The assessee is entitled to interest under s. 244(1A) of the IT Act, 1961 on the amount of Rs. 65,281 being pre-assessment tax paid and found in excess of regular demand after giving effect to appellate order, but the interest is to be paid from the date of the original assessment and not from 1st April, 1976. Further, no interest is payable for a period of one month from the date of the passing of the order in appeal.

ASHOK BHAN, J.

1. At the instance of the Revenue, Tribunal, Amritsar, in exercise of its powers under s. 256(1) of the IT Act, 1961 (hereinafter referred to as the Act), has referred the following question of law to this Court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in upholding the CIT(A)s order that the assessee is entitled to interest under s. 244(1A) of the IT Act on the amount of Rs. 65,281 being pre-assessment tax paid and found in excess of regular demand after giving effect to appellate order ?"

2. Shortly stated, the facts relevant to the controversy in this reference petition are :

For the asst. yr. 1976-77, relevant to the accounting period from 1st October, 1974 to 30th September, 1975, assessee had paid a sum of Rs. 4,44,145 as advance tax. Rs. 91,755 were paid as self-assessment tax. Total of both these amounts comes to Rs. 5,35,900. The ITO framed the regular assessment under s. 143(3) of the Act on 30th August, 1976. The net income was determined at Rs. 8,13,688, on which the tax payable was determined at Rs. 5,55,342. After deducting the advance tax and the self-assessment tax already paid from the total determined demand of tax, assessee was directed to make the payment of the balance amount of Rs. 19,442. Assessee paid the balance amount of Rs. 19,442 on 2nd December, 1976.

Against the order of assessment, assessee filed an appeal, which was partly accepted by the CIT(A) on 8th December, 1978. CIT(A) reduced the total taxable income by Rs. 1,24,135. While giving effect to the appellate order, ITO refunded the sum of Rs. 84,724. Instead of allowing interest on the total refundable amount of Rs. 84,724 under s. 224(1A) of the Act, ITO ordered payment of interest of Rs. 4,666 only as interest on Rs. 19,442, which had been deposited by the assessee on a demand created after the framing of the regular assessment.

On 25th April, 1980, assessee made an application under s. 154 of the Act, demanding to revise the refund order and claimed interest on the total refundable amount of Rs. 84,724 from 1st April, 1976 till the date of refund, after excluding the interest already paid on Rs. 19,442. ITO rejected the claim of the assessee against which an appeal was filed by the assessee before the CIT(A). CIT(A) accepted the appeal. It was held by the first appellate authority that the assessee was entitled to interest on the balance amount of Rs. 65,281 as well under s. 244(1A) of the Act from 1st April, 1976 till the date of refund. This order of the CIT(A) was upheld by the Tribunal. On a petition filed by the Revenue under s. 256(1) of the Act, the Tribunal has referred the question of law, reproduced in the earlier part of the judgment, to this Court for its opinion.

3. There is no appearance on behalf of the respondent.

4. Mr. B. S. Gupta, senior advocate, appearing for the Revenue, fairly concedes that the question referred to this Court has to be answered in the affirmative, i.e., against the Revenue and in favour of the assessee, but with certain modifications, in view of the judgment of the Supreme Court in Modi Industries Ltd. & Anr. V/s. CIT & Anr. (1995) 216 ITR 759 (SC) 38.

5. First modification sought by Mr. Gupta is that in order to bring the order of the Tribunal in conformity with the judgment of the Supreme Court in Modi Industries & Anr V/s. CIT & Anr. (supra), the interest has to be paid not from 1st April, 1976 but from the date of the order of assessment, i.e., 30th August, 1976. The second modification which Mr. Gupta seeks is that the interest has to be made payable under second proviso to s. 244(1A) of the Act, after the expiry of a period of one month from the date of the passing of the order in appeal. Sec. 244(1A) of the Act reads as under :

"244. (1A) Where the whole or any part of the refund referred to in sub-s. (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March,