2002 (4) TMI 34 - HC - Income Tax

Refund, Interest On Refund - Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal had erred in not allowing interest under section 244 on the entire amount of refund irrespective of the fact that the information required by the Income-tax Officer for giving effect to the order of the Appellate Assistant Commissioner was furnished after the expiry of the period mentioned in the said section? - we are of the opinion that the assessee has rightly been held to be not entitled to (interest on) the refund by the Income-tax Appellate Tribunal. - The answer to the question must be rendered in the negative, i.e., in favour of the Revenue and against the assessee.

Summary

Issues Involved:
1. Entitlement to interest under section 244 of the Income-tax Act on the entire amount of refund.
2. Impact of delay attributable to the assessee on the payment of interest.

Detailed Analysis:

1. Entitlement to interest under section 244 of the Income-tax Act on the entire amount of refund:

The core issue was whether the Income-tax Appellate Tribunal erred in not allowing interest under section 244 on the entire refund amount despite the assessee furnishing required information after the stipulated period. The assessment year in question was 1968-69, and the assessee was a company. Initially, the assessment concluded with a tax payable of Rs.3,01,634, later reduced to Rs.2,93,931 through rectificatory orders. The assessee's appeal led to a relief of Rs.3,07,022, and further reassessment on August 29, 1977, resulted in a refund of Rs.4,57,055.

The Tribunal held that the refund could have been partially paid without further verification, but the balance required additional evidence from the assessee. Consequently, the assessee was entitled to interest only on the portion of the refund not requiring further verification.

2. Impact of delay attributable to the assessee on the payment of interest:

The Tribunal and the court examined whether the delay in reassessment and subsequent refund was due to the assessee's failure to provide necessary evidence. The court noted that the refund was contingent on the assessee furnishing required information, which they failed to do timely. The law, as per section 244, mandates interest on refunds delayed beyond three months, but this is not applicable if the delay is attributable to the assessee (section 243).

The court emphasized the legal maxim "Lex non cogit ad impossibilia" (the law does not compel the impossible), indicating that the Assessing Officer could not complete the reassessment without the assessee's cooperation. The court stated that the refund became payable on August 29, 1977, when the necessary evidence was finally provided. Therefore, the assessee could not claim interest for the period of delay caused by their own inaction.

Conclusion:

The court concluded that the assessee was not entitled to interest on the entire refund amount due to their delay in providing required information. The Tribunal's decision was upheld, and the reference was disposed of in favor of the Revenue and against the assessee. The court's interpretation aligned with the principles that interest is compensatory but not applicable when the delay is due to the claimant's own conduct.