AO's order quashed for failing to compute section 244A interest following established judicial precedents

The Bombay HC quashed an AO's order dated 26th August 2019 for failing to compute interest under section 244A following established judicial precedents. The AO improperly dissected the ratio of the Delhi HC decision in India Trade Promotion Organisation case instead of simply implementing ITAT directions. The court clarified that interest on delayed refund amounts constitutes primary amount requiring further interest calculation, not compound interest. The matter was remanded to AO with strict directions to apply India Trade Promotion Organisation principles for computing section 244A interest payable to petitioner.

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Issues involved:
The issues in this judgment involve the disobedience of orders/directions by an Assessing Officer, computation of interest payable under Section 244A of the Income Tax Act, 1961, and the application of principles laid down by the Delhi High Court in the case of India Trade Promotion Organisation.

Writ Petition No. 3890 of 2021:
The High Court noted that the Assessing Officer, Mr. Rahul Singhania, disobeyed orders/directions of ITAT and the Court by exceeding his brief in computing interest under Section 244A. The Court set aside the impugned order and directed the Officer to compute interest by applying the principles laid down by the Delhi High Court in the India Trade Promotion Organisation case. The Court clarified that interest payable would be subject to the outcome of the pending Income Tax Appeal assessment order.

Income Tax Appeal No. 650 of 2019:
The appeal was dismissed as withdrawn due to a procedural error, with the appellant seeking leave to file a Writ Petition instead, as per a previous judgment. The appellant was granted liberty to file the Writ Petition within three weeks.

The Court emphasized that the interest payable under Section 244A becomes due and payable when the refund is issued, and the Revenue is required to pay interest on the total amount refundable, including the interest accrued. It clarified that this does not constitute interest on interest but rather ensures that the entire amount due to the assessee is refunded, discouraging part payments. The Court referred to a Supreme Court decision in HEG Limited, which supported the assessee's entitlement to interest on the principal amount not paid for a certain period.

The Court directed the Assessing Officer to complete the computation exercise by a specified date and assigned the matter to an officer other than Mr. Rahul Singhania, who repeatedly flouted directions. The Court also allowed the petitioner to assist the assigned officer with prior notice.

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