2024 (3) TMI 1223 - HC - Income Tax

Additional interest u/s 244A(1A) not granted - whether the assessee is entitled to additional interest as prescribed under Section 244A(1A) of the Act or not? - HELD THAT - A bare reading of Section 244A(1A) of the Act would reflect that once the assessee s right of refund originates as a result of an appeal effect order under Section 250 of the Act whereby fresh assessment or reassessment has not been undertaken then the assessee is entitled to receive an additional interest of three per cent per annum apart from the interest accrued under Section 244A(1) of the Act for the duration starting from the date following the date of expiry of time as permitted u/s 153(5) of the Act to date on which the refund is granted. Section 244A(2) of the Act would manifest that the only contingency in which the statutory interest can be denied to the assessee is the circumstances where the delay is attributable to the assessee itself. The reasons for non-issuance of the refund alongwith additional interest which is statutorily prescribed u/s 244A(1A) of the Act should be weighed on the anvil that those reasons are attributable to the assessee or not. In the instant case it is seen that the additional interest of three percent per annum as mandated u/s 244A(1A) of the Act is the statutorily prescribed interest and can only be denied if the statute so permits. It is also evident that the contingency for the denial of additional interest u/s 244A(1A) is envisaged u/s 244A(2) of the Act and only on the ground where the delay is attributable to the assessee. In any case it is not the case of the Revenue that the COVID-19 pandemic is attributable to the assessee.Revenue may have had some difficulties in dealing with such instances however the same would not absolve the Revenue from the rigour of Section 244A(1A) of the Act. Notably since the Revenue has already granted the interest under Section 244A(1) of the Act without attributing any reason of delay to the assessee we do not find any cogent reason for not granting additional interest as mandatorily prescribed under Section 244A(1A) - reasons of delay attributed to the assessee are without any logical explanation and lack merit. Therefore taking into consideration the abovenoted facts and legal position we find no reason to sustain the impugned order. Allow the writ petition and hereby quash and set aside the order dated 18 November 2022. We further direct the Revenue to grant the statutorily prescribed interest as mandated under the Section 244A(1A) of the Act to the assessee with due expediency.

Summary

Issues Involved:
1. Entitlement to additional interest under Section 244A(1A) of the Income Tax Act, 1961.
2. Attribution of delay for the issuance of refund.
3. Applicability of principles of equity in the context of statutory obligations.

Summary of Judgment:

1. Entitlement to Additional Interest under Section 244A(1A):
The core issue is whether the assessee is entitled to additional interest under Section 244A(1A) of the Income Tax Act, 1961. The Court noted that Section 244A(1A) mandates an additional interest of three percent per annum on refunds arising from an appeal effect order, provided the delay is not attributable to the assessee. The assessee argued that the additional interest is statutory and should not be denied based on reasons like amalgamation, non-availability of functionality on the ITBA portal, and the COVID-19 outbreak.

2. Attribution of Delay:
The Revenue contended that the delay in issuing the refund was due to the amalgamation of the assessee, non-functionality of the ITBA portal, and the COVID-19 pandemic. The Court found no merit in these contentions, noting that the assessee had informed the Revenue about the amalgamation in 2016, well before the CIT(A) order. The Court held that the non-functionality of the ITBA portal and administrative difficulties were issues on the part of the Revenue and could not be attributed to the assessee. Therefore, the delay was not attributable to the assessee under Section 244A(2) of the Act.

3. Applicability of Principles of Equity:
The Revenue argued that due to the COVID-19 pandemic, principles of equity should be considered to justify the denial of additional interest. The Court rejected this argument, stating that equity cannot override clear statutory provisions. The Court emphasized that the statutory obligation to pay interest is non-discretionary and must be adhered to, regardless of the pandemic.

Conclusion:
The Court quashed the impugned order dated 18 November 2022, which denied additional interest to the assessee. It directed the Revenue to grant the additional interest as mandated under Section 244A(1A) of the Act. The petition was disposed of in these terms, along with any pending applications.