2024 (11) TMI 1380 - HC - Income Tax

Interest towards refund negatived in the Rectification Petition - HELD THAT - As in the present case, it is seen that the impugned order came to be passed negativing the petitioner's claim for interest by stating that in terms of Section 244 A (2) of the Act, if the proceedings resulting in the refund are delayed for the reasons attributable to the assessee (petitioner in this case), the delay so attributable to him shall be excluded from the period, for which, the interest is payable, but the respondent failed to take into considering that only due to the faults committed on their side, (i.e. Department) in having failed to deal with the petitioner's case with abundant caution, the petitioner is now facing loss. Further, this Court is of the view that there cannot be a straight jacket formula in all such cases, where, the assessees are claiming for refund/interest. The impugned order is set aside. The matter is remanded to the respondent for re-consideration, in which case, respondent is directed to consider the petitioner's claim for interest and pass orders towards release of the interest amount from the date of filing of the Revision Petition i.e. 31.03.2014 till the date of payment i.e. On 31.10.2024, with interest at the rate of 6% p.a. after deducting a sum as already been refunded to the petitioner.

Summary

Issues:
1. Challenge to the order denying interest towards refund.
2. Calculation errors in determining the interest for refund.
3. Application of Section 244 A(2) of the Income Tax Act in the case.

Detailed Analysis:

Issue 1: The petitioner challenged the order denying interest towards refund, citing the history of the case involving the sale of a family property and subsequent tax implications. The petitioner's mother, a joint owner of agricultural lands, faced tax issues following the sale. Despite the property being declared agricultural by the ITAT, the respondent issued a notice under Section 148, leading to tax payments by the petitioner's mother. After a series of legal proceedings, the Assessing Officer sanctioned a refund but made errors in the calculation, leading the petitioner to file a Rectification Petition. The petitioner argued for 12% interest from the date of filing the revision.

Issue 2: The respondent based the interest calculation on Section 244 A(2) of the Income Tax Act, which excludes interest if the delay in refund is attributable to the assessee. The respondent contended that the delay in the claim of refund was due to the petitioner's actions, thus justifying the denial of interest. However, the court found the reason for denial inadequate, emphasizing that the petitioner was not liable to pay tax on the capital gains and had followed legal procedures diligently. The court noted errors in the respondent's handling of the case and stressed that the petitioner should not be penalized for the respondent's faults.

Issue 3: The court set aside the impugned order and remanded the matter to the respondent for re-consideration. The court directed the respondent to calculate and release the interest amount from the date of filing the Revision Petition till the date of payment, with interest at the rate of 6% p.a. The court emphasized the need for a case-specific approach rather than a rigid application of Section 244 A(2) in cases involving refund claims. The Writ Petition was allowed, and no costs were imposed, bringing the matter to a close.