2024 (12) TMI 263 - HC - Income Tax

Cost of delay in Refund of eligible amount on Government of India - interest on refund - HELD THAT - These situations payment of interest is an unwarranted burden required to be borne by the Government of India. The concern of the Court is on a larger issue, not only in regard to the present proceedings but in several similar proceedings reaching the Court. Whether there is any routine audit, as to who would become accountable for such huge interest amounts being required to be paid by the Government of India, when there are refund amounts which are admittedly payable to the assessee s. Any delay being caused in making payments of such refund and the interests payable thereon, is attributable wholly to the officials of the department, as it is they who are not taking prompt actions. As a Constitutional Court, we cannot overlook these issues and merely pass routine orders recording grant / receipt of refund. This ought not to be the only concern of the Court, in considering the legal rights of the assessees, as the Court would be equally concerned with the larger public interest of a burden on the public exchequer, when it is noticed by the Court that for no justifiable reasons, such refunds are blocked and huge interest in that regard is ultimately paid by the Government of India. We direct respondent Nos. 5 and 6 to place an affidavit on record, after taking appropriate instructions from the CBDT and after confirming such affidavit from the CBDT, as to approach the concerned officials are required to follow, in such situations so as to avoid burdening the public exchequer with interest payments. We are constrained to pass such order, in view of the concerns, we have recorded hereinabove. In such context, we may also observe that if already the rules are not in place, such rules would be required to be framed and if any rules are already framed, as to why such rules are not being strictly adhered, and as to why any mechanism by which accountability needs to be fixed on the particular officers, whose actions are increasing the burden on the Government of India, are concerns required to be immediately looked into. These are the issues and concern which be addressed in the reply affidavit, to be filed by the said respondents. We are also equally conscious that the delayed payment of refunds not only burdens the public exchequer with such interest amounts being required to be paid, but it also brings about a situation that the assessees are deprived of these amounts causing them a serious prejudice. Also the Government of India would not be in a clear position to utilise such funds for any public purpose, as these funds are required, to be in any case paid to the assessee. Thus, any situation of an unjust enrichment is not acceptable. The situation in hand is of a delay, by which a serious prejudice to both the revenue and to the assessee is caused. As regards the total interest amount being payable to the petitioner in the present proceeding Respondents would take instructions and make an appropriate statement either on the adjourned date of hearing or earlier to that so that appropriate orders can be passed.

Issues:
1. Delay in refund of tax by the Respondent-department.
2. Concerns regarding interest burden on the Government of India.
3. Petitioner's claim for refund for Assessment Years 2016-17 and 2013-14.
4. Prayers sought by the petitioner in the petition.
5. Response by the Revenue through an affidavit.
6. Refund granted to the petitioner after court orders.
7. Outstanding interest amount due to the petitioner.
8. Lack of internal controls and checks in the income tax department.
9. Concerns of the Court regarding interest payments and public exchequer burden.
10. Directions to respondent Nos. 5 and 6 to provide an affidavit.
11. Need for rules and accountability in refund processes.
12. Hearing on the affidavits directed to be filed.
13. Impact of delayed refunds on the public exchequer and assessees.
14. Pending interest amount to be addressed by the Revenue.
15. Next hearing date set by the Court.

Analysis:

The High Court judgment addressed a petition under Article 226 concerning the delay in refunding tax to the petitioner by the Respondent-department. The Court expressed serious concerns about the laxity leading to such delays, highlighting the unwarranted interest burden on the Government of India due to negligence. The petitioner sought refunds for Assessment Years 2016-17 and 2013-14, claiming a substantial amount of Rs. 77,64,71,629 was not granted. The petitioner requested a Writ of Certiorari to quash the adjustments and a Writ of Mandamus to prompt the refund with applicable interest. The Revenue responded through an affidavit, acknowledging mistakes and leading to further court orders for appropriate steps.

Following the court orders, the petitioner was granted a refund of the claimed amount. However, an outstanding interest of Rs. 3,10,58,865 remained unpaid. The Court raised concerns about the lack of internal controls in the income tax department, leading to unwarranted interest burdens on the Government. It directed respondent Nos. 5 and 6 to provide an affidavit on procedures to avoid such burdens. The Court emphasized the need for rules, accountability, and mechanisms to prevent delays in refunds and interest payments.

The judgment highlighted the broader public interest in avoiding unjust enrichment and ensuring timely refunds to prevent prejudice to both the revenue and the assessees. The Court scheduled a hearing on the affidavits to be filed, considering the impact of delayed refunds on public funds and assessees. The Revenue was instructed to address the pending interest amount promptly to enable appropriate orders. The next hearing was set for further proceedings on the matter.

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