PAWAN KUMAR vs. ITO 5(5) CHANDIGARH AND ANR

Facts

The petitioner, Pawan Kumar, an employee of M/s HMT Ltd Tractor Division, sought a writ of mandamus directing the respondents to give effect to the CIT(A) order dated 26.02.2020 and grant consequential refunds. The petitioner received benefits under a Voluntary Retirement Scheme (VRS). He filed an original return on 11.07.2016 and a revised return on 21.03.2018, claiming exemption under Section 10(10B) of the Income Tax Act, 1961. The Assessing Officer (AO) rejected the Section 10(10B) exemption but granted Rs. 5,00,000/- under Section 10(10C), leading to an addition of Rs. 30,70,360/- and a demand of Rs. 16,55,384/-. The CIT(A) partly allowed the appeal on 26.02.2020. The AO rectified the order on 06.08.2020 and gave appeal effect on 03.06.2020, determining a refund of Rs. 8,73,380/-. The respondents stated the refund was issued on 28.01.2022 and credited on 04.02.2022 after the petitioner validated his bank account on 04.01.2022, attributing the delay to the petitioner.

Held

The High Court held that the petitioner is entitled to simple interest under Section 244A of the Income Tax Act, 1961, on the refund amount. The Court reasoned that the delay in validating the bank account by the petitioner cannot be a ground to deny interest, as the provision for interest is statutory. The Court referred to Section 244A, which entitles an assessee to interest on any amount of refund due. Applying the ratio of the Supreme Court judgment in Sadvik Asia Ltd vs. Commissioner of Income Tax-I, Pune, the Court found that the assessee has a right to claim interest. The petition was allowed, and the respondents were directed to pay simple interest at the rate of 9% per annum from 11.07.2016 until the payment is made, to be completed within three months from the receipt of the order. The Court did not expressly leave any issue undecided.

Key Issues

1. Whether the petitioner is entitled to interest under Section 244A of the Income Tax Act, 1961, on the refund amount, despite the delay in validating his bank account. Assessee's Contention: The petitioner argued that he is entitled to interest on the refund amount as per Section 244A of the Act, irrespective of the delay in validating his bank account, citing the Supreme Court judgment in Sadvik Asia Ltd vs. Commissioner of Income Tax-I, Pune. Revenue's Contention: The respondents contended that the petitioner is responsible for the delay in validating his bank account, which occurred on 04.01.2022, leading to the refund being issued on 28.01.2022 and credited on 04.02.2022. Therefore, the petitioner is estopped from claiming interest for the period of delay.