Facts of the Case

The petitioner, KRBL Limited, filed a writ petition seeking directions to the Revenue authorities to give effect to the order passed by the Income Tax Appellate Tribunal (ITAT) dated 09 May 2022. The ITAT had decided all issues in favour of the petitioner and deleted the additions made by the department.

Despite repeated representations dated 20 May 2022 and 11 July 2022, the Revenue failed to:

  • Pass the appeal effect order,
  • Issue a refund of ₹11,56,81,040/- along with applicable interest,
  • Pay short interest of ₹1,74,91,170/-,
  • Release seized amount of ₹60,00,000/- with interest.

Issues Involved

  1. Whether the Revenue is obligated to pass an appeal effect order within a prescribed time after an ITAT decision.
  2. Whether failure to issue a refund along with statutory interest violates provisions of the Income Tax Act, 1961 and Article 265 of the Constitution of India.
  3. Whether the pendency of a proposed appeal by the Revenue can justify delay in granting refunds.

Petitioner’s Arguments

  • The ITAT had conclusively decided the matter in favour of the petitioner, making them entitled to a refund of taxes paid.
  • The delay in issuing refunds violates:
    • Section 244A & 244A(1A) (interest on refunds),
    • Section 237 & 240 (refund provisions under the Act),
    • Article 265 of the Constitution (no tax shall be collected except by authority of law).
  • Despite formal requests, the Revenue failed to act, causing unjustified withholding of lawful dues.

Respondent’s Arguments

  • The Revenue submitted that it was in the process of filing an appeal against the ITAT order.
  • Implicitly, the delay was sought to be justified on the ground of intended appellate proceedings.

Court’s Findings / Order

The Delhi High Court held:

  • The Revenue had sufficient time to file an appeal against the ITAT order.
  • As per legal mandate, appeal effect orders must be passed within three months from the date of the appellate order.
  • Pendency or intention to file an appeal does not justify withholding statutory refunds.

Directions Issued:

The Court directed the Revenue to:

  1. Issue refund of ₹11,56,81,040/- along with up-to-date interest;
  2. Pay short interest of ₹1,74,91,170/-;
  3. Release ₹60,00,000/- seized during search with applicable interest;

Further, the Court directed that:

  • All actions must be completed within six weeks,
  • Rights and contentions of parties were kept open.

Important Clarification

  • Filing or intention to file an appeal does not suspend the obligation to grant refunds arising from an appellate order.
  • The Revenue is bound to follow statutory timelines for passing appeal effect orders.
  • Tax authorities cannot retain taxpayer money without legal authority once the issue is decided in favour of the assessee.

Sections Involved

  • Section 244A & 244A(1A), Income Tax Act, 1961 – Interest on refunds
  • Section 237, Income Tax Act, 1961 – Refund of excess tax
  • Section 240, Income Tax Act, 1961 – Refund on appeal
  • Article 265, Constitution of India – No tax without authority of law 

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH19102022CW145902022_190720.pdf

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