judgment based had been reversed or modified by subsequent decision of a superior Court could not be a ground for exercise of power under section 154

P.K. Bhowmik, Advocate for the Appellant. J.P. Khaitan, Sr. Advocate and S. Basu, Advocate for the Respondent.

JUDGMENT

1. The Court : When the appeal was admitted the following questions of law were framed :

2. Briefly stated, facts and circumstances of the case, are that the Assessing Officer while passing order under section 143(3) allowed interest upon interest. He, however, sought to recall the order granting interest upon interest by resorting to proceeding under section 154 of the Income Tax Act. The order passed by him was upheld by the CIT(A) but in an appeal preferred by the assessee, the learned Tribunal has set aside the order passed in exercise of jurisdiction under section 154 of the Income Tax Act.

3. Mr. Bhowmik, learned advocate appearing for the revenue submitted that the judgement of the Supreme Court in the case of CIT v. Gujarat Fluoro Chemicals [2014] 222 Taxman 349  has differed with the earlier views expressed in the case of Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643  wherein interest upon interest was allowed.

4. Mr. Bhowmik contended that since the law has been modified by the judgement in the case of Gujarat Fluoro Chemicals (supra) the assessing officer was entitled to exercise jurisdiction under section 154.

5. Mr. Khaitan, learned Senior Advocate appearing for the assessee/respondent submitted that the judgement in the case of Gujarat Fluoro Chemicals (supra) has not noticed an earlier judgement of the Supreme Court of equal strength in the case of CIT v. Heg Ltd. [2010] 324 ITR 331 wherein following views were taken :

‘…The next question which we are required to answer is–what is the meaning of the words “refund of any amount becomes due to the assessee” in section 244A ? In the present case, as stated above, there are two components of the tax paid by the assessee for which the assessee was granted refund, namely TDS of Rs. 45,73,528 and tax paid after original assessment of Rs. 1,71,00,320. The Department contends that the words “any amount” will not include the interest which accrued to the respondent for not refunding Rs. 45,73,528 for 57 months. We see no merit in this argument. The interest components will partake of the character of the ‘amount due’ under section 244A. It becomes an integral part of Rs. 45,73,528 which is not paid for 57 months after the said amount became due and payable. As can be seen from the facts narrated above, this is the case of short payment by the Department and it is in this way that the assessee claims interest under section 244A of the Income Tax Act. Therefore, on both the aforestated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs. 45,73,528. The principal amount of Rs. 45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above, partook of the character of “amount due” under section 244A.’

6. In the case of Gujarat Fluoro Chemicals (supra) in paragraph-8 Their Lordships opined that “we clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.”

7. But in the case of Heg Ltd. (supra) Their Lordships construed the meaning of the words ‘amount due’ appearing in section 244A of the Income Tax Act and came to the conclusion that the interest becomes part of the amount due.

8. In any event, the fact that the decision on a question of law on which the judgement is based has been reversed or modified by any subsequent decision of a superior court cannot be a ground for exercise of power under section 154 of the Income Tax Act. Reference in this regard may be made to a Division Bench judgement of this Court in the case of Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710 wherein the following views were taken :

“…We are, however, unable to accept the contention of Mr. Pal that the principle of retrospective legislation is applicable to the decisions of the Supreme Court declaring the law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on a provision of a statute between the different High Courts of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court, in our opinion, cannot be said to have retrospective operation in the sense that although a debate or doubt or a conflict of judicial opinion is resolved and settled by the Supreme Court, yet still that does not obliterate the existence of such debate or doubt or conflict that existed prior to the decision of the Supreme Court setting at rest such debate or doubt or conflict.”

9. There is still another way of looking at it. Under Order 47 Rule 1 of the Code of Civil Procedure there is a provision for review. But the power of Court to review contains the following restriction.

“..Explanation:— The fact that the decision on a question of law on which the judgment of the Court is based has been reversed or modified by the subsequent decision of a superior Court in any other case, shall not be a ground for the review of such judgment”.

10. We are, as such, of the opinion that the learned Tribunal was justified in reversing the order passed in exercise of section 154 by the Assessing Officer.

11. In that view of the matter the first question is answered in the affirmative. The second question need not be answered for the purpose of disposal of the appeal.

12. Thus, the appeal is disposed of.