The Orissa High Court directed authorities to grant income tax refunds under Sections 240 and 244A with interest calculated until actual payment. It ruled that interest cannot be limited to a notional date, ensuring full compensation for delayed refunds.
CUTTACK: The Orissa High Court has observed that retaining the refund matter on its file would serve no meaningful purpose other than directing the competent authority to disburse the refund in terms of Sections 240 and together with interest under section 244A of the IT Act, calculated up to the date on which the payment is actually made. Accordingly, the writ petition was disposed of with such directions.
The court further clarified that once a refund becomes payable to an assessee, the Revenue is duty-bound to grant interest up to the actual date of release. It stressed that interest cannot be curtailed to a hypothetical or earlier cut-off date, as taxpayers are entitled to complete recompense for delays in receiving amounts lawfully due to them.
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The petitioner approached the Orissa High Court seeking a writ of mandamus under Articles 226 and 227 of the Constitution to direct the release of a refund under Sections 240 and 244A of the Income Tax Act, so as to give effect to the appellate order dated 14 June 2018 passed by the Commissioner of Income Tax (Appeals)-2, Bhubaneswar, in IT Appeal No. 0684/2016-17 for the Assessment Year 2009-10.
The background is that the assessment order dated 28 December 2016 had been issued under Section 153A by the Assistant Commissioner of Income Tax, Central Circle, Cuttack, and the appellate authority allowed the appeal, deleting the additions made by the Assessing Officer. Despite this, the refund had not been granted, prompting the filing of the writ petition.
Submissions of Parties:
Learned counsel for the petitioner submitted that the challenge to the assessment order dated 28 December 2016 issued by the Assistant Commissioner of Income Tax, Central Circle, Cuttack under Section 153A of the IT Act for the Assessment Year 2009-10 led to the Bhubaneswar Commissioner of Income Tax (Appeals)-2, who on 14 June 2018, allowed the appeal by deleting the additions to income made by the Assessing Officer.
The authority concerned was required to release the refund in favour of the petitioner in terms of Sections 240 and 244A of the IT Act to reflect the disposal of the appeal. Since the refund had not been granted, the present writ petition was filed.
When the matter came up on 2 February 2026, the petitioner contended that, in light of the deletion of the additions, the petitioner was entitled not only to the refund under Section 240 but also to the interest under Section 244A. The Department sought time to obtain instructions.
During the course of hearing, a copy of the Rectification Order dated 11 February 2026 under Section 154 read with Section 251 of the IT Act for the Assessment Year 2009-10, issued by the DCIT, Circle 1(1), Cuttack, was furnished by the Department, which was also handed to the petitioner’s counsel. The Rectification Order indicated that steps had been taken to release the refund along with interest.
Observations of the Court:
After hearing the parties and examining the Rectification Order, the Court found that steps had been taken to release the refund along with interest. Consequently, it appeared that the relief sought by the petitioner had been substantially provided.
The Court then concluded that keeping the matter pending would not serve any purpose, and directed that the refund be released along with interest computed up to the date of actual payment within two weeks from the date of the order. The writ petition, along with any pending Interlocutory Applications, was disposed of accordingly.
The disposition clarifies that the petition was entertained to obtain relief under Sections 240 and 244A of the IT Act to give effect to the appellate order, and the matter has since been resolved by the Rectification Order and the consequent release of the refund with interest.
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