23 January 2008
Along with the double corrected assessment sent on 18 December 2003 Mr Sebastian sent a demand notice asking me to pay up the additonal tax. Among other things it said: "If you do not pay the amount within the period specified above, you shall be liable to pay simple interest at one and one-half per cent for every month or part of a month from the date commencing after end of the period aforesaid in accordance with Section 220(2)."
Now one and one-half per cent per month amounts to 18% a year. That's a lot of money. Naturally I paid up pronto.
In October 2004 the Commissioner of Income Tax (Appeals) passed an order in my favour. Naturally, it was time for the Income Tax Department to pay up the extra tax I had paid with an interest rate of 18%. I could almost hear myself telling friends: "See, honesty pays."
But when the money arrived, calculations showed that the tax department had paid at an interest rate of only 6%. Apparently, when you wanted to punish assessees who dared to fight, the last thing you wanted them to do was to laugh all the way to the bank. We inquired about what had happened to the rest of the money. I quote below the reply of Mr J.D. Mahadik, assistant commissioner of income tax. It makes no sense at all to me. The income tax department, it seemed, wanted to change the rules of the game whenever it lost. The casual reader will want to skip it, unless he is suffering from insomnia.
"Please refer to your representative’s letter on the above subject wherein it is alleged that the refund was issued to you along with interest u/s 244 (1A) which was calculated at the imaginary rate of 6%.
"It is seen from your letter that you have not under gone thoroughly with ITNS-150 which was enclosed alongwith the order passed u/s 250 of the IT Act. In the ITNS-150 it is clearly mentioned that the interest was due to you u/s 244 A(1)(b) and not u/s 244 (1A). it is calculated as per the provision of the IT Act, 1961. For you kind reference I am giving the details of interest rates applicable u/s 244A(1)(b), which are as under:-
|Period||Rate of Interest|
|From 01.06,2002 to 07.09.2003||Two third per cent per month|
|From 08.09.2003 and onwards||Half per cent per month|
"Further, I would like to bring to your kind notice, that the issue pertains to Asstt. Year 2001-02 hence the provision of the section 244(1A) is not applicable in your case. Section 244(3) the governing section of 244(1A) is reproduced as under, for you ready reference.
"244(3) 'The provisions of this section shall not apply in respect of any assessment for the assessement year commencing on the 1st day of April, 1989, or any subsequent assessment years.'
"I hope that the above explanation will clarify your confusion between Section 244A(1)(b) and section 244(1A)."
To which my only honest answer could have been: "Sorry, Mr Mahadik. It has only confounded my confusion."
If Mr Mahadik was not trying to put one over me, he won't mind my bringing the above bit of correspondence to the public notice.
More in the next.