Delay in refunds must be treated as a cause of serious concern for costs by way of interest, interest on interest and impairment of goodwill of government.

[C.A. DEV KUMAR KOTHARI]

Delayed refund and cost:

Delay in refund of excess tax paid by the government entails cost by way of interest payable by the government. In case of inordinate delays, the assessee can also claim interest on interest for  period of delay (though after indulging into long drawn litigation) . Beside cost by way of interest, it also causes cost due to impairment of reputation of the government. However, that feeling is not in mind of the revenue officers. If we go by the Citizen’s Charter of GOI the tax payer can reasonably expect that the refund with full interest, will be made available at the home of the tax payer.

Though the revenue officers generally try to grant lesser interest to tax payer by processing or granting refund but delaying actual refund by delay in posting of refunds. By this way interest for few months is saved, however, this definitely caused loss of impairment on reputation of the government because there is difference between promises and actual delivery. However, as usual, the revenue officers have attitude of ‘who cares’, on such matters.

Simplified refund cases- refund must be prompt:

We can say that in the following situations cases can be considered as simplified cases for refunds:

1. where return has been filed, and accepted and no notice has been issued for scrutiny of return,
2. There is claim for refund of excess tax paid,
3. Tax credit is shown in the report in form no. 26AS in OLTAS  report.
4. Tax credit shown in report in form 26AS is more than liability admitted by assessee and / or that accepted by the AO/ computerized system.
5. There are complete details given for refund of excess tax by way of ECS credit or bank account.

In case the above circumstances exist, then there should not be delay in refund through ECS so far excess tax paid on the basis of  report in Form 26AS is concerned.

In case the assessee has not provided  complete details of bank account  for ECS credit or if the ECS fails for any technical or other reason, then the AO should send the refund cheque for the excess found as per credit in report in form 26AS  over admitted and accepted tax liability of assessee.

Suppose some TDS are not tallied in report in Form 26AS, for that reason entire refund should not be withheld. Refund can be granted on the basis of credit found in the From 26AS. Then the un reconciled TDS can be reconciled with original documents and then refund for such amount can be given.

 Public feeling:

It is felt by public (many assesses) that only smaller refunds are directly credited through ECS or refund cheques are sent timely. However, in case of larger amount say above Rs.20,000/- in many cases refunds are not sent either through ECS or cheque. Though returned liability of tax has been accepted and as per Form 26AS there is credit which is in excess of assessed liability.

In past, when all refunds were sent by cheques, we had experienced that cheques were written and signed but not dispatched, and only when assessee approached, cheques were dispatched even after revalidation. There was also system of  sending advice to banker for clearing  the cheque and cheques used to return unpaid for want of such advice. In such situations also the assessee had to visit the office of AO to ensure that the advice was sent by the AO to the refund baker.

This is a serious matter, because a bankers cheque, signed by bank manager was returned for want of advice from the AO. Communications to bank did not yield any result even reply.

It seems that at present also similar practices are prevalent. In many cases when we enquire about refund status online, we find standard reply like your AO has not sent the refund cheque. In some cases small refunds are sent by AO through ECS / Cheque.

Off course, there are few officers who are very particular, to ensure that refunds are sent timely. However, in large number of cases one needs to approach officers or clerks to get refund. This is not proper.

ECS details available but cheques are issued:

In some cases it was noticed that the assessee had provided full details for sending refund by way of ECS, however, still cheque was sent. In some cases cheque was issued by the manager of SBI (it was like demand draft or pay order issued by bank, which must be honored on presentation). However, such bankers cheque or DD was also returned unpaid by SBI, stating the reason that advice was not received. The assessee had to approach officer or other babus to ensure that advice is sent to the bank.

Feeling of the Central Board of Direct Taxes:

We can say that the feeling about delays in refunds and incidental matters is expressed by the following message from the Chairman of the CBDT: 

Chairman CBDT’s Messages (Message no 17) - Casual & cavalier attitude

Refund cases not yet entered on the system

 All the CCITs, including the CCITs (CCA), were advised by the Board on Feb 28 & again on March 05 11 to provide data regarding paper refund cases not yet entered on the system.

The CBDT feels anguished that, except CCITs Nagpur, Ranchi, Panaji & Guwahati, no other CCIT has taken care to comply with the Board’s appeal.

Such a casual & cavalier response of senior-most functionaries in the field is disheartening for the Board, which is doing its best for the welfare of the entire cadre.

May the CBDT expect that all the CCITs will get the paper refund cases not yet entered on the system uploaded today itself & ensure that all refund cases are processed forthwith without any further delay?

Analysis and observations:

The above communication contains administrative concerns of CBDT. First is about providing information and uploading the same in system about paper refunds. The second is Board’s zeal to process refund cases ( that should include actual refund  by way of ECS or cheque also). Only four CCIT’s appears to have taken the instructions ( though described as an appeal) of the CBDT in this matter.