learned C.I.T. had concluded that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue.

The above is the question to which the Court, therefore, will have to turn to.

To determine the above question we have read and considered the order of the Assessing Officer dated 30th March, 2004 as well as the order of the learned C.I.T. dated 20th March, 2006.

From the above consideration, it appears that the learned C.I.T. in the course of the revisional proceedings had scrutinized the record of the proceedings before the Assessing Officer and noted the various dates on which opportunities to produce the books of account and other relevant documents were afforded to the assessee which requirement was not complied with by the assessee.

In these circumstances, the revisional authority took the view that the Assessing Officer, after being compelled to adjourn the matter from time to time, had to hurriedly complete the assessment proceedings to avoid the same from becoming time barred.

In the course of the revisional exercise relevant facts, documents, and books of account which were overlooked in the assessment proceedings were considered.

On such re-scrutiny it was revealed that the original assessment order on several heads was erroneous and had the potential of causing loss of revenue to the State.

It is on the aforesaid basis that the necessary satisfaction that the assessment order dated 30th March, 2004 was erroneous and prejudicial to the interests of the revenue was recorded by the learned C.I.T. At each stage of the revisional proceeding the authorized representative of the assessee had appeared and had full opportunity to contest the basis on which the revisional authority was proceeding had proceeded in the matter.

If the revisional authority had come to its conclusions in the matter on the basis of the record of the assessment proceedings which was open for scrutiny by the assessee and available to his authorized representative at all times it is difficult to see as to how the requirement of giving of a reasonable opportunity of being heard as contemplated by Section 263 of the Act had been breached in the present case.

The order of the learned Tribunal insofar as the first issue i.e. the revisional order going beyond the show cause notice is concerned, therefore, cannot have our acceptance.

The High Court having failed to fully deal with the matter in its cryptic order dated 7th August, 2008 we are of the view that the said orders are not tenable and are liable to be interfered with.

This will bring us to a consideration of the second limb of the case as dealt with by the learned Tribunal, namely, that tenability of the order of the learned C.I.T. on the three (03) issues mentioned in the show cause notice and also dealt with in the revisional order dated 20th March, 2006.

The aforesaid three (03) issues are: Assessee maintaining 5 bank accounts and AO not examining the 5th bank account, books of account and any other bank account where receipts related to KBC were banked.

ii) Regarding claim of deposits of Rs.52.06 lakhs in Special Bench A c No.11155 under the head Receipts on behalf of Mrs. Jaya Bachchan and iii) Regarding the claim of additional expenses in the re-revised return.

On the above issues the learned Tribunal had given detailed reasons for not accepting the grounds cited in the revisional order for setting aside the assessment under Section 263 of the Act.

The reasons cited by the learned Tribunal insofar as the first two issues are concerned may not justify a serious relook and hence need not be gone into.

The third question would, however, require some detailed attention.

The said question is with regard to the claim of additional expenses made by the assessee in its re-revised return which was subsequently withdrawn.

The assessee in the re-revised return dated 31st March, 2003 had made a claim of additional expenses of 30 of the gross professional receipts (Rs.3.17 crores).

It appears that the Assessing Officer required the assessee to file requisite details in this regard.

The assessee responded by letter dated 13th February, 2004 stating as follows: With regard to the 30 estimated expenses claimed, we have to submit that these are the expenses which are spent for security purposes by employing certain Agencies, guards etc.

for the personal safety of Shri Bachchan as he has to protect himself from various threats to his life received by him and to avoid extortion of money from gangsters.

The names of such Agencies cannot be disclosed divulged as there is a possibility of leakage of information of Agencies names from the office staff, which will obviously be detrimental to the interests of Shri Bachchan.

The payments have been made out of cash balances available and lot of outstanding expenses are to be paid which could not be paid for want of income.

Thereafter by letter dated 13th March, 2004 the assessee informed the learned C.I.T. that the claim was made on a belief that the same is allowable but as it will not be feasible for the assessee to substantiate the same, the re-revised return of income may be taken to the withdrawn.

It appears that thereafter the Assessing Officer issued a notice to show cause as to why the provisions of Section 69-C should not be invoked and the expenses claimed should not be treated as unexplained expenditure.

In reply, the assessee by letter dated 24th March, 2004 submitted that the claim was made as a standard deduction and that the assessee had been wrongly advised to make the said claim and as the same has been withdrawn, Section 69-C will have no application.

The record of the assessment proceedings disclose that the said stand was accepted by the Assessing Officer and the matter was not pursued any further.

The learned C.I.T. took the view that notwithstanding the withdrawal of the claim by the assessee, in view of the earlier stand taken that the said expenses were incurred for security purposes of the assessee, the Assessing Officer ought to have proceeded with the matter as the assessee was following the cash system of accounting and the filing of the re-revised return, prima facie, indicated that the additional expenses claimed had been incurred.

In this regard, the following findings reasons recorded by the learned C.I.T. in the order dated 20th March, 2006 would be of particular relevance: Withdrawal of claim by assessee can be for variety of reasons and this does not mean that Assessing Officer should abandon enquiries regarding sources for incurring expenses.

Assessee follows cash system of accounting and the claim regarding additional expenses was made through duly verified revised return.

The claim was pressed during assessment proceedings carried on by A.O. after filing revised return and it was specially stated in letter dated 13.02.2004 that expenses were for security purposes and that payments have been made out of cash balances available etc.

Under the circumstances, the Assessing Officer was expected to examine the matter further to arrive at a definite finding whether assessee incurred expenses or not and in case, actually incurred, then what were sources for incurring these expenses.

Assessing Officer was satisfied on withdrawal of the claim and in my view, his failure to decide the matter regarding actual incurring of additional expenses and sources thereof resulted into erroneous order which is prejudicial to the interest of revenue.

An argument has been made on behalf of the assessee that notice under Section 69-C was issued by the Assessing Officer and thereafter on withdrawal of the claim by the assessee the Assessing Officer thought that the matter ought not to be investigated any further.

This, according to the learned counsel for the assessee, is a possible view and when two views are possible on an issue, exercise of revisional power under Section 263 would not be justified.

Reliance in this regard has been placed on a judgment of this Court in Malabar Industrial Company Limited vs CIT3 which has been approved in Commissioner of Income-tax vs Max India Ltd. 4 There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter.

Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority.

This is a course of action that must be desisted from.

However, the above is not the situation in the present case in view of the reasons stated by the learned C.I.T. on the basis of which the said authority felt that the matter needed further investigation, a view with which we wholly agree.

Making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue.

The notice issued under Section 69-C of the Act could not have been simply dropped on the ground that the claim has been withdrawn.

We, therefore, are of the opinion that the learned C.I.T. was perfectly justified in coming to his conclusions insofar as the issue Number(iii) is concerned and in passing the impugned order on that basis.

The learned Tribunal as well as the High Court, therefore, ought not to have interfered with the said conclusion.

In the light of the discussions that have preceded and for the reasons alluded we are of the opinion that the present is a fit case for exercise of the suo motu revisional powers of the learned C.I.T. under Section 263 of the Act.

The order of the learned C.I.T., therefore, is restored and those of the learned Tribunal dated 28th August, 2007 and the High Court dated 7th August, 2008 are set aside.

The appeal of the Revenue is allowed.

SLP(C) Number861 of 2013 Leave granted.

Pursuant to the revisional order dated 20th March, 2006 under Section 263 of the Income Tax Act setting aside the assessment order for the assessment year 2001-2002 and directing fresh assessment, a fresh assessment had been made by the Assessing Officer by order dated 29th December, 2006.

Against the said order the respondent assessee filed an appeal before the learned Commissioner of Income Tax (Appeals).

By order dated 18th October, 2007 the learned Commissioner of Income Tax (Appeals) had set aside the assessment order dated 29th December, 2006 as in the meantime, by order dated 28th August, 2007 of the learned Income Tax Appellate Tribunal the revisional order dated 20th March, 2006 under Section 263 of the Act was set aside.

The Revenues appeal before the learned Tribunal against the order dated 18th October, 2007 was dismissed on 11th January, 2000 and by the High Court on 29th February, 2012.

Against the aforesaid order of the High Court this appeal has been filed by the Revenue.

As by the order passed today in the Civil Appeal arising out of Special Leave Petition (Civil) Number11621 of 2009 we have restored the suo motu revisional order dated 20th March, 2006 passed by the learned C.I.T., we allow this appeal filed by the Revenue and set aside the order dated 11th January, 2010 passed by the learned Tribunal and the order dated 29th February, 2012 passed by the High Court referred to above.

However, we have to add that as the re-assessment order dated 29th December, 2006 had not been tested on merits the assessee would be free to do so, if he is so inclined and so advised.

The appeals are disposed of in the above terms.

,J. RANJAN GOGOI ,J. PRAFULLA C. PANT NEW DELHI MAY 11, 2016 ----------------------- 1 (1970) 76 ITR 496 2 (1971) 82 ITR 824 3 (2000) 243 ITR 83 (SC) 4 (2007) 295 ITR 282 (SC)

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