2017 (4) TMI 1619 - AT - Income Tax

Compensation for issuing delayed refund assessee - AO had not granted additional compensation on the interest receivable u/s. 244A - HELD THAT - After considering the decision of Gujarat Flouro Chemicals 2012 (8) TMI 740 - SUPREME COURT as elaborated in the findings of the ld. CIT(A) we find that Ld.CIT(A) was justified in his decision as in the above case the Hon ble Supreme Court has decided that section 214 of the act does not provide for payment of compensation by the revenue therefore we do not find any reason to interfere in the findings of the ld. CIT(A). Appeal of the assessee is dismissed.

Summary

Issues:
1. Appeal against rejection of compensation for delayed refund.
2. Interpretation of section 244A of the Income Tax Act, 1961.

Issue 1: Appeal against rejection of compensation for delayed refund

The appeal in question pertains to the block period from 01-4-1995 to 27-09-2001, arising from the order of the CIT(A)-XI, Ahmedabad dated 11-11-2013. The assessee raised grounds of appeal challenging the rejection of compensation amounting to Rs. 32,490 for delayed refund issuance. The assessing officer had granted a refund to the assessee under section 154 of the Income Tax Act, 1961, without providing the additional compensation claimed by the assessee. The CIT(A) dismissed the appeal, citing the decision of the Hon'ble Supreme Court in the case of CIT vs. Gujarat Flouro Chemicals, which overruled the earlier decision in the case of Sandvik Asia. The CIT(A) held that the delay in granting interest under section 244A was not inordinate and did not cause irreparable damage to the appellant. The CIT(A) concluded that the appellant was not entitled to compensation as per the provisions of the Act.

Issue 2: Interpretation of section 244A of the Income Tax Act, 1961

The debate centered around the interpretation of section 244A of the Income Tax Act, 1961, concerning the payment of interest on delayed refunds. The Hon'ble Supreme Court's decision in the case of Gujarat Flouro Chemicals was pivotal in this matter. The Supreme Court held that section 214 of the Act does not mandate the revenue to provide compensation to the assessee for delayed refunds. The court emphasized that the interest payment in such cases was based on equity and constitutional provisions rather than statutory requirements. The court expressed doubts about the correctness of the earlier decision in the Sandvik Asia case and directed the matter for further consideration. In light of this interpretation, the appellate tribunal upheld the CIT(A)'s decision to dismiss the appeal, stating that the delay in granting interest did not warrant compensation as per the legal provisions.

In conclusion, the appellate tribunal upheld the CIT(A)'s decision to reject the appellant's claim for compensation for delayed refund issuance based on the interpretation of section 244A of the Income Tax Act, 1961 and the relevant judicial precedents. The appeal was dismissed, emphasizing that the delay in granting interest did not entitle the appellant to additional compensation under the law.