Department must pay interest on cleared bills when payment delayed beyond three working days after clearance

Delhi HC held that the Department must pay interest on cleared bills when payment is delayed beyond three working days after clearance. The court reiterated its March 2016 directions and dismissed the Department's modification application. Interest serves to incentivize prompt payment and compensate counsel for delays beyond their control. The Department was ordered to issue instructions requiring interest payment at the same rate applicable to assessee refunds for any delay in RTGS payment after bill clearance. Petition disposed of.

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Issues:
1. Modification of direction issued by the Court in para 7 of the order dated 29th March 2016.
2. Delay in payment to panel counsel and the need for interest payment.
3. Revision of time lines for scrutiny and verification of bills and release of payments.
4. Digitization of internal processes for streamlined operations.
5. Payment of interest on outstanding bills to incentivize prompt action by the Department.

Issue 1 - Modification of Court's Direction:
The Income Tax Department sought modification of the direction issued by the Court in para 7 of the order dated 29th March 2016. The Department proposed revised timelines for scrutiny, verification of bills, and release of payments. However, the Court, after hearing the Additional Solicitor General, concluded that there was no ground for modification. The Court emphasized the importance of adhering to the time limits set out in the CBDT instructions and suggested streamlining processes through digitization to reduce delays.

Issue 2 - Delay in Payment to Panel Counsel and Interest Payment:
The Court highlighted concerns raised by panel counsel regarding delays in receiving payments, including retainership amounts. The Court directed the Department to issue specific instructions mandating interest payment if there is a delay beyond three working days after clearing bills for payment. The Court emphasized the need to compensate counsel for delays in bill settlement and incentivize prompt action by the Department.

Issue 3 - Revision of Time Lines for Scrutiny and Verification of Bills:
The Department pointed out that bills are sent to the Zonal Accounts Officer for payment, and the verification process takes about a month. The Court reiterated the importance of complying with time limits for bill scrutiny and verification as per CBDT instructions. The Court suggested that processes could be streamlined and time periods shortened through digitization to enhance efficiency.

Issue 4 - Digitization of Internal Processes:
The Court emphasized the need for the Department to lead in digitizing its internal processes, especially in the context of the 'Digital India' initiative. By digitizing operations, needless delays in administrative functions could be eliminated. The Court urged the Department to adopt digital solutions to improve operational efficiency and reduce delays in processing and clearing bills.

Issue 5 - Payment of Interest on Outstanding Bills:
The Court directed the Department to issue instructions for interest payment if there is a delay in making actual payments beyond three working days. The interest would be payable at the same rate as refunds to Assessees. The Court emphasized that interest payment on outstanding bills aims to encourage timely action by the Department and compensate counsel for delays in bill settlement. The Department was required to pay interest to the counsel within six weeks from the date of the order.

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