In a recent ruling, the Gujarat High Court directed the Income Tax Department to pay 6% interest per annum for a period of 20 months on the delayed refund of ₹2,20,41,042 under the Direct Tax Vivad se Vishwas (DTVSV) Scheme, 2020.
The order was propounded by the Gujarat High Court against a Special Civil Application filed by M/s Sahil Total Infratech Pvt. Ltd. The concerned refund, which was due under Form-5 and issued on December 7, 2021, was ultimately credited to the petitioner’s bank account only on January 25, 2024 prompting the filing of the present petition.
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The Petitioner, represented by Aditya Ajgaonkar and Bhaumik Dholariya contended that the Jurisdictional Assessing Officer (JAO) had issued a refund order on May 12, 2022, which was subsequently accounted for at the Centralized Processing Center (CPC) on July 26, 2022.
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However, it was claimed that the refund was not credited to the petitioner due to issues of bank account validation. The petitioner had closed their existing bank account and validated a new account in May 2022, but despite repeated grievances raised on the Income Tax Portal, the refund remained unprocessed until January 2024.
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The Income Tax Department, represented by Senior Standing Counsel Karan G. Sanghani, contested claim for interest, arguing that explanation to Section 7 of the DTVSV Act, 2020, interest under Section 244A of the Income Tax Act, 1961, was not payable.
The Division Bench of Justice Bhargav D. Karia and Justice D.N. Ray referenced the Supreme Court decision in Union of India v. Tata Chemicals Ltd. (2014) observing that tax refunds, if delayed, must carry interest as compensation for the retention of funds by the Department. The Division Bench explicitly stated that while interest under Section 244A was not applicable, the petitioner was still entitled to interest on the refund amount under the Vivad se Vishwas Scheme, 2020.
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Holding that the fault may not be attributed to either party, the Court ordered the Department to pay interest at 6% per annum for a period of 20 months (from June 1, 2022, to January 31, 2024), amounting to ₹22,04,104. The Court directed that this amount be paid within three months from the date of receipt of the order.
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