2023 (2) TMI 808 - HC - Income Tax

Non-grant of the refund as withheld with interest and additional interest u/s 244A - Compensation sought for non-payment of the statutory interest from the time - HELD THAT - Considering the fact that both the provisions of Section 244 and 244A will be given effect to what the assessee is presently seeking is the compensation for the delay that has been caused in making the refund. It is not disputed that sub-section (1) of Section 244A requires the revenue to grant interest at the statutory rate if the refund becomes due to the assessee. Department since is not in a position to take shelter of pendency of the appeal, before this Court also, it is not necessary for this Court to give any directions with regard to the applicability of both the provisions and the requirement of the revenue to grant the refund bearing in mind the existing provisions. Compensation which is being sought for non-payment of the statutory interest from the time, this Court decided the appeal. much is insisted upon. Nima Specific Family Trust ( 2018 (10) TMI 441 - GUJARAT HIGH COURT had noted various provisions and also the decision of the Gujarat Flourochemicals Ltd. 2015 (2) TMI 453 - GUJARAT HIGH COURT to hold that there cannot be any direction for payment of interest on interest. The statute provided for interest on delayed refund under sub-section (1) of Section 244A, then newly inserted sub-section (1A) provides for additional interest. There cannot be any further directions for payment of interest over and above such statutory prescriptions and hence it had direction the cost of Rs.1 lac to the petitioner by way of compensation on the amount of interest which remained unpaid for long time. Respondent is not yet clear on the outstanding amount, however, it is volunteered that within three months, it shall be in a position to complete the same noticing the fact that the company has changed its name with all its past and future liabilities. As given e-pan number and it is the same pan number which was with M/s Bombardier Transportation, however, necessary procedure shall need to be completed by the petitioner and name change with supporting documents shall go to the concerned officer-ACIT Income Tax Vadodara both e-copies and physical copies through registered letter within one week from the date of receipt of this order. Let process be completed in a three months period, after receipt of such copies. If not done within three months, the amount of compensation to be paid shall be Rs.1 lacs.

Summary

Issues:
Challenge to non-grant of refund with interest and additional interest under Section 244A of the Income Tax Act.

Analysis:
1. The petitioner challenged the respondent's action for withholding the refund, which was withheld with interest and additional interest under Section 244A of the Income Tax Act. The petitioner made certain accounting entries for the financial year 2004-05, but no actual remittance was made. The respondent claimed there was an obligation for tax deduction at source on the provision made by the petitioner, leading to penalties and orders passed against the petitioner.

2. The petitioner filed an appeal against the penalties imposed, and the CIT (appeals) partly ruled in favor of the petitioner. The petitioner also made payments against demands raised, claiming some were erroneously placed. The ITAT later allowed the petitioner's appeal and deleted the penalty. However, the tax appeal by the revenue was dismissed in 2016.

3. The petitioner alleged that the department had not issued the refund despite the petitioner depositing a significant sum. Complaints were filed before CPGRAM for non-issuance of the refund, with no satisfactory response received. The petitioner approached the High Court seeking directions for the refund and additional compensation.

4. The respondent, in its affidavit-in-reply, stated difficulties in processing the refund due to outstanding demands and technical issues. The respondent highlighted the separate portals for processing Income Tax and TDS returns, causing delays in adjustments and refunds. The respondent also mentioned challenges in verifying manual deposits made before the online system was implemented.

5. The Court considered previous decisions and statutory provisions related to interest on delayed refunds. It noted that the petitioner was entitled to compensation for the delay in refund processing. The Court emphasized that the petitioner should receive the refund with interest as per the existing provisions, without the need for additional directions.

6. The Court addressed the issue of compensation for non-payment of statutory interest and clarified that interest on interest was not permissible. Referring to past cases, the Court emphasized that interest should be paid as per the statutory provisions without additional directions for interest on interest.

7. The Court directed the respondent to expedite the process of determining the outstanding amount and completing necessary procedures for refund processing. The petitioner was instructed to provide relevant documents for name change, and a timeline of three months was set for the completion of the process. Failure to comply within the specified timeframe would result in a compensation payment of Rs.1 lakh.

8. The petition was disposed of with the above directions and clarifications provided by the Court to ensure the timely processing of the refund and adherence to statutory provisions regarding interest payments.