2024 (4) TMI 94 - HC - Income Tax

Delay in issuing Refund under Direct Tax Vivad Se Vishwas Scheme 2020 - interest on delayed refund - DR as informed that though the department conceded that the amount ought to be refunded and has eventually refunded the amount interest should not be levied on account of the technical reasons due to which the payment of refund got delayed - HELD THAT - Identical issue decided in UPS Freight Services India Private Limited 2023 (9) TMI 34 - BOMBAY HIGH COURT wherein held that Except a bald statement in the affidavit that delay in issuing refund has been attributable to some technical issues there is nothing substantial in the affidavit and as concluded that the Petitioner shall be entitled to the interest on the amount from the date the refund became due till the date it was actually paid at the rate of 6% per annum which is the rate prescribed under Section 244(A) of the Income Tax Act. In view of the above this Writ Petition is partly allowed. We direct the department to calculate the interest at the rate of 6% per annum to be paid within 30 days.

Summary

Issues involved:
The issues involved in the judgment are delay in payment of refund under the Direct Tax Vivad Se Vishwas Scheme 2020, non-payment of interest on the refund amount, and the legal obligation of the government to pay interest on delayed refunds.

Delay in Payment of Refund:
The Petitioner sought the quashing of the impugned order for Assessment years 2010-11 and 2012-13 due to delays in refund issuance despite the issuance of Form No. 5 under the VSV Scheme. The Petitioner repeatedly requested the refund from the Income Tax Officer, highlighting the delay in processing. The department eventually refunded the amounts on different dates in 2022, after significant delays as indicated in the chart provided.

Non-Payment of Interest on Refund Amount:
Despite the dropping of penalty proceedings under Section 271(1)(c) of the Income Tax Act, the Petitioner did not receive the refund amount promptly. The Petitioner received a letter questioning the validity of Form Nos. 3 and 5, to which a response was provided. However, no interest was paid on the delayed refund amount until the refunds were finally issued in March 2022 for both assessment years.

Legal Obligation to Pay Interest on Delayed Refunds:
The Court referred to a previous order where it was established that the government is obligated to pay interest on delayed refunds. Citing the case of Tata Chemicals Limited, it was emphasized that the government, having retained and used the money without right, is bound to reimburse the amount with accrued interest for the period of undue retention. The Court concluded that the Petitioner is entitled to interest on the refund amount at the rate of 6% per annum, as prescribed under Section 244(A) of the Income Tax Act. The department was directed to calculate and pay the interest within 30 days.

The judgment partly allowed the Writ Petition, directing the department to pay interest on the delayed refund amount. The ruling highlighted the legal obligation of the government to provide interest on delayed refunds, as established in previous legal precedents.