2019 (3) TMI 502 - HC - Income Tax

Writ for Refund of tax - petitioner is Officer in the Indian Army - paid the income tax on his entire income from 2008 to 2016 including the disability pension - excess tax paid by the petitioner on his exempted income for the financial year 2008-09 to 2015-16 - CBDT vide memorandum dated 2.7.2001 has notified that the disability pension received by the Officers of the Indian Armed Forces is completely exempted from Income Tax - HELD THAT - In the considered opinion of this Court, as the income of the petitioner was exempted, the department does not have any other choice except to refund the amount and the disabled Army Officer cannot be made to run from pillar to post on account of various technicalities as stated in the writ petition. Our Army Soldiers, Naval Officials and Fighter Pilots are Day and Nights protecting Our Territorial Borders from Enemy Infiltration and Attacks and even while putting their life to the greatest risk, are keeping all Citizens safe and Secure and making Our life free from all such Dangers, where they don't think of Technicalities while Fighting with Enemies at the Front, as to whether pulling the Trigger of their Gun would invite a Court of inquiry and from this practical perspective this Court wants to express its concern for not putting too much of technicalities in such matters by those who are invested with Administrative Powers to deal and decide the affairs of the Personnel of Indian Armed Forces. The Court records and reiterates its absolute commitment to adherence of Rule of Law in its strictest terms, without carving out any exception to it, however it intends to convey its concern for the welfare of the War Heros who marvels at the Borders and within the Country, should not be unnecessarily Harassed or Troubled, for Technical adherence to some archaic administrative procedures having no thoughtful purpose sought to be achieved, while denying Legitimate Relief to the Members of the Armed Forces. Resultantly the respondent is directed to refund the entire amount of income tax they have recovered, which was an exempted amount and which the petitioner has paid in respect of his disability pension. The exercise of refunding the amount be concluded within a period of 30 days from the date of receipt of certifiedcopy of this order. Authorities shall be free to pass appropriate order in the matter of refund and the petitioner shall be entitled for interest @ 12% per annum from the date the amount was deposited with the income tax department till the amount is paid. After 30 days Non compliance of order of court shall be issuing suo motu notices for initiating contempt proceedings against the respondent Commissioner of Income Tax as well as against the Principal Commissioner of Income Tax II who has filed the affidavit in the present writ petition. Also after 30 rate of interest shall be 18% per annum from the date of entitlement till the amount is actually paid to the petitioner.

Summary

Issues:
1. Excess tax paid by petitioner on exempted income for financial years 2008-09 to 2015-16.
2. Refusal of Commissioner of Income Tax II to refund the excess tax paid.
3. Interpretation of CBDT notification exempting disability pension from income tax.
4. Delay in refunding the amount by the Income Tax Department.
5. Concerns regarding administrative technicalities affecting the refund process for an Army Officer.
6. Court's directive for refund and interest payment on the refunded amount.
7. Contempt proceedings in case of non-compliance with the court's order.

Analysis:
The petitioner, an Army Officer, filed a petition seeking a writ for the refund of excess tax amounting to ?11,16,643 paid on his exempted disability pension for the financial years 2008-09 to 2015-16. The petitioner contended that disability pension for Indian Armed Forces officers is exempt from income tax as per a CBDT notification dated 2.7.2001. Despite repeated requests, the Commissioner of Income Tax II had not refunded the amount, causing the petitioner distress. The petitioner had submitted a representation for refund on 6.12.2017, emphasizing his entitlement to the refund based on the CBDT notification.

The CBDT notification clarified the exemption of disability pension for disabled officers of the Indian Armed Forces from income tax. The Income Tax Department, however, added the disability pension to the petitioner's total income for assessment years 2008-09 to 2015-16, resulting in the excess tax payment. The Court noted that the department should have considered the CBDT notification while assessing the petitioner's income and should have refunded the excess amount promptly upon the petitioner's representation for refund.

The Court emphasized the duty to provide justice without unnecessary technicalities, especially for individuals like the petitioner who have dedicated their lives to national service. The judgment highlighted the sacrifices made by Army personnel and expressed concerns about administrative hurdles hindering legitimate relief for Armed Forces members. The Court directed the Income Tax Department to refund the entire excess tax amount within 30 days, with an additional interest of 12% per annum. Non-compliance would lead to contempt proceedings against the concerned tax officials, with the interest rate increasing to 18% per annum if the order is not followed within the stipulated timeline.