Company deprived of Rs. 40 lakhs for 17 years as department withheld it for no reason: court
A fit case to take action against all officers concernedForward judgment copy to Union Finance Minister: BenchDepartment to pay interest at the rate of 9 per cent
New Delhi: The Supreme Court on Friday held that income tax assessees are entitled to get compensation from the Income Tax Department for belated payment of refunds, including interest thereon.
A Bench of Justice H.K. Sema and Justice A.R. Lakshmanan held "when the claims of the authority are found to be unsustainable or erroneous by the courts, it follows that the authority has acted wrongfully in the sense of not [acting] in accordance with law and compensation to the party deprived must follow."
Writing the judgment, Mr. Justice Lakshmanan noted that in this case the appellant, Sandvik Asia Ltd was deprived of the use of its money of Rs. 40 lakhs for 17 years as the department without any rhyme or reason withheld the amount.
The company had preferred an appeal against a Bombay High Court judgment rejecting its plea for payment of compensation for belated issue of refunds.
Allowing the appeal, the Bench pointed out that while charging interest from the assessees "the Department first adjusts the amount paid towards interest so that the principal amount of tax payable remain outstanding and they are entitled to charge interest till the entire outstanding is paid.
But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest.
This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assessees."
The Bench pointed out that the appellant had been deprived of Rs. 40 lakhs from 1978-79 for no fault of its own and exclusively because of the admittedly unlawful actions of the IT Department without any compensation.
"Such actions and consequences, seriously affected the administration of justice and the rule of law," the Bench said.
The Bench held that this was a fit and proper case in which action should be initiated against all the officers concerned who were in charge of this case at the relevant point of time as because of their inaction the appellant was made to suffer both financially and mentally.
The Bench directed that "a copy of this judgment be forwarded to the Union Finance Minister [P. Chidambaram] for his perusal and further appropriate action against the erring officials on whose lethargic and adamant attitude the Department has to suffer financially."
The Bench directed the department to pay interest at 9 per cent from March 31, 1986 till March 27,1998, the date on which the sum of Rs. 40,84.906 was refunded to the appellant company.
The Bench made it clear that if the amount was not paid within one month the department should pay a penal interest of 15 per cent for the above period.