2025 (2) TMI 331 - AT - Income Tax

Denial of interest on refund u/s. 244A for a part of the statutorily eligible period - interest payable between the date of payment of self-assessment tax till the date on which the assessee filed rectification application - Whether the interest for the period in question could have been denied to the assessee viz. from the date of payment of self-assessment tax till the date on which the assessee filed a rectification application? HELD THAT - If the AO is successful in establishing that the delay in claiming the refund was attributable to the act/omission on the part of assessee then the AO can deny the claim of under subsection (2) of section 244A of the Act. CIT(A) has accepted the fact that the assessee on entering into the JDA dated 29.11.2013 had offered tax on LTCG and paid self-assessment tax; and thereafter JDA got cancelled on 22.12.2017 and thereafter has claimed refund which means according to CIT(A) the delay in claiming the refund was due to reasons attributable to the assessee and justified the action of AO. We do not subscribe to such reasoning since it is a narrow or pedantic view in the facts of the case. In this case it is to be noticed that the event which triggered capital gain was caused due to the assessee entering into JDA to develop its property on 29.11.2013 with the developer/builder. Since the JDA/ agreement was not acted upon; and developer backed out and since the JDA in question was not registered as per law as held by Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT i.e. un-registered JDA is not enforceable in law. And when we juxtapose this case law with the JDA in question then there is no JDA in the eyes of law and therefore is un-enforceable in law. Thus it is noted that the assessee offered capital gain upon mistake of fact or misconception of fact or law which should be used against the assessee for denying the interest from the date of remittance of Taxes to the exchequer because State should not be unjustly enriched on an event which didn t exist in the eyes of law. And it is no longer res-integra that CBDT Circular are binding on the Income Tax Authorities as held in the case of UCO Bank 1999 (5) TMI 3 - SUPREME COURT Therefore as land in question was sold to different party in July 2018 for a total consideration of Rs. 16 crores and the capital gains arising from that event was offered to tax in AY 2019-20 the assessee succeeds and the AO is directed to grant interest u/s. 244A from the date of payment of self-assessment tax. Appeal filed by the assessee is allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue in this appeal is the denial of interest on refund under Section 244A of the Income Tax Act, 1961. Specifically, the Tribunal considered whether the assessee was entitled to interest on the refund for the period from the date of payment of self-assessment tax until the date of filing the rectification application under Section 154 of the Act.

ISSUE-WISE DETAILED ANALYSIS

Denial of Interest on Refund under Section 244A

Relevant Legal Framework and Precedents

Section 244A of the Income Tax Act provides for interest on refunds due to an assessee. The provision entitles the assessee to receive interest on the refund amount from the date of payment of tax or filing of the return, whichever is later, until the refund is granted. However, if the delay in proceedings resulting in the refund is attributable to the assessee, the period of such delay is excluded from the interest calculation.

The Tribunal also referred to the Supreme Court's decision in Balbir Singh Maini, which clarified that an unregistered Joint Development Agreement (JDA) is not enforceable under Section 53A of the Transfer of Property Act, thereby impacting the recognition of capital gains.

Court's Interpretation and Reasoning

The Tribunal examined whether the delay in claiming the refund was attributable to the assessee. The lower authorities held that the delay was due to the assessee's actions, as the refund was claimed only after the cancellation of the JDA. The Tribunal disagreed, noting that the assessee's initial offering of capital gains tax was based on a misconception of law, as clarified by subsequent judicial decisions.

Key Evidence and Findings

The Tribunal found that the assessee had paid self-assessment tax based on an unregistered JDA, which was later deemed unenforceable by the Supreme Court. The JDA was cancelled, and the property was eventually sold to a different party, with capital gains tax offered in a subsequent assessment year.

Application of Law to Facts

The Tribunal applied Section 244A, emphasizing that the denial of interest could only be justified if the delay was attributable to the assessee. It concluded that the delay was not due to the assessee's fault but rather a result of a legal misconception corrected by later judicial interpretations.

Treatment of Competing Arguments

The Tribunal considered the argument that the assessee delayed the refund claim by not filing a revised return. However, it found this reasoning narrow and not applicable, given the subsequent legal developments that rendered the initial tax payment unnecessary.

Conclusions

The Tribunal concluded that the assessee was entitled to interest on the refund from the date of payment of the self-assessment tax, as the delay was not attributable to the assessee but rather due to a legal misunderstanding.

SIGNIFICANT HOLDINGS

The Tribunal held that the assessee is entitled to interest under Section 244A from the date of payment of the self-assessment tax. It emphasized that the State should not be unjustly enriched due to an event that did not exist in the eyes of the law. The Tribunal referred to CBDT Circular No. 68, which supports rectification in light of subsequent Supreme Court interpretations, underscoring that such circulars are binding on tax authorities.

The Tribunal directed the Assessing Officer to grant interest on the refund from the date of payment of self-assessment tax, thereby allowing the appeal in favor of the assessee.