Gujarat High Court Orders Interest on Delayed Tax Refund
M/s Sahil Total Infratech Pvt. Ltd vs. ACIT [ R/Special Civil Application 20804 of 2022]
Background of the Case
The Appellant, M/s Sahil Total Infratech Pvt. Ltd., had filed an application under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act), seeking to settle a tax dispute. The designated authority approved the application, and an order was passed on 12 May 2022, directing a refund of Rs. 2.20 crore to the appellant. However, the refund was not processed promptly, leading to a delay of nearly 20 months.
Arguments by the Appellant
The appellant argued that it was entitled to interest on the delayed refund under the principles of natural justice and the Supreme Court’s ruling in Union of India v. Tata Chemicals Ltd. The appellant contended that the department’s retention of the refund amount for 20 months without valid reasons warranted compensation.
The appellant submitted that it had raised multiple grievances on the Income Tax portal and followed up with the department, but the refund was not processed until the court’s intervention.
Respondent’s Response
The respondent, IT department contended that the DTVSV Act does not provide for interest on refunds. It argued that the appellant was not entitled to interest under Section 244A of the Income Tax Act since the refund arose from the DTVSV scheme. The department claimed that the delay was caused by the appellant’s failure to validate its new bank account promptly.
It argued that the refund could not be processed until the account was validated. The department denied any negligence on its part and argued that it had followed due process in handling the refund.
Court Findings and Decision
The Gujarat High Court ruled in favor of the appellant, holding that the department was liable to pay interest on the delayed refund. The court held that the appellant was entitled to interest at 6% per annum for the period of 20 months amounted to Rs. 22.04 lakh. The court noted that the appellant had taken all necessary steps to validate the new bank account and had raised multiple grievances on the Income Tax portal. The delay was primarily due to the department’s failure to process the refund promptly.
The court relied on the Supreme Court’s decision in Union of India v. Tata Chemicals Ltd., which held that interest on delayed refunds is a form of compensation for the unauthorized retention of money by the government.
Gujarat High Court Orders Interest on Delayed Tax Refund
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