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Technicality in processing refund payable to assessee is invalid grounds for condoning delay to repel remedial provisions of Section 244A(1): HC

2019-TIOL-1993-HC-AHM-IT

IN THE HIGH COURT OF GUJARAT

AT AHMEDABAD

R/special Civil Application No. 13075 of 2019

JUGAL KISHORE MAHENDRA BIYANI

Vs

INCOME TAX OFFICER

J B Pardiwala & A C Rao, JJ

Dated: August 27, 2019

Appellant Rep by: Ms Vaibhavi K Parikh (3238)
Respondent Rep by: Mrs Kalpanak Raval (1046)

Income Tax – Writ – Section 244A(1)

Keywords – Delay in Refund – Interest on refund

THE issue involved is regarding delay in process of remand which the assessee termed as inaction on the part of the Revenue. The issue arose after the Revenue made additions during the relevant AY 2004-05 on four attributes, which are one addition in respect of bogus opening stock, two additions in respect of bogus credits and disallowance of certain expenditure. The CIT(A) partly allowed the appeal of the assessee. When the matter was carried by the Revenue and the assessee before the ITAT, it substantially decided the issue in favour of the assessee by only confirming the disallowance made in respect of certain expenses. The Revenue appeal against the ITAT was dismissed by the High Court in – 2018-TIOL-1879-HC-AHM-IT. The assessee, then made repeated reminders to the Department to release the refund due with interest for the relevant AY. When no action was taken, the assessee opted to invoke the writ jurisdiction of the High Court.

Having heard the parties, the High Court held that,

Whether technicality in processing the refund due to the assessee is a good ground for condonation of delay to repel the remedial provision like sec. 244A(1) – NO: HC

++ the matter is no longer res integra in view of ruling in Nima Specific Family Trust vs. ACIT. Hence, direction issued to the Revenue to release the refund for the AY 2004-05 in accordance with the provisions of section 244A(1) within a period of six weeks from the date of the receipt of this order.

Assessee’s writ petition allowed

Case followed:

Nima Specific Family Trust vs. Assistant Commissioner of Income Tax – 2018-TIOL-2188-HC-AHM-IT

JUDGEMENT

Per: J B Pardiwala:

1. Rule returnable forthwith. Mrs. Kalpana Raval, the learned senior standing counsel waives service of notice of rule for and on behalf of the respondent.

2. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs :

“7. the petitioner, therefore, prays that this Hon’ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction or order and be pleased to :

(a) direct the Respondent to release refund for the Assessment Year 2004-05 along with interest;

(b) pending admission, hearing and final disposal of this petition, direct the Respondent to release the refund due to the petitioner for the Assessment Years 2004-05;

(c) any other and further relief deemed just and proper be granted in the interest of justice;

(d) to provide for the cost of this petition.”

2.1 The writ applicant seeks to challenge the inaction on the part of the respondent in not releasing the refund for the Assessment Year 2004-05 legitimately issued to the writ applicant under the provisions of the Income Tax Act, 1961 (for short “the Act, 1961”). The writ applicant is engaged in the business of trading in textiles. The writ applicant filed his return of income for the Assessment Year 2004-05 (i.e. the year under consideration) on 01.11.2004 declaring total income at Rs.NIL. The said return of income was initially processed under Section 143(1) of the Act. Later, the case of the writ applicant for the year under consideration was selected for scrutiny assessment. Eventually, the assessment was framed under Section 143(3) of the Act vide order dated 30.12.2011 determining the total income of the writ applicant at Rs.9,58,11,340/- as against the returned income of Rs.NIL.

2.2 It appears from the materials on record that four additions i.e. (1) addition of Rs.6,51,00,020/- in respect of bogus opening stock, (2) addition of Rs.1,21,34,503/- in respect of bogus credits, (3) addition of Rs.1,83,89,471/- in respect of bogus credits and (4) addition of Rs.1,87,346/- in respect of certain expenses were made. A demand of Rs.6,09,60,380/- was raised in the case of the writ applicant.

2.3 The writ applicant challenged the assessment order in appeal before the Commissioner of Income Tax (Appeals). The CIT(A) partly allowed the appeal vide order dated 12.03.2013.

2.4 It appears from the materials on record that two appeals came to be preferred before the Income Tax Appellate Tribunal, one by the Revenue and another by the assessee i.e. the writ applicant herein. The Appellate Tribunal vide its order dated 14.02.2018 substantially, decided the issue in favour of the wit applicant herein excluding the issue of Rs.93,673/- in respect of the disallowance made by the Assessing Officer in respect of certain expenses.

2.5 It also appears that the matter was carried before this Court by the Revenue by preferring Tax Appeal No.1000 of 2018. The appeal preferred by the Revenue came to be dismissed by this Court vide order dated 14.08.2018 = 2018-TIOL-1879-HC-AHM-IT.

2.6 The issue now is with regard to the refund. The grievance of the writ applicant is that despite repeated reminders to the respondent as well as the PCIT and CCIT, the respondent is not releasing the refund legitimately due to the writ applicant for the Assessment Year 2004-05 i.e. the year under consideration. In such circumstances referred to above, the writ applicant is here before this Court with the present writ application.

3. In response to the notice issued by this Court to the respondent, Mrs. Kalpana Raval, the learned senior standing counsel has appeared for the Revenue and opposed this writ application. Mrs. Raval invited our attention to the affidavit-inreply filed on behalf of the respondent, duly affirmed by one Santosh Kumar, Income Tax Officer, Ward-1(3)(2), Surat. Our attention was invited, more particularly, to paragraph 10 of the reply. Paragraph 10 reads as under :

“10 It is further submitted that, the appeal effect to the order of the Ld.CIT(A) was given on 25/04/2013 and the appeal effect to the order of Hon’ble ITAT was given on 06/06/2018. The appeal effects to the above appellate orders were given manually and the same was uploaded on 31/01/2019 and duly forwarded to the CPC Bangalore so that the resultant effect would entail the assessee to receive refund of Rs.77,76,561/-. But unfortunately, due to some technical problem beyond the control of the undersigned, the uploaded appeal effect had not been processed which resulted into non issuance of refund to the assessee. A request with incident ID 717939 was registered with ITBA helpdesk on 04/05/2019 vide which it was brought to the notice of the ITBA help desk that the refund has not been issued to the assessee. In response, it was replied by the ITBA Helpdesk that “It is seen from CPC portal for the PAN and AY, return has been processed and determining refund. Refund for the same is being issued. Request taxpayer / AO to wait for the same.” Subsequently, the incident ID 717939 was auto closed by ITBA Helpdesk. On 23/05/2019, a fresh request was raised on ITBA helpdesk with incident ID 746064 recalling the previous instances and it was again requested to issue refund in favour of the petitioner. In response, it was replied by the ITBA Helpdesk that “As seen in CPC portal for given AY refund of Rs.7776561/- determined and same has been in under process. Once the refund release from CPC AO will get the notification.” Subsequently, the incident ID 746064 was auto closed by ITBA Helpdesk. However, no refund has been issued to the petitioner till date due to some technical error or technical issue. Another incident with incident ID 797337 was registered with ITBA Helpdesk recalling the previous instances and it was again requested to issue refund in favour of the petitioner. In response, it was replied by the ITBA Helpdesk that “As seen in CPC portal for given AY refund of Rs.7776561/- determined and same has been in Ready for Refund Banker. Once the refund release from CPC AO will get the notification.” The issuance of refund in the case of the petitioner is pending at the end of CPC and procedurally nothing is pending on part of this office.”

3.1 Thus, the stance of the Revenue is quite clear and fair too. However, the Revenue has expressed helplessness as regards the issue on the grounds of technical error or to be precise, technical issues.

4. Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are of the view that there is nothing much to be adjudicated in the present writ application. As indicated above, the stance of the Revenue is very clear. The Revenue has accepted that the writ applicant is entitled to the refund as claimed and has also accepted that there has been a delay in the refund of the particular amount.

4.1 The issue as such raised in this writ application is no longer res integra. We may refer to a decision of this Court in the case of Nima Specific Family Trust vs. Assistant Commissioner of Income Tax reported in [2018] 100 taxmann.com 262 (Gujarat) = 2018-TIOL-2188-HC-AHM-IT, wherein this Court has explained the scope of Section 244A of the Act, 1961. We may refer to the relevant observations made by this Court in the above referred decision :

“9. We would first address the petitioner’s grievance of undue delay in granting the refund. We may recall that after the Assessing Officer passing order of assessment on 29th December 2006 making substantial additions, raising tax demands, a sum of Rs. 97.41 lakhs [rounded off] was recovered through adjustment of refund for earlier assessment year. Subsequently, the petitioner’s appeal was substantially allowed by the Appellate Commissioner on 5th March 2009. This gave rise to the petitioner’s claim for refund of excess tax collected. Though the Department had filed appeal against the order of Commissioner [Appeals], there was no stay granted by the Tribunal. Thereafter, the Tribunal also dismissed the Department’s appeal on 30th June 2011. Again, the Department filed appeal before the High Court. Such appeal is pending without any stay.

10. It is well settled legal proposition that an order passed by the judicial or quasi judicial authority should be implemented within a reasonable period; if no specific time frame is provided in such order. The aggrieved person may reasonably pursue the appeal options but not wait indefinitely to implement the adverse order. Mere pendency of the appeal would not prevent implementation of the order under challenge. Unless the order is stayed, the same must be given effect to within a reasonable period.

11. The Department therefore cannot take shelter of pendency of the appeal before the Tribunal and thereafter before the High Court, since in both cases, the appellate for a had not granted any stay against the order of the Appellate Commissioner. In the present case, even after the Tribunal dismissed the Department’s appeal on 30th June 2011, no steps were taken by the Department to refund the excess tax. First proactive step taken by the departmental authorities was passing of an order dated 8th March 2018. Even such order was a mere paper order not giving any relief to the petitioner, since as noted, in such order the authority noted that the petitioner’s request for refund of adjusted tax of Rs.97.41 lakhs [rounded off] cannot be granted since the same is not reflected in the Department’s portal. Only after High Court issued notice in the present petition that the Assistant Commissioner passed a further order granting actual refund of the excess tax collected. At all stages, thus, the departmental machinery moved rather slowly. For years together, the Department waited for the outcome of the appeals. Eventually, even after passing of an order recognizing the petitioner’s right to receive refund, actual refund was delayed on the ground that tax was not reflecting in the department’s portal. No explanation would be sufficient to cover a period of nine years. What ever tax structure of the petitioner and the group entities and whatever Department’s resource limitations be, the delay of nearly nine years in granting the refund simply cannot be explained away.

12. This brings us to the claims of the petitioner. In this context, learned counsel Shri Soparkar had made two principal claims – one was that additional interest under subsection [1A] of Section 244A of the Act should be granted. He argued that this provision was inserted by the legislature by way of a remedial measure and should therefore be applied to all pending cases, even those which might have arisen prior to enactment of such section. His second prayer was to grant compensation for long delay in granting refund. He contended that though the Supreme Court in the case of Gujarat Flourochemicals Ltd. v. CIT [2015] 377 ITR 307/230 Taxcmann.com 204 [Guj.] had disapproved the claim of interest-on-interest, had not held that the compensation for delay in giving refund cannot be ordered.

13. In this context, we may refer to the relevant statutory provisions. Section 244A of the Act pertains to “Interest on refunds.” Subsection [1] of Section 244A mandates the Revenue to grant interest at the statutory rate where refund of any amount becomes due to the assessee under the Act. The situations envisaged under subsection [1] of Section 244A are subdivided into three parts contained in clauses (a), (aa) and (b). Clause (a) of subsection [1] of Section 244A covers situations where the refund is out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199 of the Act. Clause (aa) refers to refund which arises out of any tax paid under section 140A of the Act which pertains to self-assessment and clause (b) pertains to claim of refund in any other case. For all the three situations, the period during which such interest would be computed and the rate of interest to be paid are specified.

14. Subsection [1A] was inserted in Section 244A of the Act by the Finance Act, 2016 w.e.f 1st June 2016 and reads as under:

“[1A] Where the whole or any part of the refund referred to in subsection (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March 1975, in pursuance to any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in subsection (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted.”

15. Simultaneously, the legislature has also amended Section 153 of the Act which pertains to time-limit for completion of assessment, reassessment and re-computation. Entire section 153 was substituted for the original by the Finance Act 2016 w.e.f 1st June 2016. Subsection [5] of Section 153 of the Act reads as under :

“[5] Where effect of an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer, wholly or partly, otherwise than by making a fresh assessment or reassessment, such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner :

Provided that where it is not possible for the Assessing Officer to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer, if satisfied, may allow an additional period of six months to give effect to the order :

Provided further that where an order under section 250 or section 254 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under section 250 or section 254 or section 260 or section 262 of section 263 or section 264 shall be made within the time specified in subsection (3).”

16. We may note that in the earlier form, Section 153 of the Act did not contain any provision similar or equivalent to subsection (5) of Section 153 of the Act.

17. Brief analysis of the above provisions would show that prior to the amendments in the Act, by virtue of which Section 244A [1A] and Section 153 [3] were brought into effect from 1st June 2016, the Legislation did not envisage any interest on refund in addition to the interest prescribed under subsection [1] of Section 244A. Likewise, Section 153 of the Act did not contain any provision prescribing time limit for giving effect to the appellate or revisional orders. With the amendment, subsection [1A] of Section 244A now provides that in case where a refund arises as a result of giving effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264; wholly or partly, otherwise than by making a fresh assessment or reassessment, the assessee would be entitled to receive, in addition to the interest payable under subsection (1), an additional interest on such amount of refund calculated at the rate of three per cent per annum for the period beginning from the date following the date of expiry of the time allowed under subsection (5) of Section 153 of the Act to the date on which the refund is granted. Provisions of subsection [1A] can be summarized, thus –

[i] this subsection would be applicable :

(a) where the refund arises as a result of giving effect to an appellate or revisional order under the sections mentioned therein.

(b) is otherwise than by making a fresh assessment or reassessment;

[ii] In such circumstances, in addition to interest under subsection (1), the assessee would receive additional interest at the rate of three per cent per annum.

[iii] the period during which such interest would be computed would begin from the date of expiry of the time limit referred to in subsection (5) of Section 153 of the Act and would end on the date when the refund is granted.

18. Subsection (5) of Section 153 provides that where the effect to an order of appellate or revisional authority under various sections of the Act is to be given by the Assessing Officer, otherwise than by making a fresh assessment or reassessment; wholly or partly, such effect would be given within three months from the end of the month on which such appellate order is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, or passed by the revisional authority; as the case may be.

19. Proviso to subsection (5), however, provides that where it is not possible for the Assessing Officer to give effect to such order within such time, for reasons beyond his control, the Principal Commissioner or Commissioner, on receipt of such request in writing from the Assessing Officer, if satisfied, may allow an additional period of six months to give effect to the order. The further proviso to sub-sec. (5) provides that where an appellate or revisional order requires verification of any issue by way of submission of any document by the assessee or any other person, or where an opportunity of being heard is to be provided to the assessee, the order giving effect to such order shall be made within the time specified in sub-sec. (3). Subsection (3) in turn provides for a time limit for passing fresh assessment pursuant to appellate or revisional order by prescribing time limit of nine months from the end of financial year in which the order under section 254 is received, or order under section 263 or section 264 is passed.

20. Analysis of subsection (5)of Section 153 would show that the said provision prescribes a time limit of three months for the Assessing Officer to pass an order giving effect to the appellate or revisional order from the end of the month in which appellate order is received or revisional order is passed. Such time limit could be extended by additional period of six months by the Principal Commissioner or Commissioner, if he is satisfied that it was not possible for the Assessing Officer to give effect to such order within time prescribed, for reasons beyond his control. Cases where appellate or revisional order requires verification of any issue by way of submission or documents, or where opportunity of being heard is to be given to the assessee, would be governed separately. The time limit prescribed therein would be same as in subsection (3) of Section 153.

21. In absence of the provisions contained in subsection (5) of Section 153, the Assessing Officer was under no obligation to pass order giving effect to the appellate or revisional orders within a particular time. Subsection (5) now lays down such time limit. Likewise, in absence of provisions contained in subsection (1A) of Section 244A, there was no further adverse effect on the revenue for not passing consequential orders giving effect to appellate or revisional order which may be in favour of the assessee; except for paying interest as prescribed under subsection (1) of Section 244A. These provisions, therefore, on one hand lay down time limits for giving effect to the appellate or revisional orders and on the other hand, provide for payment of additional interest at the rate of three per cent per annum from the end of the period for passing order giving effect to such appellate or revisional orders. For obvious reasons, the inability of the Assessing Officer to pass orders giving effect to the appellate or revisional orders which had given relief to the assessee within the time prescribed under sub-sec. (5) of Section 153, would not make the proceedings honest. It is the assessee who stands to gain out of the appellate or revisonal order, and therefore, would be eager to have the Assessing Officer give effect to such order. The Assessing Officer, if for some reason cannot pass order within prescribed time, must still do so but, this would trigger the liability of the revenue to pay additional interest; as provided under sub-sec. [1A] of Section 244A.

22. This somewhat detailed analysis of the statutory provisions was necessary in order to ascertain whether the provisions are meant to be applied prospectively or retrospectively. It is well settled that a statutory amendment making substantive changes would have prospective effect unless either expressly or by necessary implications, the legislature has provided for retrospective operation thereof. In his book “Principles of Statutory Interpretation”, Justice GP Singh refers to observations of Frankfurter in his article “Some reflections on the Reading of Statutes”, wherein, it is observed that, “Legislation has an aim, it seeks to obviate some mischief, to supply and indequacy, to effect a change of policy, to formulate a plan of government. That aim, that policy is not drawn, like nitrogen, out of the air, it is evidenced in the language of the statute, as read in the light of other external manifestations of purpose.”

23. Though it is well settled that statutes dealing with substantive rights are prima facie prospective, unless it is expressly or by necessary implication made to have retrospective operation, such rigors are not recognized by the Courts when it comes to dealing with remedial statutes. Nevertheless, whether remedial statute is meant to apply to past situations arising before introduction of the provisions in the statute book must depend on the language used in the statute and the purpose for which the amendment was being made by the legislature.

24. We have noticed that prior to the relevant amendments made in the Act and introduced w.e.f 1st June 2016, there was neither a limit prescription for passing orders giving effect to appellate or revisional orders in which relief – partially or fully may have been given to the assessee nor was there any adverse impact on the revenue if such action was delayed; except for paying statutory interest under sub-sec. [1] of Section 244A of the Act. Subsection [5] of Section 153 introduced time limits for passing such orders. Such time limits were also prescribed in graded manner. Ordinarily, the Assessing Officer would have three months to pass orders giving effect to appellate or revisional orders. If the Commissioner was satisfied that it was not possible for the Assessing Officer to do so within such time, he could extend the time by further six months but no more. In cases where the order required verification of any issue by way of submission of document by the assessee or any other person, or where an opportunity of being heard is to be provided to an assessee, the time limit from the outset would be longer. This laying down of the time limit per se would be of no consequence unless non adherence to the time would result into some adverse consequences to the Revenue. It is therefore that subsection [1A] of Section 244A provides for additional interest at the rate of three per cent per annum upon the Assessing Officer failing to pass an order giving effect to the appellate or revisional order withing the time frame.

25. These provisions thus are in the nature of deterrence to the Assessing Officer’s inaction. Simultaneously, the assessee would be compensated for delay by way of additional interest.

26. These provisions are thus remedial in nature and meant to address the issue of inordinate delay in giving effect to the appellate or revisional orders made in favour of the assesses. However, minute examination of these provisions would show that the same were not meant to have retrospective effect. The computation provision for granting such interest provides for two terminal points – the beginning point is the end of the period beginning from the date following the date of expiry of time allowed under section (5) of Section 153 and the end point of computing the interest would be the date on which refund is granted. Applying such provisions for the past period would immediately throw a question as to from which date such interest liability would arise. For the past period, there being no provision in subsection (5) of Section 153 laying time limits, the computation of beginning of the period for granting interest would be unworkable. Claim of interest for the past period cannot be accepted for want of any machinery provided by the legislature to calculate such interest. The legislature therefore by necessary implications did not desire to give any retrospective effect to these provisions. The claim for additional interest therefore cannot be granted for the periods when the provisions of Section 244A [1A] and 153 [3] as they stand now were not in statute book at all.

27. There would however be a caveat to this proposition and it is this. There may be cases where the appellate or revisional order may have been passed long before 1st June 2016. Till the relevant provisions of Section 244 [1A] and 153 [5] were added by the legislature on 1st June 2016, the Assessing Officer may not have passed the consequential order. Even after such amendments, he may not have passed the order within the time provided ion such amendments. Even in such a case, if the amended provision of subsection [1A] of Section 244 of the Act is not applied for the period past 1st June 2016, the same would give rise to two class of cases – [I] where the appellate or revisional order is passed after 1st June 2016 and the other where such order is passed before such date. In the former, all the provisions of subsection [1A] of Section 244A as well as subsection (5) of Section 153 of the Act would apply. In the latter, if harmonious construction approach is not adopted, the Assessing Officer could contend that he is under no obligation to pass order giving effect to the appellate or revisional order, nor would the revenue be liable to pay additional interest even after the time available to the Assessing Officer for passing such order has expired. The legislature could not be expected to have brought about such a situation. Any such interpretation would also restrict the prospective effect of these provisions. In such circumstances, the harmonious construction of the statutory provisions would require that if any order giving effect to the appellate or the revisional order is not passed by the Assessing Officer within the time permitted under section 153 [5], after the amendments were made in the statute book, even though the appellate or revisional order was passed before 1st June 2016, the liability to pay additional interest under subsection [1A] of Section 244A would arise upon completion of such period as if the starting point for computing such period for passing the order was 1st June 2016. To this limited extent, the petitioner would be entitled to additional interest for limited period, but not for the entire period starting from the original order of Commissioner dated 5th March 2009.

28. Learned counsel Shri Soparkar had, however, argued that the compensation for delayed payment of refund should be granted. This contention and claim was independent of the claim for interest on interest which he agreed would not be payable by virtue of the judgment of the Supreme Court in the case of Gujarat Flourochemicals Limited [Supra] and also independent of the additional interest under subsection [1] of Section 244A. This judgment has a short history, which we may record. As is well-known, the Supreme Court in the case of Sandvik Asia Limited v. CIT [2006] 150 Taxman 591/280 ITR 643 [SC] = 2006-TIOL-08-SC-CX had an occasion to consider a situation in which the advance tax paid by the assessee became refundable pursuant to an appellate decision. The principal was refunded but refund of interest was withheld for a long time. The Supreme Court posed a question to itself whether on general principles, the assessee ought to have been compensated for the inordinate delay for receiving monies properly due to it. It was noticed that the revenue has retained such monies of the assessee for the periods ranging from 12 to 17 years. The Court held that the revenue having unjustifiably withheld the refund for seventeen years without any reason, the assessee would be entitled to receive such amount with further interest. The larger Bench of the Supreme Court considered the question whether the decision in case of Sandik Asia Limited v. CIT [Supra] lays down the principle that interest on interest is payable when the refund is delayed. The Supreme Court explained the decision in case of Sandvik Asia Limited [Supra] observing that the Supreme Court in such case was considering the issue as to whether the assessee who was made to wait for refund of interest for decades should be compensated for great prejudice caused to it due to delay in its payment after the lapse of statutory period. It was in this background, the Court directed the Revenue to pay compensation which cannot be seen as a direction for payment of interest on interest. The Supreme Court held and observed as under :

“6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assesses and also by the Revenue. They are of the view that in Sandvik case [Supra] this Court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period.

7. As we have already noted, in Sandvik case [Supra] this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice cause to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest.”

29. For subsequent year also, in the case of the same assessee Gujarat Flourochemicals Limited, a similar issue came up before the Supreme Court. Upon an appeal against the judgment passed by the High Court, the Supreme Court remanded the proceedings before the Court after making reference to its earlier judgment in the case of Gujarat Flourochemicals Limited [Supra]. It was in this background that the Gujarat High Court in the case of Gujarat Flourochemicals Limited v. Commissioner of Income-tax, [2015] 377 ITR 307 [Guj.] was examining the issue of payment of interest for delayed refund made by the Revenue. The Court noticed observations of the Apex Court that the interest on the amount of refund, if provided by the statute, such would govern the field. The Court was of the opinion that in case of Gujarat Flourochemicals Limited [Supra], the Supreme Court did not shut out the question of directing the Government to pay compensation for non payment of statutory interest. In this background, the Court gave suitable directions for payment of compensation.

30. The situation therefore emerges is that as held by the Supreme Court in the case of Gujarat Flourochemicals Limited [Supra], whenever statute provides for interest on delayed refunds, the same would hold the field. Further, there cannot be any direction for payment of interest on interest. In the present case, the statute provides for interest on delayed refund in terms of subsection [1] of Section 244A of the Act. As and when applicable, newly inserted subsection [1A] of Section 244A provides for additional interest. The statutory provisions thus govern the situations where the interest on delayed refund would be paid as also the rate on which such interest is to be calculated. There cannot be any further direction for payment of interest over and above such statutory prescriptions. This is not a case where the principal refund is granted at one point of time, withholding the interest and the Revenue thereafter, having frozen the liability of interest seeks to avoid making any further payment of compensation on the amount of interest which remained unpaid for a long period of time.”

5. In view of the aforesaid, we dispose of this writ application with a direction to the respondent to release the refund for the Assessment Year 2004-05 in accordance with the provisions of Section 244A(1) of the Act within a period of six weeks from the date of the receipt of this order. We hope and trust that the writ applicant may not have to comeback to this Court redressing any further grievance.

5.1 With the above, this writ application is disposed of. Rule made absolute to the aforesaid extent. Direct service is permitted.

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