2025 (3) TMI 152 - HC - Income Tax

Entitlement to interest for delayed payment of refund under the Direct Tax Vivad Se Vishwas Act 2020 - HELD THAT - It is true that the petitioner is not entitled to interest under Section 244A of the Income Tax Act 1961 however when the petitioner has opted for direct tax for Vivad se Visvas Scheme 2020 and filed the application which was approved by the designated authority and refund order is also passed as per the said scheme on 12/05/2022 by the Jurisdictional Assessing Officer the petitioner was entitled to the interest on the amount of refund till the same was paid to the petitioner. The respondents are therefore liable to pay the interest on the amount of refund. Without considering whether it is a fault on part of the petitioner to validate the bank account or whether any negligence on part of the respondents for not releasing the amount of refund we direct the respondents to pay the amount of interest at the rate of 6% per annum as per the calculation provided to us amounting to Rs.22, 04, 104/- for twenty months from 01/06/2022 to 31/01/2024 considering the entire month on amount of Rs. 2, 20, 41, 042/- within a period of three months from the date of receipt of copy of this order.

The issues presented and considered in the judgment are as follows:1. Whether the petitioner is entitled to interest for delayed payment of refund under the Direct Tax Vivad Se Vishwas Act, 2020.2. Whether the petitioner's failure to validate the bank account affects their entitlement to interest on the refund.3. The interpretation and application of relevant legal provisions regarding the payment of interest on tax refunds.Detailed Analysis:Issue 1:Relevant legal framework and precedents:The petitioner claimed entitlement to interest on delayed refund payment under the Direct Tax Vivad Se Vishwas Act, 2020.Court's interpretation and reasoning:The petitioner argued that they were eligible for interest on the delayed refund as per the Act. The Court considered the petitioner's submissions and the timeline of events leading to the delayed refund.Key evidence and findings:The petitioner received the refund after a significant delay, despite raising grievances and validating their bank account multiple times.Application of law to facts:The Court analyzed the provisions of the Direct Tax Vivad Se Vishwas Act, 2020 and relevant case law to determine the petitioner's entitlement to interest on the delayed refund.Treatment of competing arguments:The respondents argued that the petitioner was not entitled to interest as per the Act's provisions.Conclusions:The Court found in favor of the petitioner, holding that they were entitled to interest on the delayed refund amount as per the Act. The Court directed the respondents to pay the calculated interest to the petitioner within a specified timeframe.Issue 2:Relevant legal framework and precedents:The issue of whether the petitioner's failure to validate the bank account affected their entitlement to interest on the refund was raised.Court's interpretation and reasoning:The Court examined the petitioner's actions regarding bank account validation and the impact on the refund payment process. The Court considered the timeline of events and the reasons for the delay in refund payment.Key evidence and findings:The respondents argued that the delay in refund payment was due to the petitioner's failure to validate the bank account.Application of law to facts:The Court assessed the significance of bank account validation in the refund process and its impact on the petitioner's entitlement to interest.Conclusions:The Court held that regardless of the petitioner's bank account validation issues, they were still entitled to interest on the delayed refund payment as per the Act and relevant legal principles.Significant Holdings:The Court cited the decision of the Hon'ble Supreme Court in Union of India vs. Tata Chemicals Limited, emphasizing the entitlement of taxpayers to interest on delayed refund payments. The Court directed the respondents to pay the calculated interest amount to the petitioner within three months.Core principles established:1. Taxpayers are entitled to interest on delayed refund payments as a form of compensation for unauthorized retention of funds by the government.2. The failure to validate a bank account does not negate the taxpayer's entitlement to interest on delayed refunds.3. The Direct Tax Vivad Se Vishwas Act, 2020 provides for the payment of interest on delayed refund amounts.Final determinations on each issue:The Court determined that the petitioner was entitled to interest on the delayed refund payment under the Direct Tax Vivad Se Vishwas Act, 2020, and directed the respondents to pay the calculated interest amount within three months.Overall, the judgment emphasized the importance of timely refund payments and the obligation of the government to compensate taxpayers for delays in refund processing.

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