Rajasthan High Court – Jodhpur
Hindustan Zinc Ltd vs A.C.I.T.Circle-2,Udaipur … on 18 April, 2026
[2026:RJ-JD:18159-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Income Tax Appeal No. 141/2011
Hindustan Zinc Ltd., through Sh. D.S. Rudra, Yashad Bhawan,
Udaipur.
----Appellant
Versus
Assistant Commissioner of Income Tax, Circle-2, Udaipur.
----Respondent
For Appellant(s) : Mr. Anjay Kothari
Mr. Harpreet Singh
For Respondent(s) : Mr. K.K. Bissa
HON'BLE MR. JUSTICE ARUN MONGA
HON’BLE MR. JUSTICE SUNIL BENIWAL
Order
Reportable
Judgment Reserved on :- 10/04/2026
Pronounced on :- 18/04/2026
By the Court (Per, Arun Monga, J):-
1. The assessee has challenged an order dated 13.10.2009
passed by the learned Income Tax Appellate Tribunal (ITAT) for
Assessment Year (A.Y.) 1993-94. By the impugned order, the ITAT
set aside the appellate order dated 18.12.2008 passed by the
Commissioner of Income Tax (Appeals) [CIT(A)] and restored the
order dated 02.09.2008 passed by the Assessing Officer.
1.1. Under the Assessing Officer’s order, the assessee’s
determined income for A.Y. 1993-94 of Rs. 42,57,61,140/- was
reduced by Rs. 5,53,13,531/- towards brought forward losses of
A.Y. 1992-93, and tax was accordingly assessed on the net
income of Rs. 37,04,47,609/- instead of Rs. 42,57,61,140/-.
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However, the assessee’s claim for interest on the amount of tax
refund was disallowed.
2. Brief Backdrop:
2.1. Pursuant to the Kar Vivad Samadhan Scheme, 1998
(hereinafter referred as ‘KVSS’), the assessee submitted a
declaration dated 29.12.1998 under Section 88 of the Finance
(No.2) Act, 1988 qua the Assessment Years 1993-94. In this
connection, the CIT, Udaipur issued a certificate dated 02.02.1999
under Section 90(2) read with Section 91 of the Act, ibid.
2.2. In the certificate dated 02.02.1999 issued by the CIT,
Udaipur it has been stated inter alia as under:
“And whereas the Designated Authority by order dated 6.1.99/28.1.99
determined the amount of Rs. 10,15,02,255/- payable by the declarant
in accordance with the provisions of the Scheme and granted
certificate setting forth therein the particulars of tax arrears and the
sum payable after such determination towards full and final
settlement of tax arrears as per details given below:
A.Y. 1993-94 Outstanding Demand Payable
Demand
Interest 234 B Rs. 12,17,15,415
Interest 220(2) Rs. 7,52,89,095
Total demand Rs. 20,30,04,511
Rs. 10,15,02,255/-
And whereas the declarant has paid Rs. 10,15,02,255/- on 1.2.99
being the sum determined by the designated authority.
x-x-x-x
Now, therefore, in exercise of the powers conferred by sub Section (2)
of Section 90 read with Section 91 of the Finance (No.2) Act, 1988,
the designated authority hereby issues this certificate to the said
declarant
(a) Certifying the receipt of payment from the declarant towards full
and final settlement of tax arrears determined in the order dated
4.1.99/ 28.1.99 on the declaration made by the aforesaid declarant,
(b) Granting immunity, subject to the provisions contained in the
scheme, from instituting any proceeding for prosecution for any
offence under Aaykar or from imposition of penalty under the(Uploaded on 18/04/2026 at 02:53:18 PM)
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[2026:RJ-JD:18159-DB] (3of 12) [ITA-141/2011]enactment in respect of matters covered in the aforesaid declaration
made by the declarant”
2.3. The learned ITAT passed order dated 23.01.2008 (Annexure-
4) disposing of assessee’s two appeals, including ITA No.
259/JDPR/2004 (A.Y. 1993-94). It held/directed as under:
“As the assessee had not opted for KVSS with reference to payment of
tax on the assessed income, the matters connecting therewith are open
to the regular proceedings available under the Act. Admittedly, the
appeal of the assessee for the preceding A.Y. was decided after filing
of KVSS declaration and the AO, on giving effect to the order passed
by the Tribunal determined the loss of Rs. 5.53 crores available for set
off against the income of the instant year. We are, therefore, of the
considered opinion that the right of the assessee for claiming set off
cannot be snatched simply for the reason that it had availed the
benefit of KVSS for the interest payable under the Act. We, therefore,
hold that the amount of tax on the brought forward loss of Rs. 5.53
crores be refunded to the assessee. However, the assessee would not
be entitled to interest on the refund to the extent of the amount having
been covered under the declaration. The order of the Id. CIT (A) is,
therefore, set aside. As the necessary details are not emanating for the
calculation of the refund, we direct the AO to decide this matter in
consonance with our directions contained hereinabove after allowing
hearing opportunity to the assessee.
8. In the result, the appeal is allowed for statistical purposes.”
2.4. Pursuant to the aforesaid direction, the Assessing
Officer/Assistant Commissioner of Income Tax, Circle 2, Udaipur
passed order dated 02.09.2008 (Annexure-3) holding as under:
“I have considered the facts of the case & submissions of the
assessee. Respectfully following the directions of Hon’ble ITAT income
of the assessee is recalculated as below:-
Income determined for the AY Rs. 42,57,61,140/-
1993-94 as per order u/s
154/143(3)/250 dated
15.10.1998
Less: Rs. 5,53,13,531/-
Brought Forward Loss for AY
1992-93 as
per order u/s.154 dated
Net income Rs. 37,04,47,609/-
Assessed at Rs. 37,04,47,609 /-. The interest is charged u/s 234 B, C
and D and withdrawn paid u/s 244A. The calculation of tax is as per
ITNS-150 appended as part of this order. The demand notice and
Challan is issued herewith.”
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2.5. While deciding assessee’s appeal against above said order of
the Assessing Officer, an order dated 18.12.2008 (Annexure-2)
was passed by the CIT(A) holding/directing as under:
“Thus, on going through the above relevant portion of the ITAT’s
order, it is amply clear that the amount of tax on the brought forward
loss of Rs. 5,53,13,531/- should have been refunded to the appellant’
which the AO has not done in his appeal effect order dated 2.9.2008.
It is to be pointed out here that the AO has not clearly understood the
second portion of the concluding para No. 7 of the ITAT’s order that
the assessee would not be entitled interest on the refund to the extent
of amount having been covered under the declaration. In other words,
the appellant has opted for KVSS on tax arrears of Rs.20,30,04,511/-
i.e. on arrear interest of Rs. 23,17,86,378/- due to be paid by the
appellant to the department minus Rs.2,87,81,867/-, already paid
before KVSS. The appellant thus paid Rs. 10, 15,02,255/- under KVSS
on arrear of interest only. This payment of tax did not inclüde any
other regular arrear of tax as a result of ITAT’s order for A.Y. 1993-
94. Although the AO gave effect to the carry forward loss of
Rs.5,53,13,531/- but did not allow interest on this amount u/s. 244A
which is outside the purview of KVSS. It was not at all covered in this
scheme. The tax on this amount has already been paid by the
appellant. It is only as a result of ITAT’s order for A.Y. 1992-93 after
opting for KVSS by the appellant, the question of paying interest u/s.
244A on the amount of Rs. 5,53,13,531/- arose. The AO should have
allowed the interest u/s. 244A of the Act on this amount but he has
not. In fact he has instead charged interest u/s. 234B, 234C and 234D
and has withdrawn interest payable u/s 244A of the Act to the
appellant. This order is totally erroneous, misconceived and
unjustified. Therefore, the AO is directed to grant refund u/s. 244A of
the Act on the amount of Rs. 5,53,13,531/-.
3.In the result, the appeal is allowed.”
2.6. Appeal against the said order dated 18.12.2008 filed by the
revenue was accepted vide impugned order dated 03.10.2009
passed by the learned ITAT of which the relevant part is as under:
“8.We have heard Ld. departmental representative ex parte qua
assessee with reference to material on record within the meaning of
sub rule (6) of Rule 18 of Appellate Tribunal Rules 1963. The findings
reached by Ld. CIT(A) that interest payable u/s 244A of the Act on the
amount of Rs. 5,53,13,531/- is not covered in KVSS is found perverse
on facts. It is also not correct that interest on this amount u/s 244A is
outside the purview of KVSS. In fact the amount of disputed interest
aggregating to Rs. 20.30 crores was payable on the assessed income
of Rs. 42,57,61,140/-. The same were tax arrears within the meaning
of Section 87(m) of KVSS that came to be settled at an amount of
Rs.18.15 crores(sic) which was conclusive in terms of Section 90(1) of
that Act. The Appellate Tribunal at Jodhpur(Uploaded on 18/04/2026 at 02:53:18 PM)
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[2026:RJ-JD:18159-DB] (5of 12) [ITA-141/2011]being of the opinion that income tax chargeable on the assessed
income of Rs. 42,57,61,140/- not being disputed tax for settlement
under KVSS found no fetters for allowing refund of income tax
amount on the amount of Rs. 5,53,13,531/- which was allowed to be
set off as brought forward loss against income of the year under
consideration. Accordingly it directed the assessing officer to grant
refund of the amount of income tax thereon. It also clarified that
interest on tax worked out having been settled under KVSS, the same
cannot be refunded but as the details were not available on tribunal’s
record, it remitted the matter to the assessing authority verify and to
carry out the directions as such. The assessing authority in this case is
found to have acted on the directions of the Appellate Tribunal and
granted refund of income tax on the aforesaid amount of income of Rs.
5,53,13,531/-. He did not find any interest that can be said to have
been charged u/s 244A of the Act but not settled under K.V.S.S. and
thus did not allow any credit or refund of interest. The Ld. CIT(A)
however recorded unreasonable findings, contrary to record that
interest on the amount of Rs. 5,53,13,531/- is not at all covered by the
scheme of K.V.S.S. He in fact had no reasonable basis to say so nor
made any reference to the cogent material on record. The amount of
Rs. 5, 53,13,531/- on which refund u/s 244A of the Act was directed to
be granted is the amount of loss that was allowed to be carried
forward for set off against income of the year under consideration. It
could not be taken as the amount of tax eligible for any interest to
assessee. We, therefore, by setting the findings reached by Ld. CIT(A),
also set aside his order and restore the order passed by Ld assessing
authority. The ground in appeal raised by revenue stands allowed.
9.As a result, appeal by revenue stands allowed.”
2.7. The assessee has filed the instant appeal seeking to set
aside/quash the impugned order dated 03.10.2009 passed by the
learned ITAT and for affirming the order dated 18.12.2008 passed
by the CIT(A).
3. The appeal was admitted vide order dated 28.04.2011 on
following substantial question of law:-
(i) Whether the claim of the assessee towards interest in
respect of the year under consideration is legally tenable?
4. We have heard the learned counsel for the parties and with
their able assistance have gone through the record.
Arguments of the Appellant
5. Learned counsel for the appellant argued that under Section
244A of the IT Act, the assessee is entitled to interest on the
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amount of tax refund. It is submitted that it was by virtue of and
after the order dated 23.01.2008 (Annexure-4) passed by the
learned ITAT that the assessee became entitled to set off on
account of the brought forward loss of Rs. 5.53 crores. Entitlement
to interest flowed from and was consequential to the entitlement
for the tax refund.
5.1. Furthermore, only the assessee’s liability for payment of
interest under Section 234 B and 220(2) of the IT Act were the
subject matter of the declaration. The assessee’s entitlement to
interest under Section 244A, which accrued by virtue of order
dated 23.01.2008 was not covered by or the subject matter of the
assessee’s declaration dated 29.12.1998 under Section 88 and
certificate dated 02.02.1999 under Section 90(2) read with
Section 91 of the 1988 Act issued by the CIT, Udaipur.
5.2. It was urged by learned counsel for the appellant/assessee
that in the scheme of things too, assessee’s entitlement to interest
under Section 244A which accrued upon and flowed from ITAT’s
order dated 23.01.2008 could not have been the subject matter of
or covered by the aforesaid antecedent declaration dated
29.12.1998 and certificate dated 02.02.1999.
5.3. It was contended that the assessee’s entitlement/claim for
interest under Section 244A of the IT Act on the amount of tax
refund qua the brought forward loss of Rs. 5.53 crores of previous
year and set off against the income of AY 1993-94 was not
covered by and was outside the scope of the assessee’s
declaration and the CIT’s certificate under KVSS.
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5.4. Hence, the argument is that the assessee was/is entitled to
claim interest under Section 244A of the IT Act on the amount of
tax refund qua the brought forward loss of Rs.5.53 crores of
previous year and set off against the income of AY 1993-94.
5.5. Learned counsel for the appellant heavily relied upon the
order dated 18.12.2008, Annexure-2, passed by the CIT(A)
holding that the assessee was entitled to interest on the amount
of tax refund.
Arguments on behalf of the Revenue
6. Learned counsel for the respondent/revenue pointed out
that vide order dated 23.01.2008 (Annexure-4) the learned ITAT
held that inter alia that the assessee would not be entitled to the
interest on the refund to the extent of the amount having been
covered under the KVSS declaration.
6.1. The assessee did not file any appeal to challenge this finding/
direction. In the appeals (No. DB-ITA-96/2008 and DB-ITA-
161/2008) filed by the Revenue against ITAT’s order dated
23.01.2008, the challenge is confined to the direction given
therein that the amount of tax on the brought forward loss of Rs.
5.53 crores be refunded to the assessee.
6.2. Thus, the finding recorded and direction give in order dated
23.01.2008 passed by the learned ITAT that the assessee would
not be entitled to the interest on the refund to the extent of the
amount having been covered under the KVSS declaration,
remained unchallenged and has attained finality. [Note:- This
factual position is not disputed by the assessee.]
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6.3. It is contended by the learned counsel for the Revenue that
the CIT (A) misconstrued the order dated 23.01.2008 passed by
the learned ITAT and wrongly and illegally passed own order
dated 18.12.2008 (Annexure-2), for payment of interest on the
amount of tax refund, which was contrary to the direction in the
order dated 23.01.2008 (Annexure-4) passed by learned ITAT.
The said order dated 18.12.2008 was, therefore, rightly set aside
vide the impugned order dated 03.10.2009 passed by the learned
ITAT.
Discussion and Analysis
7. Having heard the rival contentions and upon perusal of the
record, in light of the discussion and the reasons stated hereafter,
we are of the opinion, that the claim of the assessee for interest in
respect of the year under consideration is not legally tenable. Let
us see how.
8. As per the certificate dated 02.02.1999 issued by the CIT,
Udaipur, the outstanding demand against the assessee towards
interest for A.Y. 1993-94 was Rs. 20,30,04,511/-. Against this
demand, the assessee availed the benefit of the Kar Vivad
Samadhan Scheme (KVSS) and paid Rs. 10,15,02,255/- on
01.02.1999, being the amount determined by the designated
authority in full and final settlement of the outstanding interest
demand. Consequently, the balance liability of Rs. 10,15,02,256/-
towards interest stood extinguished.
9. By order dated 23.01.2008 (Annexure-4) (relevant portion
reproduced above), the learned ITAT held that the tax arising from
the reduction of brought forward loss amounting to Rs. 5.53
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crores was refundable to the assessee. However, the assessee
would not be entitled to interest on such refund to the extent the
amount was covered under the KVSS declaration.
10. In other words, if the assessee’s entitlement to interest on
the refund, arising from reduction of Rs. 5.53 crores in the
previously determined income for A.Y. 1993-94, was less than or
did not exceed the interest liability settled under the KVSS
declaration, no interest would be payable on the refund. Step by
step, the position may be understood as follows:
(a). Determine the amount of tax refundable on account of
reduction of Rs. 5.53 crores in the previously assessed income for
A.Y. 1993-94.
(b). Determine the period for which interest under Section 244A of
the Income Tax Act would be payable on such refund.
(c). Compute the amount of interest admissible under Section
244A on the refund amount determined in clause (a) for the
period determined in clause (b).
(d). If the interest amount determined in clause (c) does not
exceed the interest demand of Rs. 20,30,04,511/- covered under
the KVSS declaration, the assessee would not be entitled to any
interest on the refund.
11. This Court has not been furnished with the relevant data or
calculations regarding the amount of tax refund arising from the
set-off of income of Rs. 5.53 crores, or the interest payable
thereon under Section 244A of the Act. Ex facie, the interest
payable on the refund relatable to the income of Rs. 5.53 crores
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could not have exceeded the assessee’s interest liability of Rs.
20,30,04,511/- under the KVSS declaration.
12. It therefore follows that, in terms of the ITAT’s order dated
23.01.2008, the assessee was not entitled to any interest on the
tax refund relatable to the set-off amount of Rs. 5.53 crores.
13. Aside all above, we are also of the opinion that, while
passing the order dated 18.12.2008 (Annexure-2), the learned
CIT(A) misconstrued the ITAT’s order dated 23.01.2008, acted
contrary to its import, and erroneously held that the Assessing
Officer ought to have granted interest under Section 244A of the
Act on the tax refund arising from the amount of Rs.
5,53,13,531/- representing brought forward losses of the previous
year.
14. As already observed above, under the ITAT’s order dated
23.01.2008, the assessee was not entitled to interest on the
refund relatable to Rs. 5.53 crores.
15. Qua reliance placed on Section 244 A of the Income Tax Act,
no doubt, section, ibid, mandates interest payment where an
assessing officer determines that a refund is due. However, instant
case is a deviation as is borne out from the order dated
23.01.2008 passed by the learned ITAT, which, to be noted, had
attained finality. At this stage, we refrain from commenting on
merits thereof. The learned Income Tax Tribunal (ITAT), after
careful deliberation held/directed vide it’s order dated 23.01.2008
that the assessee would not be entitled to the interest on the
amount of tax refund to the extent of the amount having been
covered under the KVSS declaration. Subsequently, based on
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these findings/directions, the Assessing Officer passed a revised
order declining interest under Section 244A. It is in this context
that we are of the view that the CIT (A) misconstrued and acted
contrary to the order dated 23.01.2008 passed by the learned
ITAT.
16. The finding/direction in the ITAT’s order dated 23.01.2008
that the assessee would not be entitled to the interest on the
amount of tax refund to the extent of the amount having been
covered under the KVSS declaration remained unchallenged and
had attained finality.
17. Given that the direction concerning assessee’s non-
entitlement to interest on the amount of tax refund in the
previous order dated 23.01.2008 passed by the learned ITAT,
arguendo, was given wrongly, as contended by the learned
counsel for the petitioner, the fact is that the same was not
challenged and had attained finality. There is no gainsaying that it
was open to the appellant/assessee to have assailed the said
direction given by the ITAT by taking appropriate steps. Having
consciously chosen not to do so, the appellant/assessee must
now face the consequences of finality of the said direction and
fate accomplish.
18. It is also pertinent to note that the direction contained in the
order dated 18.12.2008 (Annexure-2) was passed by the CIT(A),
i.e., a quasi judicial authority lower to the ITAT, requiring payment
of interest on the tax refund, in direct contravention to the earlier
finding and direction of the order dated 23.01.2008 passed by the
superior tribunal i.e. ITAT. In the said order, the learned ITAT had
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clearly held that the assessee would not be entitled to interest on
the amount of tax refund to the extent such amount was covered
under the KVSS declaration.
19. On that count too, as above, we are of the view that the
direction issued by the CIT(A) in the order dated 18.12.2008 was
illegal, without jurisdiction, and unwarranted. The same was,
therefore, rightly set aside by the ITAT vide the impugned order
dated 13.10.2009.
20. To sum up, it is held that the assessee’s claim for interest for
the year under consideration is not legally sustainable. The
question of law framed in the present case is answered
accordingly.
21. Since the assessee’s claim for interest on the tax refund
arising from the amount of Rs. 5,53,13,531/-, representing
brought forward loss of the previous year (A.Y. 1992-93) set off
against A.Y. 1993-94, has been held to be legally untenable, the
appeal stands dismissed.
22. All pending applications also stand disposed of.
(SUNIL BENIWAL),J (ARUN MONGA),J
36-Anshul/-
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