2023 (9) TMI 34 - HC - Income Tax

Refund interest under s.244A at 6% for delayed payment; inquiry under ss.5(2) and 6 DTVSV Act

UPS Freight Services India Private Limited Versus Deputy Commissioner of Income Tax Central Circle-3-2

HC held petitioner entitled to refund interest under s.244A at 6% p.a. from 1 Aug 2021 to 26 May 2023, as refund should have been processed by 31 Jul 2021 ... Interest u/s 244A on refund - refund amounts payable as reflected in Form No. 5 dated 15th June 2021 issued under the Direct Tax Vivad Se Vishwas (DTVSV) Act - HELD THAT:- In the present case, it is not in doubt that Petitioner was entitled to refund which ought to have been processed and paid latest by 31st July 2021. The amount as stated in the affidavit-in-reply has been paid only on 26th May 2023. Consequently, we are of the view that Petitioner is entitled to interest on this amount from 1st August 2021 upto 26th May 2023 at the rate of 6% p.a. which is the rate prescribed u/s 244A of the Act. As the amount of interest is being paid out of public exchequer, the Chief Principal Commissioner in-charge of Circle 3 (2), Mumbai shall hold an enquiry as to why the order u/s. 5(2) read with 6 of the DTVSV Act was not passed till 21st June 2022 and why the refund amount was not paid until 26th May 2023, identify where the fault was and may take such steps as available in law including recovering the interest paid to Petitioner from the erring officer (s). Petitioner has also prayed for cost. Since we have awarded simple interest at 6% p.a. we are not granting any cost in this case. Respondents, are, however, put to notice that if such issues come in future, Court may even consider imposing cost to be recovered from the concerned officer's salary. Issues involved:The issues involved in the judgment are the failure of the Respondent to refund amounts payable under the Direct Tax Vivad Se Vishwas (DTVSV) Act, 2020, the delay in issuing the refund, and the entitlement of the Petitioner to interest on the refunded amount.Issue 1: Failure to refund amounts under DTVSV Act:The Petitioner approached the Court due to the failure of the Respondent to refund the amount payable as per Form No. 5 issued under the DTVSV Act, 2020. Despite the issuance of Form No. 5 on 15th June 2021, the consequential orders for refund were not passed by the designated authority until 21st June 2022, leading to the Petitioner seeking relief from the Court.Issue 2: Delay in issuing the refund:The Respondent's delay in issuing the refund was highlighted, with the affidavit-in-reply stating that the refund was credited to the Petitioner's account on 26th May 2023. The delay was attributed to technical issues without substantial explanation, contrary to the Central Action Plan's deadline of 31st July 2021 for issuing refunds in such cases.Issue 3: Entitlement to interest on the refunded amount:The Petitioner contended that they were entitled to reasonable interest on the refunded amount. The debate centered on whether the DTVSV Act provided for interest on excess amounts under Section 244A of the Income Tax Act, 1961. Reference was made to judicial precedents, including a Delhi High Court case, to argue that the State's obligation to refund money retained without right implies the right to interest, especially in cases where the party had to borrow at high rates to cover the amount.Judgment:The Court held that the Petitioner was entitled to interest on the refunded amount of Rs. 62,81,983 from 1st August 2021 to 26th May 2023 at the rate of 6% per annum, aligning with Section 244A of the Income Tax Act. An inquiry was ordered to investigate the delays in passing the necessary orders and making the refund, with the possibility of recovering the interest paid from the responsible officer(s). The Court did not award costs to the Petitioner but warned that costs might be imposed on concerned officers in future instances. The petition was disposed of accordingly.