By TIOL News Service

SHILLONG, SEPT 27, 2017: THE Issue before the High Court is - Whether Where a delay in filing the condonation petition before CBDT is attributable to the Assessee, interest on refund of TDS amount can be denied altogether by the Revenue, though, there was a delay on part of Revenue also in ordering and making refund. And the verdict favours the Assessee.

Facts of the Case

The Assessee-company is a Co-operative Bank engaged in the business of banking and claim to be exempted from the payment of income tax on the income derived from the interest on securities as per the provisions contained in Section 80 P (2)(a)(i) of the Act. During the FYs 1999-2000 to 2002-2003, the Assessee made huge investments in the Central, State and Trustee Securities and earned income through interest over such deposits. The case of the Assessee had been that the concerned organizations with whom the investments were made for the said AYs, deducted TDS on the interest income under Section 193 of the Act to the tune of Rs.2,24,07,941/- and deposited this deducted amount with the Revenue and hence, it was not liable for any such tax over the income derived from the interest on securities. The Assessee filed its return and claim refund of TDS after adjustment of tax liability to the tune of Rs.2,22,78,250/-.

However, it was noticed by the AO that the PAN of Assessee was not correct as per the status of the Assessee as a Co-operative Bank and hence, a new PAN was obtained in order to correct the status of Assessee and revised returns for the relevant AYs were filed. By effect of that, the return of the Assessee became belated. On the request of Assessee for refund, it was contended by the Asst. CIT that the belated refund claim exceeded a sum of Rs.1 lakh and by virtue of CBDT"s Circular, such a claim was not admissible in his office. The Assessee had further made a request before the CCIT, but looking to the quantum of the amount involved, the prayer had to be made to the CBDT and accordingly, the Assessee filed a petition under Section 119(2)(b) of the Act before the CBDT for admitting the claim for refund of excess tax paid by way of TDS along with interest.

The CBDT, in its order found it to be a case of genuine hardship and on the facts and in the circumstances of the case, while condoning the delay in filing the returns to claim refund for the aforesaid AYs, directed the AO to allow the refund claims subject to verification but also directed that “no interest should be paid on these refund claims".

In Writ, the High Court held that,

++ there had, of course, been an initial delay on the part of the Assessee inasmuch as the claim for refund of TDS deducted and deposited in the Assessment Years 2000-2001, 2001-2002, 2002-2003 and 2003-2004 was for the first time made only on 05.10.2006 by filing the returns and that too with an incorrect PA Number. The revised returns with freshly obtained correct PA Number for the said Assessment Years were filed only on 08.03.2007. Even then, the Assessee did not take requisite steps for filing appropriate petition before the concerned authority i.e., the Central Board of Direct Taxes for condonation of delay. Such a petition was filed before the CBDT only on 26.02.2008. The delay in claiming refund, from the date it should have been claimed for the relevant Assessment Years and until 26.02.2008 for each of the four aforesaid Assessment Years, is squarely attributable to the Assessees alone; and the Assessees cannot be held entitled to interest until 26.02.2008, the date of making the petition before the CBDT. However, the manner of dealing with the matter after filing of the petition by the Assessee before the CBDT has left several things to be desired on the part of the Revenue.

++ the petition dated 26.02.2008 for condoning the delay and entertaining the refund claims was decided by the CBDT only on 19.10.2011 i.e., after nearly two years and eight months of filing. There is no explanation whatsoever on the part of the Revenue as to why the said petition was decided after such a delay of more than two and a half years. Even thereafter, the Assigning Officer took further extra time in finally concluding on the assessments by the order dated 30.12.2013. Even if the verification process was to be carried out, it remains explicable that such a process took more than two and half years to complete. Yet further, it is noticed that even after 30.12.2013, the information about part acceptance of the claim for refund was sent to the Assessee only on 20.05.2014; and then, wrong cheques were sent and which were corrected after about a week.

++ The submissions of the Assessee that once CBDT condoned the delay, interest could not have been denied at all remains unsustainable for the reason that the CBDT, while passing the order under Section 119 (2)(b) of the Act considered it expedient to direct the Assessing Officer to admit the claim of refund after accepting it to be a case of genuine hardship but, such directions by the Board cannot by themselves override the operation of sub-section (2) of Section 244-A whereby, the interest is denied for the period of delay attributable to the Assessee.

++ the delay up to the date of filing the petition before CBDT i.e., 26.02.2008 is attributable to the Assessee and they are not entitled to claim interest on refund until this date but the delay thereafter had essentially been on the part of the Revenue; and it had been squarely against the plain statutory provisions as also against the spirit of law that the Revenue chose to deny interest altogether to the Assessee. The contentions of the Revenue that the Assessee had accepted the CBDT orders and hence, are not entitled to claim interest has only been noted to be rejected. As observed, the right of receiving interest is available to the Assessee as per the statute and nothing of any estoppel could be considered operating against the Assessee over the statutory provisions contained in Section 244-A of the Act.

(See 2017-TIOL-2030-HC-MEGHALAYA-IT)