Law: Income Tax Act, 1961

Section: 154,214

Income-tax----Rectification of mistakes---Interest---Interest under S.214 whether payable on refund resulting from rectification order---Debatable issue---Interest cannot be withdrawn by order passed under 5.154---Indian Income Tax Act, 1961, Ss.154 & 214. The Income-tax Officer was of the view that under section 214 of the Income Tax Act, 1961, interest is allowed only on the difference between tax determined on regular assessment and the advance tax paid. He was of the view that further interest on refunds computed under section 154 which are not regular assessments could not have been allowed and payment of interest on refund resulting from the rectification order was a mistake apparent from the record liable to be rectified under section 154 of the Act. The Tribunal set aside the order. On a reference: Held, that in CIT v. Tata Chemicals Ltd. (1988) 169 ITR 314, the Bombay High Court held that the assessee is entitled not only to interest on the amount required to be refunded by reason of the order of rectification but he has also entitled to such interest up to the date of the order of rectification This view was taken by the Bombay High Court in view of the circular instruction of the Central Board of Direct Taxes, which the Board was authorized to issue. In view of the decision of the Bombay High Court, the question whether interest can be paid under section 214 in view of the rectification order is not free from debate. In the decision of the Bombay High Court, it is implicit that the assessee will be entitled to interest in view of the rectification order. From this decision it is apparent that two views on the ,question referred to this Court for the opinion, are possible. The Tribunal was, therefore; right in cancelling the order passed by the Income-tax Officer under section 154 of the Act. CIT v. Tata Chemicals Ltd. (1988) 169 ITR 314 (Bom.) ref. JUDGMENT Pursuant to the direction given by the High Court under section 256(2) of the Income Tax Act, 1961 (briefly the Act), the Income-tax Appellate Tribunal drew up a statement of the case and referred the following question relating to the assessment year 1971-72 for the opinion of this Court…

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