Section 244A Interest on Advance Tax Refund Cannot Be Denied for Omission in Return – ITAT Pune

Facts and Issues of the Case

The appeal was filed by Den Discovery Digital Networks Private Limited (the assessee) against the Commissioner of Income Tax (Appeals) and the Assessing Officer (AO) relating to Assessment Year 2014–15 before the ITAT Pune Bench. The core factual background and issues can be simplified as follows:

• The assessee, a cable television distribution company, filed its income tax return on 1st December 2014, declaring total income of approximately ₹2.49 crore.
• Inadvertently, the assessee did not claim credit for advance tax paid amounting to ₹20 lakh in that return, despite the fact that this payment was reflected in its Form 26AS – the government-generated tax credit statement.
• The assessment under Section 143(3) was completed in 2017 with no demand, but because of the omission, the assessee didn’t initially receive refund or interest on the unclaimed advance tax.
• The assessee subsequently filed a rectification application under Section 154 to correct the omission. The AO granted credit for the advance tax and also granted interest under Section 244A on the refund.
• Later, the AO issued a show-cause notice proposing withdrawal of the interest under Section 244A, relying on a CBDT circular and stating that the delay was attributable to the assessee for not claiming the advance tax originally. The AO instead proposed interest under Section 234D (interest for delayed filing of return/late claim), which is generally at a lower rate and under different criteria. The Commissioner (Appeals) upheld this action.

The key legal question was:
Does an inadvertent omission to claim advance tax in the return of income prevent the assessee from being eligible for interest under Section 244A on the corresponding refund? If so, can the Withdrawal of that interest be done as a rectification under Section 154 of the Act?

This raised important concerns about statutory rights versus procedural technicalities, especially where the credit was already visible to the revenue through Form 26AS.

Observations by the Tribunal

In its detailed analysis, the ITAT Pune Bench focused on both statutory interpretation and factual fairness:

Interest Under Section 244A is a Statutory Right

The Tribunal reiterated that Section 244A of the Income Tax Act provides that where a refund of any amount paid by a taxpayer (including advance tax) becomes due, the taxpayer is entitled to receive that refund with interest. The legislative language does not contain any requirement that the claim for advance tax must be made in the original return of income itself.

Form 26AS Reflects Tax Credit Available to Revenue

The Tribunal noted that the advance tax payments were reflected in Form 26AS, which is generated by the tax department. Because this information was already in the hands of the revenue, the department always had notice of the payment. Therefore, the fact that the credit was not claimed in the ITR does not mean the tax was unknown or undisputed. The Tribunal emphasized that an omission of this nature was not a deliberate tax evasion but a genuine error.

Error Was Not ‘Apparent Mistake’ Under Section 154

The AO’s reliance on withdrawal via Section 154 (rectification) was found to be improper, because an important principle of law is that a mere debatable point of law or fact does not constitute a mistake apparent from the record.

The Tribunal held that such interests were correctly granted and that withdrawing them through a rectification order on the basis of a CBDT circular was legally unsustainable.

Delay Attributable to the Assessee?

While Section 244A(2) excludes interest for delays attributable to the assessee, the Tribunal clarified that in this situation, because the advance tax information was already available to the department (through Form 26AS), the delay was not solely attributable to the assessee. Hence, the assessee should not lose interest just because of the non-claim in the return.

Law Applicable: What Section 244A Says

What Does Section 244A Provide?

Section 244A of the Income Tax Act deals with interest on refunds of excess tax, including advance tax. Broadly speaking:

• Interest on Refund: Assessees are entitled to interest on refunds resulting from excess payment of advance tax, TDS, or other credited taxes, from the date the excess was paid until the date the refund is made.
• Period Exclusions: Under Section 244A(2), the period for which interest is payable may be reduced if the delay is attributable to the assessee. However, this does not mean that an unintentional omission voids interest if the revenue always had the information to compute the correct credit.

Form 26AS as Supporting Evidence

Since Form 26AS shows actual credits of advance tax, the courts and tribunals have taken the view that this should suffice as prima facie evidence of payment, even if the claim itself wasn’t made in the tax return form. This principle played a key role in the Tribunal’s reasoning.

Rectification Under Section 154

Rectification is meant for correcting a mistake apparent on the face of the record — a narrow concept. The Tribunal reiterated that disagreement over legal interpretation or withdrawal of benefits granted on debatable grounds does not fall under rectification.

Conclusion by the Tribunal

After interpreting the statutory provisions and examining the facts, the ITAT Pune Bench delivered a decisive and taxpayer-friendly view:

• The assessee is entitled to refund of unclaimed advance tax with interest under Section 244A, even if there was an inadvertent omission in the original return.
• The withdrawal of statutory interest by the AO and CIT(A) was held to be contrary to law.
• The rectification under Section 154 was found to be improper because the interest already granted was based on a legitimate legal interpretation and not a mistake apparent on record.
• The Tribunal therefore set aside the orders of the lower authorities and directed the tax officer to grant the advance tax credit along with interest under Section 244A.