The Bombay High Court earlier this month expressed ‘serious concerns’ over ‘laxity’ and delays by the Income Tax department over cases of tax refunds stuck for ‘no rhyme or reason,’ resulting in an increase in ‘huge interest burden’ on the Central government or public exchequer.
The court said such ‘unwarranted interest amounts’ being required to be paid, if saved, can be utilised for other essential public expenditures and citizens are deprived of benefits of such amounts instead of same being paid to the assessee due to negligence of officials.
A bench of Justices Girish S Kulkarni and Advait M Sethna made observations on December 2 while hearing a plea filed by Bloomberg Data Services (India) Pvt Ltd, which challenged delay in receiving tax refunds worth Rs 77. 64 crore for assessment years 2013-14 and 2016-17.
The petitioner firm through senior advocate Percy Pardiwalla argued that the refund had not been processed in a timely manner and an interest of Rs 3.1 crore is due and payable to his client and it has not been granted by the department. The firm sought prompt release of refund along with applicable interest.
The bench observed, “We are quite seriously concerned with such a state of affairs…Once the taxpayer is entitled to the refund and when there are no proceedings against the assessee in that regard that are intended to be taken by the Revenue, the refund of the tax amount, if any, ought to be immediately granted to the assessee, needs to be the rule. If this is being followed in breach, merely on account of negligence/laxity on the part of the department… It may be quite easy for the tax officials not to be serious on such an issue, however, it cannot be forgotten that such interest payment goes from the taxpayers’ pockets.”
Justice Kulkarni for the bench questioned as to why no appropriate communication between authorities should result in government being “unwarrantedly saddled with huge interest amounts” and same can be avoided by effective mechanism having prompt flow of instructions between officers concerned.
It wondered whether the authorities had such a mechanism or routine audit in place to ascertain who would become accountable for huge interest amounts.
“As a Constitutional court, we cannot overlook these issues and merely pass routine orders recording grant/receipt of refund,” the court said. It added that besides rights of assessees and ‘serious prejudice’ caused to them due to delays, it was ‘equally concerned with the larger public interest of burden on the public exchequer.’
Posting the next hearing to December 10, the HC asked authorities to address the issue and sought an affidavit from the IT department as to what is the mechanism in place for officials concerned to avoid incurring huge interest amounts.