2020 (1) TMI 1036 - HC - Income Tax

Powers to pass orders u/s 119(2)(b) for processing refund claims - Interest on belated refund claims - HELD THAT - Power has been given under the circular to the Chief Commissioner of Income Tax for refund of amount not exceeding ₹ 50,00,000/-. The Circular also makes it clear that no interest will be admissible in case of belated refund claims. While A Division Bench of the Bombay High Court in Sitaldas K.Motwani -Vs- Director-General of Income-Tax and others 2009 (12) TMI 36 - BOMBAY HIGH COURT has also considered this circular and has remitted back to the authority to consider the question of hardship as well as the correctness and genuineness of the refund claim. It is of the view that this case also should be remitted back to the respondent to pass appropriate order, keeping in mind, the purpose of circular issued under section 119 of the Income Tax Act, 1961 by construing it liberally. Impugned order is thus set aside and the case is remitted back to the respondent. The respondent shall pass appropriate order within a period of three months from the date of receipt of copy of this order.

Summary

Issues:
1. Interpretation of circular issued by the Central Board of Direct Tax under Section 119 of the Income Tax Act, 1961.
2. Delegation of powers for processing refund claims under Section 119(2)(b) of the Income Tax Act.
3. Consideration of hardship, correctness, and genuineness of refund claims.
4. Application of circular in determining the admissibility of interest on belated refund claims.

Analysis:

1. The judgment revolves around the interpretation of a circular issued by the Central Board of Direct Tax under Section 119 of the Income Tax Act, 1961. The circular, dated 22.12.2006, instruction number 13 of 2006, delegates powers to pass orders under Section 119(2)(b) for processing refund claims. It specifies that claims below ?50,00,000 fall under the jurisdiction of the Chief Commissioner of Income Tax.

2. The circular further outlines conditions for acceptance or rejection of refund claims, emphasizing that no interest will be admissible on belated refund claims. The judgment references a decision by a Division Bench of the Bombay High Court, Sitaldas K.Motwani -Vs- Director-General of Income-Tax, which considered the circular and remitted the matter to the authority to evaluate hardship, correctness, and genuineness of refund claims.

3. In line with the Bombay High Court decision, the court in this case decides to remit the matter back to the respondent for a reevaluation. The court emphasizes the need to interpret the circular liberally and directs the respondent to pass an appropriate order within three months from the date of receipt of the court's order. The impugned order is set aside for reconsideration.

4. The judgment highlights the importance of considering the purpose of the circular issued under Section 119 of the Income Tax Act, 1961, in a comprehensive manner. It underscores the significance of evaluating refund claims while keeping in mind the conditions and limitations outlined in the circular, particularly regarding the admissibility of interest on belated refund claims. The writ petition is disposed of with no costs, emphasizing the need for a fresh assessment based on the circular's provisions.