Refund –When an amount though found refundable to the assessee is utilised by the Department, interest is payable u/s. 244(1A) for the period of such utilization.

CIT v. Jyotsna Holding P. Ltd. [2016] 382 ITR 451 (SC)

The
Supreme Court took note of the facts in respect of the assessment year 1987-88
(similar fact situation appeared in respects of all three assessment years viz.
1985-86, 1986-87 and 1987-88.) For the assessment year 1987- 88, the respondent
filed its return on the basis of self tax assessment made by it and paid a sum
of Rs.3,23,68,834 on September 12, 1987. The assessment was made u/s. 143(3) by
the assessing authority on March 28, 1988, as per which an amount of
Rs.2,03,29,841 was found refunable to the respondent/assessee. Instead of
immediate refund of this amount, the assessing authority ordered that the same
would be adjusted against the demand for the year 1986-87. It was ultimately
adjusted on July 25, 1991. The question that arose, in these circumstances, was
as to whether the assessee would be entitled to interest on the aforesaid
amount which was kept by the Revenue for the period from March 28, 1988 to July
25, 1991. The assessee claimed the interest, which request was rejected by
Assessing Officer. However, the Commissioner of Income-tax (Appeals) allowed
the appeal of the assessee against the order of the Assessing Officer by
invoking the provisions of section 244(1A) of the Income-tax Act and held that
the interest was payable on the aforesaid amount. This order was upheld by the
Income-tax Appellate Tribunal as well as by the High Court.

On appeal, the
Supreme Court after going through the order of High Court did not find anything
wrong with the same. According to the Supreme Court the amount in question,
though found refundable to the assessee, was utilized by the Department and,
therefore, interest was payable u/s. 244(1A) of the Income-tax Act.