Bhamabai Gangadhar Mate v. The Union of India Through Its Principal Secretary and Others

IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT AURANGABAD

WRIT PETITION NO. 8850 OF 2023 Bhamabai w/o Gangadhar Mate age 85 years, occ. Agril R/o Nighoj, Tq. Rahata Dist. Ahmednagar (Maharashtra State) PAN No. BBZPM1987K. .. Petitioner Versus

¶1The Union of India Through Secretary Ministry of Finance New Delhi

¶2The Principal Commissioner Income Tax – 1, 3rd Floor, A-Wing Shankar Seth Road, Swargate Pune.

¶3The Income Tax Officer Ward -1, Behind Natraj Hotel, Ahmednagar Tq. & Dist. Ahmednagar .. Respondents Mr. R. R. Chandak, Advocate for the Petitioner. Mrs. Kalpalata Patil Bharaswadkar, Advocate for Respondent Nos. 2 and 3.

CORAM : RAVINDRA V. GHUGE AND R. M. JOSHI, JJ.

DATE : 23rd FEBRUARY, 2024. JUDGMENT : ( Per Ravindra V. Ghuge, J.) 2024:BHC-AUG:4636-DB

¶1Rule. Rule made returnable forthwith and heard finally by the consent of the parties.

¶2The Petitioner has put forth prayer clauses 'C', 'D' and 'E' as under :- C) By issuing appropriate writ, order or directions in the like nature, the impugned order dated 23.03.2023 passed by the respondent no. 3 for the Assessment year 2010-11 and Assessment year 2012-13 may kindly be quashed and set aside. D) By issuing appropriate writ, order or directions in the like nature, the respondent authority be directed to pay the interest / compensation @ 9% Per Annum for the period 29.12.2020 till 02.03.2022 on the count of delay in payment of refund to the petitioner of Rs.20,07,585/- for the Assessment year 2010-11 in the interest of justice. E) By issuing appropriate writ, order or directions in the like nature, the respondent authority be directed to pay the interest/compensation @ 9% Per Annum for the period 29.12.2020 till 22.03.2022 on the count of delay in payment of refund to the petitioner of Rs.19,05,340/- for the Assessment year 2012-13 in the interest of justice.

¶3The Union of India has enacted the "Direct Tax Vivad Se Vishwas Scheme 2020" (hereinafter referred to as the "VSV Scheme"). The aim and object behind introduction of the said scheme was to provide a resolution to pending tax disputes which would not only benefit the Government by generating timely revenue, but also the tax payers. It is in this backdrop that the Petitioner opted for the said scheme. The PCIT-1, Pune issued an order in Form no. 5 for the full and final settlement of the arrears. A certificate was issued for the Assessment year 2010-2011. The refund amount to which the Petitioner was entitled to, was also mentioned in the said order.

¶4The grievance of the Petitioner is that despite Form No. 5 having been issued, the department did not issue the refund order. The Petitioner was constrained to request for the refund, to the Respondent No. 3 Income Tax Officer, Ward-1, Ahmednagar, repeatedly.

¶5It is further submitted that under the VSV Scheme, the penalty proceeding under Section 271(1)(c) of the Income Tax Act, was dropped by the department. Yet, the Petitioner did not receive the refund amount. Surprisingly, the Petitioner received a letter on 9th November, 2021 calling upon the Petitioner to explain as to why Form Nos. 3 and 5 should not be revoked. The petitioner replied to the same. Despite the above, no interest was paid on the refund amount. Ultimately, the amount for the Assessment Year 2010-11 and 2012-13 was refunded on 2nd March, 2022 and 22nd March, 2022 respectively. The chart elaborating the delay in issuing the refund is reproduced as under :- Name AY Refund amount

as per form No. Form No. 5 of DVSV issued on Date

of receipt refund No. of days delay Babasaheb Mate

10.11 1994805

29.12.2020

3.3.2022 Bhamabai Mate

10.11 2007580

29.12.2020

2.3.2022 Babasaheb Mate

12.13 1902842

29.12.2020

10.5.2022 Bhamabai Mate

12.13 1905340

29.12.2020

22.3.2022 Bhimabai mate

12.13 3538047

29.12.2020

13.10.2022

¶6The department has vehemently opposed this Petition. An affidavit-in-reply dated 20th February, 2024 has been filed for setting forth reasons to oppose the Petition. It is informed that though the department conceded that the amount ought to be refunded and has eventually refunded the amount, interest should not be levied on account of the technical reasons due to which the payment of refund got delayed.

¶7We find that this Court, at the Principal Seat, has dealt with identical facts vide it's order dated 28th August, 2023 delivered in Writ Petition No. 10314/2023 (UPS Freight Services India Private Limited vs. Deputy Commissioner of Income Tax Central Circle 3-2). This Court has recorded in Paragraph No. 4 that "Except a bald statement in the affidavit that delay in issuing refund has been attributable to some technical issues, there is nothing substantial in the affidavit." It was further recorded in Paragraph Nos. 7 and 8 as under :-

¶7It will be useful to reproduce paragraph 2 of the circular 11/2016 (F.No. 279/MISC/M-140/2015-ITJ) dated

26.4.2016 that Mr. Gandhi tendered. It reads as under :- "2. The issue of eligibility for interest on refund of excess TDS to a tax deductor has been a subject matter of controversy and litigation. The Hon'ble Supreme Court of India in the case of Tata Chemicals Limited, Civil Appeal No. 6301 of 2011 vide order dated 26.2.2014, held that "Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest." (emphasis supplied)

¶8It will be apposite to re-produce paragraphs 37 and 38 of Tata Chemicals Ltd. (supra) and the same reads as under :- "37. A "tax refund" is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled to payment of interest on the amount of taxes refunded pursuant to an order passed under the Act, including the order passed in an appeal. In the present fact scenario, the deductor/asessee had paid taxes pursuant to a special order passed by the assessing officer/Income Tax Officer. In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company.

¶38Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course." ( emphasis supplied)

¶8It was finally concluded in Paragraph Nos. 9, 10 and 11 that the Petitioner shall be entitled to the interest on the amount from the date the refund became due till the date it was actually paid, at the rate of 6% per annum which is the rate prescribed under Section 244(A) of the Income Tax Act.

¶9In view of the above, this Writ Petition is partly allowed. We direct the department to calculate the interest at the rate of 6% per annum to be paid within 30 days.

¶10Rule is made absolute in above terms.

¶11No order as to costs.

( R. M. JOSHI) ( RAVINDRA V. GHUGE) JUDGE

JUDGE dyb