SLP Dismissed Due to Unexplained Delay: Revenue Liable to Pay Interest on Refund for Wrongful TDS on Agricultural Land Compensation
Issue:
Whether the revenue is liable to pay interest under Section 244A of the Income-tax Act, 1961, on a refund claimed by an assessee for wrongfully deducted TDS on compensation for agricultural land acquisition, especially when the delay in filing the return was due to the deductor’s failure to inform the assessee about the TDS and issue Form 16A, and whether the revenue’s Special Leave Petition (SLP) challenging such a High Court order is maintainable despite a gross and unexplained delay in its filing.
Facts:
For the assessment year 2013-14, the assessee’s agricultural land was acquired by the State of Gujarat in 2001. The Land Acquisition Officer initially granted compensation, but the assessee and other claimants filed Land Reference Cases, leading to the Reference Court awarding additional compensation on April 13, 2011. While depositing 50% of this awarded amount with the Court, the Irrigation Department deducted TDS on the interest portion. However, the Executive Engineer of the Irrigation Department failed to inform the assessee about the TDS deduction and did not issue Form-16A as required by the Income-tax Act and Rules.
Due to this lack of information, the assessee filed an application on May 2, 2018, to condone the delay in filing the return of income to claim the refund. The department condoned the delay under Section 119(2)(b) but explicitly stated that no interest would be admissible on the belated refund claim.
The High Court, in its impugned order, ruled that since the assessee was not at fault for the delay in filing the return (as the deductor neither informed about TDS nor issued Form-16A), the department was liable to pay interest on the refund amount. The High Court further highlighted that, under Section 194LA, no tax was actually liable to be deducted from the interest paid to assessees on the acquisition of agricultural land. Consequently, the High Court directed the department to grant interest on the refund claim from the date of deposit of TDS until the date of refund as per Section 244A. The revenue filed a Special Leave Petition (SLP) against this High Court order.
Decision:
Yes, the Supreme Court held that there was a gross delay in filing the SLP by the revenue, and this delay was not satisfactorily explained. Therefore, the SLP filed by the revenue against the impugned order of the High Court was dismissed.
Key Takeaways:
- Deductor’s Default and Assessee’s Non-Fault: When a deductor fails to provide necessary information (like Form 16A or intimation of TDS deduction) to the assessee, leading to a delay in the assessee filing their return to claim a refund, the assessee is generally not considered at fault for the delay.
- Interest on Refund for Wrongful Collection (Section 244A): If tax is wrongfully collected (e.g., TDS deducted where no tax was liable, as in this case under Section 194LA for agricultural land acquisition interest), the assessee is entitled to interest on the refund under Section 244A. The interest runs from the date of the deposit of the tax.
- Agricultural Land Acquisition Compensation: Interest on compensation for compulsory acquisition of agricultural land is often exempt from tax. Section 194LA specifically deals with TDS on compensation for immovable property acquisition, but it has exceptions, and in this case, the interest on agricultural land compensation was likely exempt.
- Condonation of Delay and Interest: Even if the delay in filing the return is condoned under Section 119(2)(b), the department cannot unilaterally deny interest on the refund if the delay was attributable to their own or their agent’s (deductor’s) fault.
- Gross Delay in SLP: The Supreme Court is very strict about delays in filing petitions. If the revenue fails to provide a satisfactory explanation for a gross delay in filing an SLP, it is likely to be dismissed on that ground alone, without going into the merits of the case. This emphasizes the need for governmental efficiency and prompt legal action.
- Favor of Assessee: The ultimate outcome is in favor of the assessee, as the High Court’s directive to pay interest on the refund stands.
SUPREME COURT OF INDIA
Principal Commissioner Of Income Tax 2
v.
Amrutlal Madhavjibhai Bharad
J.B. PARDIWALA and R. Mahadevan, JJ.
SPECIAL LEAVE PETITION (CIVIL) Diary No.16117 of 2025
MAY 2, 2025
Venkatraman Chandrashekhara Bharathi, Adv., Raj Bahadur Yadav, AOR, Ms. Tusharika Sharma, Raghvendra Shukla, Sarthak Karol, Ishaan Sharma, Advs. for the Petitioner.
ORDER
1. There is a gross delay of 371, 390 and 374 days respectively in filing the Special Leave Petitions which has not been satisfactorily explained by the petitioners.
2. Even otherwise, we see no good reason to interfere with the impugned orders passed by the High Court.
3. The Special Leave Petitions are, accordingly, dismissed on the ground of delay as well as merits.
4. Pending applications, if any, shall also stand disposed of.
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HIGH COURT OF GUJARAT
Mohanbhai Madhavjibhai Bharad
v.
Principal Commissioner of Income-tax
BIREN VAISHNAV and BHARGAV D. KARIA, JJ.
R/SPECIAL CIVIL APPLICATION Nos. 12466, 13606 of 2021 & oths.
DECEMBER 21, 2023
Kushal V. Timbadia and Tushar L. Sheth for the Petitioner. Karan Sanghani for the Respondent.
JUDGMENT
Bhargav D. Karia, J. – Heard learned advocate Mr.Tushar Sheth for the petitioners and learned advocate Mr. Karan Sanghani for the respondent.
2. By these petitions under Articles 226 and 227 of the Constitution of India, the petitioners have challenged the order passed by the Principal Commissioner of Income Tax, Rajkot to the extent of not granting interest on the claim of the refund though the delay was condoned as per the provisions of section 119(2)(b) of the Income-tax Act, 1961 (For short “the Act, 1961”).
3. As the facts are similar in all these petitions, they have been heard together and are disposed of by this common Judgment and Order.
4. Facts are taken from Special Civil Application No. 12466 of 2021 treating it as the lead matter for the sake of convenience.
4.1 The agricultural land of the petitioner was acquired by the State of Gujarat under “Survo Scheme” on 29-11-2001. The Land Acquisition Officer awarded compensation at the rate of Rs. 7.50 per sq. mtr. for irrigated land and Rs. 5/- per sq. mtr. On non-irrigated land.
4.2 Feeling aggrieved, the petitioner and other claimants filed Land Reference Cases before the Additional Senior Civil Judge, Gondal (‘Reference Court’) for additional compensation.
4.3 The Reference Court vide Judgment and Order dated 13-4-2011 awarded the additional compensation at the rate of Rs. 342/- per sq. mtr. for irrigated land and Rs. 275/- per sq. mtr. for non-irrigated land.
4.4 The State of Gujarat challenged the Judgment and Award passed by the Reference Court before this Court. This Court vide Judgment and Order dated 30-4-2012 directed the Irrigation Department to deposit 50% of the awarded amount with the Court and out of 50% amount, half of the amount was permitted to be withdrawn by the claimants and the remaining half of the amount was ordered to be deposited in a Fixed Deposit to be maintained with a nationalized bank for five years.
4.5 While depositing 50% of the awarded amount with the Court, the Irrigation Department deducted Tax at Source (TDS) on the interest portion of the amount deposited and withdrawn. However, the Executive Engineer of the Irrigation Department did not inform the petitioners about the deduction of TDS and did not issue Form-16A as required under the provisions of the ‘the Act,1961’) and Income-tax Rules,1962 (for short ‘the Rules’). The petitioner therefore could not file the return of income to claim refund before the due date under the Act,1961.
4.6 This Court by common Judgment and Order dated 10-8-2015 remanded all the appeals to the Reference Court for deciding the same afresh and it was observed that 25% of the amount which was already paid to the petitioners-claimants would not be recovered.
4.7 Reference Court after remand passed the Judgment and Award dated 8-7-2016 which was challenged by the State Government by preferring First Appeal Nos. 2615/2016 to 2632/2016 before this Court. These appeals were admitted vide order dated 2-12-2016 and in the stay application it was observed that 50% of the amount with interest up to 31-10-2016 is already withdrawn and the remaining amount as per the Judgment and Award was stayed without directing the State Government to deposit any amount. The First Appeals are pending before this Court for adjudication.
4.8 The petitioner thereafter came to know about the fact of the deduction of TDS from the amount of interest deposited by the Irrigation Department and realized that the date of filing the return of income to claim a refund of the amount of TDS had already gone because as per provisions of section 194LA of the Act,1961 no TDS was liable to be deducted from the interest on compensation paid on acquisition of agriculture land. The petitioner, therefore, preferred the application dated 2-5-2018 to condone the delay in filing the return of the income to claim the refund before the respondent authority. The petitioner thereafter submitted a detailed explanation vide letter dated 12-9-2019 before the respondent. The respondent, thereafter, exercising powers conferred under section 119(2)(b) of the Act,1961, by order dated 31-10-2019 allowed the application by condoning the delay in filing the return of income to claim the refund by the petitioner for the Assessment Year 2013-2014. However, there was no observation about the entitlement of interest on the belated claim of the refund whereas in the other four cases, the very same officer in the capacity of PCIT-3, held that no interest would be admissible on the belated claim of refund where the delay was condoned as per the provisions of section 119(2)(b) of the Act, 1961 as per Circular 9/2015 (F. No. 312/22/2015-OT) dated 9-6-2015.
4.9 The petitioner, therefore, being aggrieved by the action of the respondent as well as the order passed by the respondent for not granting the interest on the claim of refund has preferred this petition.
4.10 The petitioner filed a return of income on 5-11-2019 with the Income-tax department and got the refund of the TDS amount which was deducted from the amount of interest amount paid as per the Judgment and Award of compensation passed by the Reference Court under section 28 of the Land Acquisition Act, 1894 by the Irrigation Department, Rajkot. In the return of income filed by the petitioner, interest on the delayed refund of TDS deducted from interest was also claimed. However, no interest on delayed refund was granted to the petitioner.
5. Learned advocate Mr. Tushar Sheth appearing for the petitioners submitted that the delay caused in filing the return of income cannot be attributed to the petitioners as the petitioners had also given an application to the Executive Engineer, Irrigation Department, Rajkot dated 30-4-2018 stating that no written notice about deduction of TDS was given to the petitioners nor the petitioners were informed in writing after deduction of TDS. It was submitted that the Executive Engineer who deducted the TDS did not issue Form-16A disclosing the amount of deduction of tax and the TDS deposited under the Act, 1961.
5.1 It was submitted that the petitioner also found that there was an error in mentioning the correct provision for the deduction of TDS in the TDS return filed by the Executive Engineer. The petitioners, therefore, prayed to the Executive Engineer to correct section 194A instead of section 194C in the TDS return and also prayed to correct ‘F’ (final) instead of ‘P’ (provisional) in the status of booking and requested to issue correct Form no. 16-A.
5.2 The petitioners by letter dated 14-12-2018 also informed the Executive Engineer that there are mistakes in Form no. 26AS related to the deduction of TDS and no corrections were made nor any reply was given to the earlier written application and Form no. 16A was also not issued. The petitioners, therefore, requested for issuance of Form No. 16A by making necessary corrections pointing out that the correct section for deduction of tax at source is section 194A and not section 194C of the Act, 1961. The petitioners along with the return of income also attached applications to condone delay and letters dated 30-4-2018 and 14-12-2018.
5.3 Learned advocate Mr. Sheth submitted that as per the provisions of Section 203 of the Act, 1961 read with Rule 31(3) of the rules, 1962, it was mandatory on the part of the Executive Engineer to issue a certificate in Form-16A to the effect that tax has been deducted specifying the amount so deducted, the rate at which the tax has been deducted and such other particulars as may be prescribed as per Rule 31 of the Rules,1962. It was, therefore, submitted that when the delay was condoned there was no reason for the Income-tax department to deny the interest on refund.
5.4 Reliance was placed by learned advocate Mr. Sheth on the decision of Hon’ble Apex Court in the case of Union of India v. Tata Chemicals Ltd. , wherein the Hon’ble Apex Court has held that 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 and the obligation to refund money received and retained without right implies and carries with it the right to interest.
5.5 It was therefore, submitted that the respondent ought to have granted interest on the refund claim of the petitioners as there was no fault on the part of the petitioners as the petitioners could not file the return of income claiming refund in time and such return was filed after condoning delay by the respondent under section 119(2)(b) of the Act,1961.
5.6 Learned advocate Mr. Sheth further submitted that as the interest on refund is liable to be paid to the petitioners under section 244A of the Act, 1961 and Circular No. 9/2015 which was issued subsequently could not be made applicable for denial of interest on the refund claim of the petitioners.
5.7 It was submitted that the amendment in sub-section(2) of section 244A of the Act, 1961 is made with effect from 1-4-2017 where the words ‘or the deductor, as the case may be’, are inserted and therefore, the same would not be applicable in the facts of the present case as TDS was deducted from the amount of interest awarded under section 28 of the Land Acquisition Act was deposited in the Financial Year 2012-2013 relevant to ?.?. 2013-2014.
5.8 It was therefore, submitted that the petitioners are entitled to interest on the refund claim as no TDS was liable to be deducted under section 194LA of the Act,1961 as the interest on the compensation amount is paid for acquisition of the agricultural land of the petitioners.
5.9 Learned advocate Mr. Sheth also referred to and relied upon Instruction No. 7/2013 dated 15-7-2013 issued by the Income-tax department wherein in view of the decision of Delhi High Court in case of Court On its Own Motion v. CIT (Judgment dated 14-3-2013 passed in Writ Petition (CIVIL) No. 2659/2012), it was directed that in no case should interest under section 244A of the Act, 1961 be denied to the assessee where assessee is not at fault as per the directions issued by the Delhi High Court in paragraph no. 32 of the said judgment.
5.10 It was therefore, submitted that the respondent may be directed to grant interest on the refund claim of the petitioners as the delay is not attributable to the petitioners but due to the fault of the Executive Engineer for deducting tax at source though the same was not deductible, therefore, interest on refund cannot be denied to the assessee when the twin conditions for payment of interest as per section 244A of the Act, 1961 are satisfied.
5.11 It was submitted that the respondent ought to have directed the Assessing Officer to grant interest on the refund claim of the petitioners.
6. On the other hand, learned advocate Mr. Karan Sanghani for the respondent submitted that the respondent has passed the order dated 31-10-2019 under section 119(2)(b) of the Act, 1961 after due verification of the application of the petitioners and considering all the aspects to condone the delay in filing the return of income for A.Y. 2013-2014 according to the relevant provisions of the Act, 1961and Circulars.
6.1 It was submitted that as per the Circular No. 9/2015 dated 9-6-2015 issued by the Central Board of Direct Taxes in cases of condonation of delay in filing of return and claim of refund, no interest would be admissible on a belated claim of refund as per Para 6 (ii) of the said Circular and accordingly, the interest on refund has not been granted to the petitioners.
6.2 It was submitted that the contention of the petitioners that the delay is not attributable to the petitioners is not tenable since the respondent after considering the facts and circumstances condoned the delay in filing the return of income and the claim of refund was allowed. However, so far as interest on the refund claim is concerned, the same is rightly not granted to the petitioners in view of Circular No. 9/2015.
6.3 It was submitted that reliance placed on the decision in case of Tata Chemicals Ltd. (supra) is also not applicable in the facts of the case as the Hon’ble Apex Court issued directions to grant interest on refund as the assessee filed the return of income in time which was assessed and the Commissioner of Income Tax(Appeals) while allowing the appeal concluded that reimbursement of expenses was not a part of income liable for deduction of tax at source under section 195 of the Act, 1961 and accordingly, directed to refund the tax which was deducted at source whereas in facts of the present case, the petitioners did not file the return of income in time and hence the question of granting interest under section 244-A of the Act, 1961 would not arise. It was submitted that the petitioners could get refund only as applications to condone delay in filing return of income to claim the refund was allowed under section 119(2)(b) of the Act,1961, and therefore, till such applications to condone the delay were allowed, the petitioners were not entitled to refund and therefore, there was no question of awarding interest on the refund claim made by the petitioners. It was, therefore, submitted that the contention raised by the petitioners that the delay is not attributable to the petitioner-assessee is not correct, and hence the petitioners are not entitled to interest on the refund claim.
6.4 It was submitted that the provisions of section 203 of the Act, 1961 read with rule 31(3) of the Rules are mandatory provisions, and therefore, it was obligatory on the part of the deductor to furnish a Certificate as per rule 31 of the Rules, 1962 in Form 16-A which was never issued by the Executive Engineer and accordingly the petitioners did not file return of income to claim the refund and therefore, no interest can be paid on the refund claim made by the petitioners after condonation of delay in filing the return of income by the respondent.
6.5 With regard to reliance placed on the decision of Delhi High Court in case of Court On its Own Motion (supra) as well as the Instruction No. 7/2013 dated 15-7-2013 on behalf of the petitioners, it was submitted that Central Processing Centre at Bengaluru only processed the returns filed within the time period specified under section 139(1) of the Act, 1961 and if there exists any refund which requires adjustment then an intimation under section 245 of the Act, 1961 was required to be issued. However, in the facts of the present case, the petitioners did not file the return of income within the stipulated time and therefore, there was no question of issuance of any notice required under section 245 of the Act,1961, and accordingly, the directions issued by the Delhi High Court and Instruction No. 7 of 2013 are not applicable in facts of the case.
6.6 It was submitted that at the time of condonation of delay in filing the return of income, the respondent authority was not required to decide the claim of interest on the refund claim as the refund is subject to the condition that no interest would be paid on refund in case of filing of belated return after condonation of delay as per Circular No. 9/2015. It was, therefore, submitted that the respondent has therefore, rightly not allowed any interest on the belated return in respect of the return of income for A.Y. 2013-2014 as the circular issued by the CBDT is binding upon the respondent authorities. Learned advocate Mr. Sanghani placed reliance on the following decisions in support of such a proposition :
6.7 Relying upon the aforesaid decisions it was submitted that the instruction issued by the CBDT vide Circular No. 9/2015 is binding on the respondent and therefore, no interest on the amount of refund was allowed to the petitioners.
6.8 It was submitted in alternative that as held by the Apex Court, the interest under section 28 of the Land Acquisition Act forms part of the compensation and shall be treated as tax free and the Irrigation Depart of the State of Gujarat is duty-bound to return the said amount with interest even without making any application or filing the income tax return by the petitioners and the State of Gujarat by circular dated 29-12-2018 has clarified that no TDS is liable to be deducted from the amount of interest under section 28 of the Land Acquisition Act. It was therefore, submitted that it is for the Executive Engineer, Irrigation Department to pay the interest on the amount which was deducted and deposited with the Income-tax department as ultimately the said amount was ordered to be refunded on the premise that the same is not taxable. It was submitted that it is clear that said amount was not liable to be deducted by the Irrigation department and therefore, necessary directions may be issued for payment of interest on the amount of TDS which was deducted by the Irrigation department and not by the Income-tax department.
7. Having heard the learned advocates for the respective parties and having considered the facts of the case, it would be germane to refer to various provisions of the Act, 1961 and the Rules,1962 which are relevant to decide the issue as to whether the petitioners are entitled to interest on the refund claim which was filed on condonation of delay by the respondents under section 119(2)(b) of the Act, 1961.
“Income Tax Act, 1961
Section 119 : Instructions to subordinate authorities.
| ** | ** | ** |
(2) Without prejudice to the generality of the foregoing power,-
| ** | ** | ** |
(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise[any income-tax authority, not being [a Joint Commissioner(Appeals) or] a [***] Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;”
Section 194LA: Payment of compensation on acquisition of certain immovable property
Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon:
Section 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 :-
| ** | ** | ** |
(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.”
(Emphasis supplied)
Inserted by the Finance Act, 2017 w.e.f 1-4-2017.
INSTRUCTIONS
Instruction No. 7/2013 dated 15-7-2013
“Hon’ble Delhi High Court vide its judgment in case of Court on its Own motion v. UOI in W.P.(C) 2659/2012 dated 14-3-2013 has issued seven Mandamus for necessary action by the Income-tax Department. One Mandamus is on payment of interest under section 244A of Income-tax Act 1961 when the assessee is not at fault.
2. On this issue, the Hon’ble Court has observed as under:
“31. In the affidavit filed on 29th January, 2013, the respondents have stated as under:-
Where an assessee makes a mistake in the claim of TDS in the e-return and the return is processed and a demand is raised and subsequently, the assessee rectifies the mistake in the claim and files an online rectification application, the same is processed and on any excess TDS is refunded, the interest under section 244A is granted as per the I.T. Act after excluding the period of delay attributable to the assessee in terms of sub-section (2) of section 244A of the Income-tax Act, 1961.
32. An assessee can be certainly denied interest if delay is attributable to him in terms of sub-section (2) to section 244A. However, when the delay is not attributable to the assessee but due to the fault of the Revenue, then interest should be paid under the said section. False or wrong uploading of past arrears and failure to follow the mandate before adjustment is made under section 245 of the Act, cannot be attributed and treated as fault of the assessee. These are lapses on the part of the Assessing Officer ie. the Revenue. Interest cannot be denied to the assessees when the twin conditions are satisfied and in favour of the assessee. However, even in such cases Assessing Officer may deny interest for reasons to be recorded in writing if the assessee was in fault and responsible for the delay. This is the fourth mandamus which we have issued.”
3. In view of the direction of the Hon’ble Court, I am directed to convey that in no case should interest u/s 244A of the Act be denied to the assessee where the assessee is not at fault. The observation of the Hon’ble High Court in Para 32 above be strictly kept in mind while dealing with such matters.
4. I am further directed to state that the above be brought to the notice of all officers working under your jurisdiction for necessary and strict compliance.”
Instruction No. 9/2015 dated 9-6-2015
“In supersession of all earlier Instructions/Circulars/Guidelines issued by the Central Board of Direct Taxes (the Board) from time to time to deal with the applications for condonation of delay in filing returns claiming refund and returns claiming carry forward of loss and set-off thereof under section 119(2) (b) of the Income-tax Act, (the Act) the present Circular is being issued containing comprehensive guidelines on the conditions for condonation and the procedure to be followed for deciding such matters.
2. The Principal Commissioners of Income-tax/Commissioners of Income-tax (Pr.CsIT/CsIT) shall be vested with the powers of acceptance/rejection of such applications/claims if the amount of such claims is not more than Rs. 10 lakhs for any one assessment year. The Principal Chief Commissioners of Income-tax/Chief Commissioners of Income-tax (Pr.CCsIT/CCsIT) shall be vested with the powers of acceptance/rejection of such applications/claims if the amount of such claims exceeds Rs. 10 lakhs but is not more than Rs. 50 lakhs for any one assessment year. The applications/claims for amount exceeding Rs. 50 lakhs shall be considered by the Board.
3. No condonation application for claim of refund/loss shall be entertained beyond six years from the end of the assessment year for which such application/claim is made. This limit of six years shall be applicable to all authorities having powers to condone the delay as per the above prescribed monetary limits, including the Board. A condonation application should be disposed of within six months from the end of the month in which the application is received by the competent authority, as far as possible.
4. In a case where refund claim has arisen consequent to a Court order, the period for which any such proceedings were pending before any Court of Law shall be ignored while calculating the said period of six years, provided such condonation application is filed within six months from the end of the month in which the Court order was issued or the end of financial year whichever is later.
5. The powers of acceptance/rejection of the application within the monetary limits delegated to the Pr.CCsIT/CCsIT/Pr.CsIT/CsIT in case of such claims will be subject to Following conditions:
i. At the time of considering the case under section 119(2)(b), it shall be ensured that the income/loss declared and/or refund claimed is correct and genuine and also that the case is of genuine hardship on merits.
ii. The Pr.CCIT/CCIT/Pr.CIT/CIT dealing with the case shall be empowered to direct the jurisdictional assessing officer to make necessary inquiries or scrutinize the case in accordance with the provisions of the Act to ascertain the correctness of the claim.
6. A belated application for supplementary claim of refund (claim of additional amount of refund after completion of assessment for the same year) can be admitted for condonation provided other conditions as referred above are fulfilled. The powers of acceptance/rejection within the monetary limits delegated to the Pr.CCsIT/CCsIT/Pr.CsJT/CsIT in case of returns claiming refund and supplementary claim of refund would be subject to the following further conditions:
i. The income of the assessee is not assessable in the hands of any other person under any of the provisions of the Act.
ii. No interest will be admissible on belated claim of refunds.
iii. The refund has arisen as a result of excess tax deducted/collected at source and/or excess advance tax payment and/or excess payment of self – assessment tax as per the provisions of the Act.”
8. The Hon’ble Apex Court in case of UOI v. Hari Singh (Judgment dated 15-9-2017 passed in Civil Appeal No.15041/2017) (2018) 15 SCC 201, observed as under:
“2. An admitted fact which is common in all these appeals is that while disbursing the compensation, the Land Acquisition Collector had deducted the tax at source and deposited the same with the Income-tax Department. These appellants preferred the writ petition in the High Court stating that no such deduction at source was permissible in view of the provisions of Section 194-LA of the Income-tax Act, 1961, since the land which was acquired was agricultural land and this provision categorically mentions that in respect of agricultural land, tax at source is not to be deducted.
3. There is no quarrel about the position of law mentioned above. After examining this provision, the High Court had passed an order in Risal Singh v. Union of India [Risal Singh v. Union of India, 2010 SCC OnLine P&H 276 : (2010) 321 ITR 251] directing the Income-tax Department to refund the amount to the Collector with a direction to the Collector to determine whether the compensation is paid for property other than agricultural land or otherwise and whether deduction of tax at source was permissible under any provision of law. The manner in which the Land Acquisition Collector has to proceed further after determining the aforesaid issue is contained in Para 8 of Writ Petition No. 9912 of 2009 decided on 11-1-2001, which is reproduced below:
“8. Accordingly, we allow this petition and direct the Income-tax Department to refund the amount to the Collector within one month from the date of receipt of a copy of this order. Thereafter, the Collector will determine whether compensation paid is for property other than agricultural land or otherwise and whether deduction of tax at source was permissible under any provision of law. Whether deduction is permissible or not will be decided by the Collector within two months from the date of receipt of a copy of this order. If deduction is found not permissible the amount will be refunded to the petitioners not later than three months from receipt of a copy of this order. It is made clear that this order will not affect the right of the Income Tax Department to take such action as may be permissible under the law.”
Similar directions in Sant Ram v. Union of India [Sant Ram v. Union of India, 2009 SCC OnLine P&H 9638] are given in the other case as well.”
9. After the aforesaid observations, the Apex Court issued the following directions:
“7.1 The respondents shall file appropriate returns before the Assessing Officer(s) in respect of Assessment Years in question within a period of two months from today in case they feel that the compensation in respect of land belonging to them which had been acquired was agricultural land, and claim refund of the tax which was deducted at source and deposited with the Income-tax Department. On the filing of these returns, the Assessing Officer(s) shall go into the aforesaid question and wherever it is found that the compensation was received in respect of agricultural land, the tax deposited with the Income-tax Department shall be refunded to these respondents.
7.2 While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) will keep in mind the provisions of section 28 of the Land Acquisition Act and the law laid down by this Court in Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF) [2009 (8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not”
10. In view of the above decision, the Income-tax department has allowed the application made by the applicant to condone the delay in filing the return of the income to claim the refund and also issued the refund. However, the respondent did not grant any interest on the amount of refund though the delay cannot be said to be attributable to the petitioners in the facts of the case.
11. Instruction No. 7/2013 dated 15-7-2013 was issued pursuant to the directions issued by the Delhi High Court in the case of Court On its Own Motion (supra), that in no case interest u/s 244A of the Act be denied to the assessee where the assessee is not at fault. In the facts of the case, the petitioners-assessees were not at fault for not filing the return of income to claim the refund as the deductor i.e. Executive Engineer, Irrigation department neither informed the petitioners about the deduction of tax nor Form-16A which is mandatory was issued. On the contrary, when the petitioners made representations by informing the Executive Engineer, Irrigation department about the wrong mentioning of the provision for deduction of tax in Form No. 26AS issued as per return of TDS to be filed by the deductor, no reply was given. Therefore, it is clear that the petitioners were not at fault for the delay caused in filing the return of income claiming the refund of the tax deducted at source as no tax was payable by the petitioners on the amount of interest under section 194LA of the Act, 1961.
12. The Hon’ble Apex Court in case of Tata Chemicals Ltd. (supra) while considering the issue of payment of interest in case of refund has held 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 for 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/assessee 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.
38. Providing 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, therebeing 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.”
13. It is true that in the said case, the refund was claimed in the return of income which was filed in time. However, the ratio of the said judgment is with regard to the entitlement of the assessee to receive interest on the amount of refund when the collection was illegal and the revenue was obliged to refund such amount with interest as money so deposited is retained and enjoyed by the revenue whereas in the facts of the present case delay in filing the return of income is not attributable to the petitioners and such fact is also not in dispute as the respondent has condoned delay and granted refund to the petitioners.
14. Reliance placed by the respondent authority on Circular No. 9/2015 is also misplaced because paragraph no. 6(ii)of the said circular is to the effect that no interest will be admissible on belated claim of refund when such application is for supplementary claim of refund i.e. claim of additional amount of refund after completion of assessment for the same year. Therefore, reliance placed by the respondent upon the said circular for denying the interest on the refund claim of the petitioners is misplaced. As held by the Apex Court in case of Tata Chemicals Ltd. (supra), the respondent is liable to pay the interest on the amount of refund claim as such amount was wrongly collected because of provisions of section 194LA as no tax was liable to be deducted from the amount of interest paid to the petitioners on the acquisition of agricultural land. The Hon’ble Apex Court has therefore, held that money received and retained without right carries with it right to interest and whenever money received by a party which ex ae quo et bono ought to be refunded, the right to interest follows as a matter of course.
15. It is not in dispute that the amount of refund is already paid to the petitioners and therefore, as a natural corollary, the petitioners are entitled to have the right to get interest on such amount of refund claim.
16. Even as per sub-section(2) of section 244A of the Act, 1961, as it existed during the relevant AY 2013-2014, when the proceedings resulting in the refund are not delayed for reasons attributable to the assessee whether wholly or in part, the period of the delay so attributable only can be excluded from the period for which interest is payable under sub-sections (1) or (1A)or (1B) to section 244A of the Act, 1961. In the facts of the case, the words “or the deductor, as the case may be,” which is inserted with effect from 1-4-2017 would not be applicable as the petitioners have been permitted to file the refund claim for the AY 2013-2014 after condonation of delay and such delay in claiming the refund cannot be said to be attributable to the petitioners as the petitioners were not made aware about the deduction of tax at source by the deductor in absence of issuance of Form No. 16-A which was mandatorily required as per rule 31(3) of the Rules.
17. In view of the foregoing reasons, the petitions succeed and are accordingly allowed. The respondent is directed to grant interest on the refund claim from the date of deposit of the TDS till the date of refund as per the provisions of section 244A of the Act, 1961. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order. Rule is made absolute to the aforesaid extent. No order as to costs.