2022 (7) TMI 1077 - AT - Income Tax

Interest u/s 244A - non-grant of interest for delayed period of 29 months in granting the tax refund - HELD THAT - Interest u/s 244A shall be granted to the assessee on delayed refund subject to the provision of said section - A.O. while granting refund u/s 237 ought to have calculated interest u/s 244A for the delayed refund, unless the delay is caused by the assessee s fault. The CBDT in its Instruction No.7/2013 dated 15th July, 2013, has endorsed the observation in case of Own motion v. UOI Others in 2013 (3) TMI 316 - DELHI HIGH COURT wherein, the Hon ble High Court had held that the assessee cannot be denied interest on refund unless the delay is caused by the assessee s fault. When the refund was finally given on 27.07.2020, the A.O. ought to have calculated interest u/s 244A of the I.T.Act while granting refund (For the delayed refund by 29 months). The rectification order dated 31.07.2020 having failed to calculate interest u/s 244A (which is automatic unless delay is attributable to assessee s fault), the first appellate authority was within his jurisdiction to have entertained the claim of interest on delayed refund u/s 244A which was repeatedly requested by the assessee vide its letters dated 05.04.2018, 01.05.2018, 25.05.2018, 02.08.2018, 08.06.2020, 29.10.2020 and 28.02.2022. In the interest of justice and equity, we restore the issue to the files of the A.O. The A.O. is directed to take a decision in accordance with law and grant interest u/s 244A of the I.T.Act with reference to the delayed refund amount (refund credited to assessee s bank account on 27.07.2020). The A.O. shall afford a reasonable opportunity of being heard to the assessee before a decision is taken in the matter. Appeal filed by the assessee is allowed for statistical purposes.

Issues Involved:
1. Short grant of interest under Section 244A of the Income Tax Act, 1961.
2. Dismissal of the appeal by CIT(A) on the grounds not arising out of the order under Section 154 of the IT Act.
3. Non-grant of interest on tax refund amount in the rectification order under Section 154 of the IT Act.
4. Incorrect and immaterial observations made by CIT(A) in the order under Section 250.
5. Delay in granting the tax refund amount and the resultant interest claim.

Issue-wise Detailed Analysis:

1. Short Grant of Interest under Section 244A:
The assessee claimed a short grant of interest amounting to Rs.33,38,380 under Section 244A of the Income Tax Act, 1961. The primary contention was that the interest was not granted for the delayed period of 29 months in issuing the tax refund determined in the assessment order dated 28.03.2018, which was actually granted on 27.07.2020.

2. Dismissal of the Appeal by CIT(A):
The CIT(A) dismissed the appeal on the grounds that the issues raised did not arise out of the order dated 31.07.2020 passed under Section 154 of the IT Act. The CIT(A) observed that the rectification application dated 05.04.2018 was not disposed of by the Assessing Officer, and the grounds raised were not linked to the rectification order.

3. Non-Grant of Interest on Tax Refund:
The assessee contended that the Assessing Officer failed to grant interest under Section 244A for the delayed period in the rectification order dated 31.07.2020. The tax refund amount of Rs.2,91,90,560 was credited to the assessee's bank account on 27.07.2020, but no interest was allowed for the period from 28.03.2018 to 27.07.2020.

4. Incorrect Observations by CIT(A):
The CIT(A) made several observations that the appellant tried to link the rectification application dated 05.04.2018 with the rectification order dated 31.07.2020, and that the rectification application was not disposed of by the Assessing Officer. The CIT(A) also noted that the grounds raised did not arise out of the order dated 31.07.2020.

5. Delay in Granting Tax Refund:
The assessee argued that the tax refund determined in the assessment order dated 28.03.2018 was granted only on 27.07.2020, after a delay of 29 months. The assessee requested that the Assessing Officer be directed to allow interest for this delay in accordance with the provisions of Section 244A.

Tribunal's Decision:
The Tribunal acknowledged that the assessment under Section 143(3) was completed on 28.03.2018, determining a tax refundable amount of Rs.2,91,90,560. The assessee filed a rectification application on 05.04.2018, highlighting a short computation of tax liability and requesting the correct refund amount along with interest under Section 244A. The excess refund granted was immediately deposited back by the assessee.

The Tribunal held that interest under Section 244A should be granted for delayed refunds unless the delay is attributable to the assessee. The Tribunal restored the issue to the files of the Assessing Officer, directing them to grant interest under Section 244A for the delayed refund period, after affording a reasonable opportunity of being heard to the assessee. The Assessing Officer was instructed to pass an order within six months from the date of receipt of the Tribunal's order.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, with directions to the Assessing Officer to reconsider the grant of interest under Section 244A for the delayed tax refund. The Tribunal emphasized the need for a fair and just decision in accordance with the law.

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