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

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 but was paid only on 26 May 2023. Chief Principal Commissioner (Circle 3(2), Mumbai) to hold an inquiry into failure to pass orders under ss.5(2) and 6 of DTVSV Act and delay in payment, identify fault and may recover interest paid from erring officer(s). No costs awarded to petitioner; court warned costs may be imposed on officers in future similar cases.

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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.

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