2016 (9) TMI 1196 - HC - Income Tax

Entitlement for interest under Section 244A - delay in refund - belated return filing - whether once the delay in filing the return has been condoned, it becomes a valid return and therefore grant of interest is consequential? - Held that - The liability to pay interest on refund arises from the date when claim for refund is made with all necessary particulars. As already indicated, Section 244A(2) imposes a restriction on payment of interest when the procedure for refund is on account of the delay attributed to the assessee. In the case on hand, what is to be looked into is whether the delay in refund was due to a cause attributable to the assessee. The facts involved in the case would disclose that the return of income for the assessment year 1997-98 was filed only on 01/02/2000 on account of delay in auditing. Return was filed belatedly and thereby it was rejected. Thereafter an application was filed under Section 119(2)(b), seeking for condoning the delay in filing the return, was rejected and ultimately the matter reached this Court wherein this Court had directed the delay to be condoned. There cannot be two ways to look at it. Admittedly, there had been delay on the part of the assessee which had given rise to a situation to condone the same. Delay has been condoned only for the purpose of accepting the return. But it cannot be stated that the delay was not attributable to the assessee. Even if such instances where the delay is condoned, still when it is attributable to the assessee, there is justification on the part of the Commissioner to deny interest under Section 244A(2). Therefore, no error in the impugned orders passed by which the claim for interest has been rejected.

Summary

Issues:
Challenge to rejection of application under Section 264 of Income Tax Act, 1961 for interest under Section 244A and direction for interest on refund from a specific date.

Analysis:

Issue 1: Rejection of Application under Section 264 for Interest under Section 244A
The petitioner, a Primary Co-operative Society, challenged the rejection of its application under Section 264 of the Income Tax Act, seeking interest under Section 244A. The petitioner contended that once the delay in filing the return was condoned, it became a valid return, and therefore, the grant of interest was consequential. However, the authorities rejected the claim for interest under Section 244A, citing delay attributable to the assessee as the reason. The petitioner argued that such an approach was illegal as the return was accepted, and a refund was ordered. The court analyzed the facts, including the delay in filing the return and subsequent condonation, and concluded that even if the delay was condoned for accepting the return, it was still attributable to the assessee. Therefore, the Commissioner was justified in denying interest under Section 244A(2).

Issue 2: Direction for Interest on Refund
The petitioner also sought a direction for interest on the refund amount from a specific date. The court reviewed the timeline of events, including the filing of the return, rejection, condonation of delay, and subsequent orders. It noted that the delay in filing the return led to the rejection initially, and even though the delay was later condoned for accepting the return, it was still attributable to the assessee. The court emphasized that the liability to pay interest on the refund arises when the claim is made, and Section 244A(2) restricts interest payment when the delay is due to the assessee. Considering the circumstances, the court found no error in rejecting the claim for interest on the refund amount.

Precedents and Legal References
The court considered various judgments cited by both parties, including Sandvik Asia Ltd. v. Commissioner of Income Tax, Commissioner of Income tax, Bhopal v. H.E.G.Limited, Commissioner of Income Tax v. Gujarat Fuoro Chemicals, and M.Ahammadkutty Haji v. Chief Commissioner of Income Tax. These judgments provided insights into the interpretation of relevant provisions of the Income Tax Act regarding interest on refunds and delays attributable to the assessee.

In conclusion, the court dismissed the writ petition, upholding the rejection of the application for interest under Section 244A and the direction for interest on the refund amount. The judgment emphasized the importance of attributing delays to the assessee when determining the eligibility for interest on refunds under the Income Tax Act.