Delay condoned under s.119(2)(b); AO ordered to refund TDS with interest under s.244A for AY 2013-14

HC quashed orders rejecting petitioners' applications to condone delay under s.119(2)(b) and directed the respondent to condone the delay as done for similarly situated persons. The AO is directed to issue the refund with interest under s.244A from the date of TDS deposit until payment. The court held the petitioners' delay was excusable because they were not informed of TDS due to non-issuance of Form 16A, and the proviso concerning "the deductor" (effective 01.04.2017) does not apply to these AY 2013-14 claims. The petitions were allowed.

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Issues: Whether the orders rejecting applications to condone delay in filing return of income to claim refund of TDS for Assessment Year 2013-2014 should be quashed and, consequentially, whether the respondents must be directed to condone the delay under section 119(2)(b) of the Income-tax Act, 1961 and to issue the refund with interest under section 244A of the Income-tax Act, 1961.

Analysis: The petitioners' agricultural land compensation proceedings revealed deduction of TDS on interest though section 194LA excludes TDS on interest paid on compensation for agricultural land. The petitioners were unaware of the TDS because the deductor did not inform them nor issue Form 16A as required by Rule 31(3) of the Income-tax Rules, 1962. The Court noted the guidance in Union of India v. Hari Singh and principles in Tata Chemicals regarding entitlement to interest where tax was collected without right and retained by the Revenue. The respondent had condoned delay and granted refunds to similarly situated persons and, having applied Hari Singh in other cases, could not reject the petitioners' condonation applications while denying interest. Circular No. 9/2015 reliance was found misplaced because it addresses supplementary claims; it does not override entitlement to interest where collection was wrongful and delay was not attributable to the assessee. Section 244A(2) (as applicable to the assessment year) permits exclusion of delay attributable to the assessee, but here delay was not attributable to petitioners as deductor failed to inform and failed to issue Form 16A; therefore interest is payable from date of deposit till refund.

Conclusion: The impugned orders rejecting condonation of delay are quashed and set aside. The respondents are directed to condone the delay under section 119(2)(b) of the Income-tax Act, 1961 and to issue the refund with interest under section 244A of the Income-tax Act, 1961 from the date of deposit of the TDS until the date of payment of refund, to be completed within 12 weeks from receipt of this order.

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