Only Commissioner Can Decide If Delay In Income Tax Refund Is Attributable to Taxpayer, Not AO: Delhi High Court

The Delhi High Court has recently held that the question whether delay in processing TDS refund is attributable to the assessee/taxpayer, for the purpose of denying interest under Section 244A(2) of the Income Tax Act, can be decided only by the Principal Commissioner/Commissioner and not by the Assessing Officer (AO).

A Division Bench of Justices Dinesh Mehta and Vinod Kumar observed,

“Looking at the language used in sub-section (2) of Section 244A of the Act of 1961, we are of the firm opinion that in case, the Assessing Officer is of the view that the delay in processing the request for refund has been caused for reasons attributable to the assessee, it is „Principal Chief Commissioner or Chief Commissioner‟ or „Principal Commissioner or Commissioner‟ who shall decide the question as to which period is to be excluded.”

The bench thus dismissed an appeal filed by the Revenue against grant of interest to HCL Infotech on delayed refund of TDS.

The assessee had originally filed its return for Assessment Year 2014–15 declaring a loss and claiming refund. Pursuant to a composite scheme of arrangement approved by the Delhi High Court, a system integration undertaking of its holding company was merged with the assessee with retrospective effect. Consequently, the assessee recast its accounts and filed a revised return claiming additional TDS credit.

Although the revised return was acknowledged, the TDS credit did not reflect due to a technical glitch in the system. The assessee flagged the issue with the Centralised Processing Centre (CPC) and also informed the AO. However, while passing the assessment order under Section 143(3), the AO did not grant the TDS refund.

Subsequently, on a rectification application under Section 154, the AO granted the TDS refund but denied interest under Section 244A on the ground that the delay in claiming TDS was attributable to the assessee.

At the outset, the High Court observed that an assessee is entitled for interest under Section 244A of the Act of 1961 as a matter of course and it is only in exceptional circumstances that the same can be denied in the event of the assessee himself being in default or remaining at fault.

It added,

“in case some period or a part of the period is to be excluded from the period for the purpose of calculation of interest, this issue has to be decided by the authorities prescribed under sub-section (2) of Section 244A. The Assessing Officer himself cannot take onto himself power and deprive an assessee from the interest payable under Section 244A of the Act of 1961.”

In the case at hand, the Court noted, the AO had given “shoddy reasons” for denying the interest by merely writing a line.

It added that having recorded assessee;s contention that the TDS was though reflected in the Form no.26AS of the respondent-assessee but was not reflected, when the revised return was filed, the AO ought not to have denied interest by saying that there was a lapse on the part of the assessee in claiming the same in its revised return of income.

As such, interest on delayed TDS refund was upheld and Revenue's appeal was dismissed.

For Appellant: Advocates Shlok Chandra, SSC with Ms. Naincy Jain, JSC.

For Respondent: Advocates Rohit Jain & Mr. Deepesh Jain, Advocates