The High Court ruled that irrespective of whether the delay was caused by the assessee or the department, the assessee was entitled to interest at a rate of 6% per annum.
In a significant ruling, the Gujarat High Court has held that an assessee is entitled to interest on a refund under the Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2020, even if there was a delay in validating the bank account.
Key Highlights of the Judgment
The bench comprising Justices Bhargav D. Karia and D.N. Ray clarified that while an assessee may not be eligible for interest under Section 244A of the Income Tax Act, 1961, they are still entitled to interest on refunds approved under the DTVSV Scheme. The court observed that once the designated authority approved the application and the refund order was passed on May 12, 2022, the assessee had a legitimate claim for interest until the refund amount was disbursed.
Case Background
- The Jurisdictional Assessing Officer issued a refund order on May 12, 2022, which was uploaded to the Income Tax Business Application (ITBA) system.
- The Centralized Processing Center (CPC) accounted for this order on July 26, 2022, and approved a refund of Rs. 2,20,41,042/-.
- However, the refund was delayed due to the assessee’s failure to validate the bank account with the CPC.
The assessee argued that they were proactive in seeking the refund, which was undisputed as per the effect order dated May 12, 2022. The department, on the other hand, contended that the delay was due to the assessee’s failure to validate the bank account and that no interest should be payable until the account was validated.
Court’s Ruling
The High Court ruled that irrespective of whether the delay was caused by the assessee or the department, the assessee was entitled to interest at a rate of 6% per annum. The total interest payable amounted to Rs. 22,04,104/- for the period between June 1, 2022, and January 31, 2024, based on the principal refund amount of Rs. 2,20,41,042/-.
Final Verdict
The Gujarat High Court allowed the petition and directed the Income Tax Department to pay the calculated interest to the assessee.
Case Details:
- Case Title: M/s Total Infratech Pvt. Ltd. v. Assistant Commissioner of Income Tax
- Case Number: R/SPECIAL CIVIL APPLICATION NO. 20804 of 2023
- Assessee’s Counsel: Bhaumik Dholariya
- Department’s Counsel: Karan G. Sanghani
Conclusion
This ruling reinforces taxpayers’ rights under the Vivad Se Vishwas Scheme and highlights that interest on refunds cannot be denied due to procedural delays. It sets a precedent for similar cases where taxpayers face delays in receiving their refunds.
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