Facts of the Case:
The Aassessee filed its original return for AY 2014-15 declaring a loss and claiming a refund of Rs. 15.38 crore. Pursuant to a scheme of arrangement approved by the Delhi High Court, a unit of the holding company was merged with the assessee. Consequently, the assessee filed a revised return on 31.03.2016, claiming additional TDS credit and total refund of Rs. 25.63 crore. Due to a technical glitch in the system, the TDS claim was not reflected in the revised return, though it existed in the uploaded XML file. The assessee immediately informed the CPC and the Assessing Officer.
Later, an assessment order u/s 143(3) of the Act was passed wherein the additional TDS claim was not allowed. The assessee then filed a rectification application u/s. 154 of the Act. The Assessing Officer allowed the refund of TDS however, denied interest u/s. 244A of the Act, stating that the delay was attributable to the assessee. The CIT(A) allowed the assessee’s appeal and granted interest, which was upheld by the ITAT. The Revenue then appealed before the High Court.
Contention of Assessee:
The Revenue contended that the assessee filed the revised return in March 2016 but sought rectification only in January 2018, resulting in a delay attributable to the assessee. The Revenue argued that u/s. 244A(2) of the Act, interest is not payable if the delay in obtaining the refund is due to the assessee. Therefore, the Assessing Officer rightly denied interest, and the orders of the CIT(A) and ITAT were erroneous.
Contention of Revenue:
The Assessee contended that the revised return was filed after the court-approved scheme of arrangement and non-reflection of TDS in the return occurred due to a technical/system error, which was promptly reported to the CPC and the Assessing Officer.
The Assessee contended contended that under section 244A(2) of the Act, if any delay is attributable to the assessee, the period to be excluded must be determined by the Principal Chief Commissioner/ Chief Commissioner/ Principal Commissioner / Commissioner, not by the Assessing Officer. Hence, the Assessing Officer had no authority to deny interest on his own.
Ruling:
The Delhi High Court dismissed the Revenue’s appeal and upheld the orders of the CIT(A) and ITAT by making following observations:
- The Court held that interest u/s. 244A of the Act is payable as a matter of course, and denial is permissible only in exceptional circumstances where the delay is attributable to the assessee.
- If the Assessing Officer believes that the delay is due to the assessee, the period to be excluded must be determined by the authorities specified in Section 244A(2) of the Act and not by the Assessing Officer himself.
- Since the Assessing Officer independently denied interest without providing cogent reasons in the order, the decision was erroneous and unsustainable in law. Accordingly, the assessee was entitled to interest on the TDS refund u/s. 244A of the Act.
Editor’s Note:-
This decision reinforces the statutory framework governing grant of interest on refunds under Section 244A of the Act. The Court reiterated that interest on refunds can be denied only in limited circumstances where the delay in granting the refund is demonstrably attributable to the assessee.
Importantly, the judgment clarifies that the power to determine the period of delay attributable to the assessee under Section 244A(2) of the Act lies exclusively with the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner, and not with the Assessing Officer.
Citation : Principal Commissioner of Income Tax, 4 New Delhi vs. HCL infotech Pvt Ltd [TS-192-HC-2026(DEL)] of Hon’ble Delhi High Court