Facts of the Case

The petitioners filed multiple writ petitions before the Delhi High Court seeking directions to the Income Tax Department to adjudicate their applications filed under Section 119(2)(b) of the Income Tax Act, 1961.

These applications sought refund of income tax inadvertently paid on interest received under Section 28 of the Land Acquisition Act, 1894 for various assessment years.

The petitioners contended that despite filing such applications, there was an inordinate delay of nearly four years in their disposal by the authorities.

Issues Involved

  1. Whether the respondent authority is obligated to decide applications filed under Section 119(2)(b) of the Income Tax Act, 1961 within a reasonable time.
  2. Whether delay in adjudication of refund applications violates administrative fairness and CBDT circulars.
  3. Whether tax is payable on interest received under Section 28 of the Land Acquisition Act, 1894.

Petitioner’s Arguments

  • The petitioners relied upon the Supreme Court judgment in CIT vs Ghanshyam Dass (HUF) (2009) 8 SCC 412, contending that interest received under Section 28 is not taxable income.
  • It was argued that even if tax was paid mistakenly or under misrepresentation, the assessee is entitled to claim a refund of non-taxable income.
  • The petitioners emphasized the unreasonable delay of nearly four years in disposal of their applications.
  • Non-adjudication was stated to be contrary to CBDT Circular dated 09 June 2015.

Respondent’s Arguments

  • The Revenue contended that subsequent High Court decisions have held that such interest is taxable under the head “Income from Other Sources.”
  • It was further argued that most applications were barred by limitation as per the same CBDT Circular relied upon by the petitioners.

Court’s Findings / Order

  • The Delhi High Court did not adjudicate on the merits of taxability of the interest.
  • Considering the limited prayer, the Court disposed of the petitions with a direction:
    • The respondent shall decide the applications within eight weeks in accordance with law.
  • The Court clarified that:
    • All rights and contentions of both parties remain open, including maintainability and limitation.

Important Clarification

  • The Court avoided ruling on whether interest under Section 28 is taxable, leaving the issue open.
  • The judgment emphasizes timely disposal of applications under Section 119(2)(b).
  • It reinforces that administrative delay cannot defeat statutory remedies.

Sections Involved

  • Section 119(2)(b), Income Tax Act, 1961
  • Section 28, Land Acquisition Act, 1894

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:2350-DB/MMH23072020CW44892020_204948.pdf


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