Stories
Tax Refund Interest Cannot Be Denied Due to Incorrect ITR, Rules ITAT
M
Moneycontrol•02-10-2026, 13:12
Tax Refund Interest Cannot Be Denied Due to Incorrect ITR, Rules ITAT
- •The Mumbai ITAT ruled that interest on tax refunds cannot be denied solely because of an incorrect Income Tax Return (ITR), unless the tax department proves taxpayer-caused delay.
- •The ruling stems from an AY 2012-13 case where a taxpayer reclassified capital gains, leading to a refund, and the ITAT upheld the right to interest under Section 244A.
- •ITAT emphasized that Section 244A provides a statutory right to interest, and exclusion is only for delays directly caused by the taxpayer, with no evidence of obstruction found in this case.
- •The tribunal directed the tax department to grant interest on a refund of Rs 5.39 crore and clarified that an erroneous return alone does not establish taxpayer delay.
- •In a separate matter, ITAT also mandated an additional 3 percent interest under Section 244A(1A) for a delayed refund of Rs 90.94 lakh, paid significantly after the statutory period.
Key Questions Answered
No, the ITAT ruled that tax refund interest cannot be denied merely because of an incorrect ITR, unless the department proves that the taxpayer caused a delay in the proceedings. Section 244A provides a statutory right to interest, and any exclusion only applies for durations of taxpayer-caused delays.
Under Section 244A(1A), an additional interest of 3 percent per annum is payable when a tax refund arises from implementing appellate or other orders and is issued after the expiry of the statutory period.
Section 244A stipulates that no interest is payable if the calculated refund is less than 10 percent of the tax determined under Section 143(1) or upon regular assessment.
