Time taken to cure defects in return not exempted while calculating interest under Sec. 244A: HC

Case Details: State Bank of India v. CCIT - [2022] 137 taxmann.com 174 (Kerala)

Judiciary and Counsel Details

• • S.V. Bhatti, Bechu Kurian Thomas and Basant Balaji, JJ.
  • A. Kumar, P.J. Anilkumar and P.S. Sree Prasad, Advs. for the Appellant. 
  • K.M.V. Pandalai and Christopher Abraham, Advs. for the Respondent.

Facts of the Case

Assessee-State Bank of India filed writ petition seeking direction for payment of interest on refund, which the Assessing Officer (AO) rejected. The assessee claimed interest on refund of surplus TDS effected in the certain Assessment Years. However, AO did not accept the appellant’s interest claim while refunding the excess amount received for the return period.

AO submitted that the assessee is expected to file the return fully compliant with the law requirements. In the given case, certain omissions were pointed out in the income tax return by the AO. When omissions were noted in the ITRs, the assessee took time to cure or rectify such omissions. Thus, the levy of interest during this period on the Department was unavailable from the plain language of Section 244A.

High Court Held

The High Court held that the section must receive a meaning, as spelt out in the enactment. As per section 244A, a refund of any amount firstly becomes due to the assessee upon order of assessment made by the assessing officer.
In addition to a refund of excess tax received or collected, the assessee is also entitled to interest on the excess refunded by order of assessment; however, Section 244A(2) governs the period of interest.

Section 244A(2) provides that if refunds are delayed for reasons attributable to the assessee, the period of the delay so attributable to him shall be excluded from the period for which interest is payable.

Therefore, omission or commission in return filed by the assessee resulting in a delay in assessment is attributable to the assessee; hence, the time taken to cure those omissions and defects is excluded for interest calculation.
The Dept. cannot be called upon to compensate by way of interest for the period which the assessee took for curing the defects. Thus, the assessee wasn’t entitled to interest on a refund for the period taken by the assessee for curing the defects or omissions in the returns.