Kerala High Court
Assistant Commissioner Of Income Tax vs Satwashil Vasant Mane on 3 March, 2025
Author: A.K.Jayasankaran Nambiar
Bench: A.K.Jayasankaran Nambiar
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1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
MONDAY, THE 3RD DAY OF MARCH 2025 / 12TH PHALGUNA, 1946
WA NO. 369 OF 2025
AGAINST THE ORDER/JUDGMENT DATED 7.1.2025 IN WP(C)
NO.21868 OF 2024 OF HIGH COURT OF KERALA
APPELLANTS/RESPONDENTS:
1 ASSISTANT COMMISSIONER OF INCOME TAX,
OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME
TAX, CENTRAL CIRCLE-1, KOZHIKODE, 7TH FLOOR,
AAYAKAR BHAVAN, NORTH BLOCK, NEW ANNEXE
BUILDING, MANANCHIRA, KOZHIKODE, PIN - 673001
2 THE PRINCIPAL COMMISSIONER OF INCOME TAX,
(CENTRAL), KOCHI,
OFFICE OF THE PRINCIPAL CHIEF COMMISSIONER OF
INCOME TAX, KERALA, CENTRAL REVENUE BUILDING,
I.S. PRESS ROAD, KOCHI, PIN - 682018
BY ADVS.JOSE JOSEPH, SC, INCOME TAX DEPARTMENT,
KERALA
SRI.NAVANEETH.N.NATH
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2
RESPONDENT/PETITIONER:
SATWASHIL VASANT MANE,
AGED 30 YEARS
S/O. VASANT RAMCHANDRA MANE, RESIDING AT 1527,
CHOVVA P.O., CHOVVA, KANNUR DISTRICT, PIN -
670006
BY ADVS.
SAJU S
A.V.SAJAN(K/384/2001)
SAHDHA K.U.(K/1330/2024)
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON
03.03.2025, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
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3
JUDGMENT
Easwaran S., J.
This intra-court appeal is preferred by the Revenue aggrieved
by the judgment dated 7.1.2025 of the learned Single Judge in WP(C)
No.21868/2024 directing the appellants to grant interest on the
amount of refund ordered.
2. The brief facts for the disposal of the appeal are as
follows:
The 1st respondent-assessee approached the writ court aggrieved by
the inaction on the part of the appellants in not releasing interest on
the amount of refund to which the 1st respondent-assessee was
entitled to in pursuance to issuance of a certificate in Form-5 under
Sections 5(2) r/w 6 of the Direct Tax Vivad se Vishwas Act, 2020. By
an order of assessment under Section 143(3) of the Income Tax Act,
1961 for the assessment year 2016-17, the assessee was assessed to
a total income of Rs.1,86,80,000/-, which includes an addition of
Rs.75,00,000/- as unexplained investment. In the meantime, the
assessee filed a declaration and undertaking under sub-Section (5)
of Section 4 of the Direct Tax Vivad se Vishwas Act, 2020 ('Act', for
short). On filing of the said undertaking and declaration, a
certificate was drawn by the Assistant Commissioner of Income Tax,
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Central Circle-I, Kozhikkode showing that the assessee was entitled
for a refund of Rs.28,81,185/-. Immediately thereof, the Principal
Commissioner of Income Tax, Kochi issued a certificate in Form-5 on
24.11.2021 under sub-Section (2) of Section 5 of the Act. Thereafter,
on 29.11.2023, the Assistant Commissioner of Income Tax, Central
Circle-I, Kozhikkode passed Ext.P4 order giving effect to the refund,
but however denying interest. Aggrieved by the said order, the
assessee filed a grievance petition on 8.1.2024 which was answered
by stating that any amount paid in pursuance of a declaration made
under Section 4 shall not be refundable under any circumstances. In
these circumstances, the assessee approached the writ court
seeking for the following reliefs:
"i). Issue a writ or directions in the nature of or
similar to writ of certiorari to quash the Exhibit-P4 so
far as it not allowed interest on refund dated
29.11.2023 and also to set aside the Exhibit-P6 and P8
Communication dated 01.02.2024 and 10.04.2024
issued by the Assistant Commissioner of Income Tax
Central Circle-1 Kozhikode, to the petitioner.
ii) Issue a Writ of Mandamus or any other
appropriate Writ, Order or Direction directing the 1st
to 2nd Respondents to reconsider the Exhibit-P5
grievance application of the petitioner afresh and
pass order to giving effect issuing applicable interest
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on refund issued from the date of issuance of Form
No.5 dated 24.11.2021, in a time bound manner.
iii) Pass such other and further directions in
favour of the petitioner as this Hon'ble Court may
deem fit and proper."
3. The learned Single Judge, who considered the writ
petition negated the contention of the Revenue that interest on such
excess payment is not payable because of a specific exclusion of the
provision of Section 244A of the Income Tax Act, 1961 by virtue of
Section 7 of the Act. The learned Single Judge proceeded to hold
that the requirement of imposing interest on delayed refunds is a
matter of accountability of the Department and a measure of
recompense for the person who was deprived of the money. It is
aggrieved by these findings that the present appeal is preferred by
the Revenue.
4. Heard Sri.Jose Joseph, the learned Standing Counsel
appearing for the appellants, and Sri.S.Saju, the learned counsel
appearing for the 1st respondent-assessee.
5. The learned counsel for the appellants primarily
contended that the Direct Tax Vivad se Vishwas Act, 2020 being a
special enactment, the provisions thereof will have to be given a
strict interpretation. He further pointed out that with reference to
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Section 7 of the Act, when the provision of Section 244A of the
Income Tax Act, 1961 has been specifically excluded, the assessee
cannot claim any interest on the amount of refund.
6. We have considered the rival submissions raised across
the bar and are of the view that the contention of the appellants has
to fail for the reasons to follow.
7. Section 244A of the Income Tax Act, 1961 reads as under:
"244A. Interest on refunds.--(1) Where refund of
any amount becomes due to the assessee under this
Act], he shall, subject to the provisions of this section,
be entitled to receive, in addition to the said amount,
simple interest thereon calculated in the following
manner, namely:--
(a) where the refund is out of any tax collected at
source under section 206C or paid by way of advance
tax or treated as paid under section 199, during the
financial year immediately preceding the assessment
year, such interest shall be calculated at the rate of
one-half per cent for every month or part of a month
comprised in the period,--
(i) from the 1st day of April of the assessment
year to the date on which the refund is granted,
if the return of income has been furnished on or
before the due date specified under sub-section
(1) of section 139; or
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(ii) from the date of furnishing of return of
income to the date on which the refund is granted,
in a case not covered under sub-clause (i);
(aa) where the refund is out of any tax paid under
section 140A, such interest shall be calculated at the
rate of one-half per cent for every month or part of a
month comprised in the period, from the date of
furnishing of return of income or payment of tax,
whichever is later, to the date on which the refund is
granted:
Provided that no interest under clause (a) or clause
(aa) shall be payable, if the amount of refund is less
than ten per cent of the tax as determined under sub-
section (1) of section 143 or on regular assessment;
(b) in any other case, such interest shall be
calculated at the rate of 5[one-half per cent.] for every
month or part of a month comprised in the period or
periods from the date or, as the case may be, dates of
payment of the tax or penalty to the date on which the
refund is granted.
(1B) Where refund of any amount becomes due to
the deductor in respect of any amount paid to the
credit of the Central Government under Chapter XVII-
B, such deductor shall be entitled to receive, in
addition to the said amount, simple interest thereon
calculated at the rate of one-half per cent for every
month or part of a month comprised in the period,
from the date on which--
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(a) claim for refund is made in the prescribed
form; or
(b) tax is paid, where refund arises on
account of giving effect to an order under section
250 or section 254 or section 260 or section 262,
to the date on which the refund is granted.
(2) If the proceedings resulting in the refund are
delayed for reasons attributable to the assessee or the
deductor, as the case may be,] whether wholly or in
part, the period of the delay so attributable to him
shall be excluded from the period for which interest
is payable under sub-section (1) or (1A) or (1B), and
where any question arises as to the period to be
excluded, it shall be decided by the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner whose decision
thereon shall be final.
(3) Where, as a result of an order under sub-
section (3) of section 115WE or section 115WF or
section 115WG or sub-section (3) of section 143 or
section 144 or section 147 or section 154 or section
155 or section 250 or section 254 or section 260 or
section 262 or section 263 or section 264 or an order
of the Settlement Commission under sub-section (4)
of section 245D, the amount on which interest was
payable under sub-section (1) has been increased or
reduced, as the case may be, the interest shall be
increased or reduced accordingly, and in a case where
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the interest is reduced, the Assessing Officer shall
serve on the assessee a notice of demand in the
prescribed form specifying the amount of the excess
interest paid and requiring him to pay such amount;
and such notice of demand shall be deemed to be a
notice under section 156 and the provisions of this Act
shall apply accordingly.
(4) The provisions of this section shall apply in
respect of assessments for the assessment year
commencing on the 1st day of April, 1989, and
subsequent assessment years:
Provided that in respect of assessment of fringe
benefits, the provisions of this sub-section shall have
effect as if for the figures "1989", the figures "2006"
had been substituted.
Explanation.--For the purposes of this clause, "date
of payment of tax or penalty" means the date on and
from which the amount of tax or penalty specified in
the notice of demand issued under section 156 is paid
in excess of such demand.
(1A) In a case where a refund arises as a result of
giving effect to an order under section 250 or section
254 or section 260 or section 262 or section 263 or
section 264, wholly or partly, otherwise than by
making a fresh assessment or reassessment, the
assessee shall be entitled to receive, in addition to the
interest payable under sub-section (1), an additional
interest on such amount of refund calculated at the
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rate of three per cent per annum, for the period
beginning from the date following the date of expiry
of the time allowed under sub-section (5) of section
153 to the date on which the refund is granted."
The scheme of Section 244A provides for calculation of the interest
in different scenarios as provided therein.
8. In order to appreciate the contention of the Revenue that
because of the exclusion provided under the Act, the assessee is not
entitled to claim interest under Section 244A of the Income Tax Act,
1961, we need to consider Sections 5 and 7 of the 2020 Act closely.
Section 5, which provides for the time and manner of payment, is
extracted hereunder:
"5. Time and manner of payment.-(1) The designated
authority shall, within a period of fifteen days from the
date of receipt of the declaration, by order, determine
the amount payable by the declarant in accordance with
the provisions of this Act and grant a certificate to the
declarant containing particulars of the tax arrear and
the amount payable after such determination, in such
form as may be prescribed.
(2) The declarant shall pay the amount determined
under sub-section (1) within fifteen days of the date of
receipt of the certificate and intimate the details of such
payment to the designated authority in the prescribed
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form and thereupon the designated authority shall pass
an order stating that the declarant has paid the amount.
(3) Every order passed under sub-section (1),
determining the amount payable under this Act, shall be
conclusive as to the matters stated therein and no matter
covered by such order shall be reopened in any other
proceeding under the Income-tax Act or under any other
law for the time being in force or under any agreement,
whether for protection of investment or otherwise,
entered into by India with any other country or territory
outside India.
Explanation.--For the removal of doubts, it is hereby
clarified that making a declaration under this Act shall
not amount to conceding the tax position and it shall not
be lawful for the income-tax authority or the declarant
being a party in appeal or writ petition or special leave
petition to contend that the declarant or the income-tax
authority, as the case may be, has acquiesced in the
decision on the disputed issue by settling the dispute."
Sub-Section (2) creates an obligation on the declarant to pay the
amount determined under sub-Section (1) within fifteen days of the
date of receipt of the certificate.
9. Section 7 of the Act reads as under:
"7. No refund of amount paid.-Any amount paid in
pursuance of a declaration made under section 4 shall
not be refundable under any circumstances.
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Explanation.--For the removal of doubts, it is
hereby clarified that where the declarant had, before
filing the declaration under sub-section (1) of section
4, paid any amount under the Income-tax Act in
respect of his tax arrear which exceeds the amount
payable under section 3, he shall be entitled to a
refund of such excess amount, but shall not be
entitled to interest on such excess amount under
section 244A of the Income-tax Act."
Section 7 speaks about refund of any amount paid in pursuance of a
declaration made under Section 4. The contention of the Revenue
that once a declaration under Section 4 is accepted, the excess
amount, if any, found though has to be refunded, the assessee cannot
claim interest, appears to be far fetched for the reason that we could
not find any absolute prohibition under the Act disentitling the
assessee from claiming interest. What is provided under Section 7
is exclusion of interest as provided under Section 244A of the Income
Tax Act, 1961.
10. The facts presented before us would clearly establish
that the appellants were clearly under fault in not releasing the
amount in due time. The declaration was accepted by Ext.P3 on
24.11.2021. Going by Section 5, if any amount was liable to be paid
by the assessee, the assessee was bound to pay the same within
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fifteen days. We are inclined to think that, since an obligation is
created on the assessee to pay the amount within fifteen days,
though not expressly provided, the Department is also equally bound
under law to refund the excess amount within a reasonable time. In
the present case, the fifteen-day period calculated from Ext.P3 order
expired on 8.12.2021. The Assistant Commissioner of Income Tax,
Central Circle-I, Kozhikkode, unreasonably sat over the matter after
Ext.P3 order and took consequential action only on 29.11.2023.
11. In this context, it is pertinent to mention that the power
of the court to grant interest is always available under the provisions
of Section 3 of the Interest Act, 1978. Notwithstanding the
provisions of the Income Tax Act, 1961 and also the Direct Tax Vivad
se Vishwas Act, 2020, the Court can always grant reasonable interest
if it is satisfied that the delay occurred is solely due to the fault of
the Revenue. We are fortified in our views in the light of the
provisions contained under Section 4 of the Interest Act, 1978.
12. We also take note of the fact that on similar facts, a
Division Bench of the Bombay High Court in UPS Freight Services
India Pvt. Ltd. v. Deputy Commissioner of Income Tax, Central Circle
3-2, Writ Petition Civil No.10314/2023 decided on 28.8.2023 [2023
SCC OnLine Bom 2960] held that interest is leviable since the State
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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. We are in respectful agreement with
the view expressed by the Division Bench of the Bombay High Court
and therefore, cannot find fault with the findings of the learned
Single Judge in the impugned judgment. Hence, we see no reason
to interfere with the findings rendered by the learned Single Judge.
Accordingly, the writ appeal fails and the same is dismissed.
No order as to costs.
Sd/-
DR.A.K.JAYASANKARAN NAMBIAR,
JUDGE
Sd/-
EASWARAN S.,
JUDGE
jg
