2018 (6) TMI 56 - AT - Income Tax

Interest on Refund u/s 244A - inordinate delay in grant of refund - interest on interest on refund - Held that - Referring to case of Umang Agrawal vs CIT 2015 (6) TMI 142 - ALLAHABAD HIGH COURT High Court has not laid down that the assessee is entitled to interest on interest for delay in payment of interest. On the other hand, Hon ble Allahabad High Court has granted compensation to the assessee for the prejudice caused to the assessee in an inordinate delay in grant of refund on the amount of interest. The said compensation was not granted under any provisions of Income tax Act but in exercise of inherent power which is vested with the Hon ble High Court. Thus in absence of any specific provisions in the Income tax Act, for allowance of interest on refund or compensation for the delayed period of refund of interest, we are constrained to hold that the appeal of the assessee cannot be allowed.

Issues:
Claim for interest under section 234B(4) by the appellant.
Delay in refund of accrued interest by the Assessing Officer.
Interpretation of judgments by the CIT(A).
Entitlement to interest for the delay in refund by the appellant.

Claim for interest under section 234B(4) by the appellant:
The appellant contended that they were entitled to interest under section 234B(4) due to an order passed by the Hon'ble ITAT. The appellant claimed interest on the delayed refund of accrued interest, which was not granted by the Assessing Officer. The CIT(A) confirmed the denial of interest. The appellant argued that the CIT(A) misinterpreted judgments that were actually favorable to the appellant. The appellant insisted on being entitled to interest for the delay in refund by seven years.

Delay in refund of accrued interest by the Assessing Officer:
The main grievance of the appellant was that interest was not allowed on the refundable amount by the Assessing Officer. The appellant became eligible for a refund of a specific amount as per the Tribunal's order, but the interest was not granted on the refunded amount after an inordinate delay. The appellant relied on a decision by the Hon'ble Allahabad High Court regarding compensation for delays in payment of interest under the Income Tax Act. The court emphasized the need to compensate for the wrongful retention of money by the department due to delays.

Interpretation of judgments by the CIT(A):
The CIT(A) based their decision on judgments enumerated in the assessment order, which the appellant claimed were misinterpreted. The appellant argued that the judgments were actually in their favor, contrary to the CIT(A)'s interpretation. The appellant highlighted the need to examine whether there was an unexplained inordinate delay in the payment of interest within the statutory period by the department.

Entitlement to interest for the delay in refund by the appellant:
The Hon'ble Allahabad High Court did not grant interest on interest for delays in payment, but rather provided compensation for the prejudice caused by inordinate delays in refund. The court clarified that compensation was granted under inherent powers, not specific provisions of the Income Tax Act. Due to the absence of provisions for interest on refund or compensation for delayed refunds, the appeal of the appellant was dismissed. The court emphasized that the appellant's case fell within instances of inordinate delays by the department in paying statutory interest, warranting compensation for wrongful retention of money.

In conclusion, the appellate tribunal dismissed the appellant's claim for interest under section 234B(4) and on the delayed refund of accrued interest by the Assessing Officer. The tribunal highlighted the misinterpretation of judgments by the CIT(A) and clarified the entitlement to compensation for delays in refund under inherent powers. The absence of specific provisions in the Income Tax Act for interest on refund or compensation for delayed periods led to the dismissal of the appellant's appeal.

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