IMPORTANT POINT
The court held that the Revenue is accountable for delayed refunds and must pay interest despite the exclusion in the Direct Tax Vivad se Vishwas Act, 2020.

JUDGMENT :

(Easwaran S., J.)

This intra-court appeal is preferred by the Revenue aggrieved by the judgment dated 7.1.2025 of the learned Single Judge in WP(C) No.21868/2024 directing the appellants to grant interest on the amount of refund ordered.

2. The brief facts for the disposal of the appeal are as follows:

The 1^st respondent-assessee approached the writ court aggrieved by the inaction on the part of the appellants in not releasing interest on the amount of refund to which the 1^st respondent-assessee was entitled to in pursuance to issuance of a certificate in Form-5 under Sections 5(2) r/w 6 of the Direct Tax Vivad se Vishwas Act, 2020. By an order of assessment under Section 143(3) of the Income Tax Act, 1961 for the assessment year 2016-17, the assessee was assessed to a total income of Rs.1,86,80,000/-, which includes an addition of Rs.75,00,000/- as unexplained investment. In the meantime, the assessee filed a declaration and undertaking under sub-Section (5) of Section 4 of the Direct Tax Vivad se Vishwas Act, 2020 ('Act', for short). On filing of the said undertaking and declaration, a certificate was drawn by the Assistant Commissioner of Income Tax, Central Circle-I, Kozhikkode showing that the assessee was entitled for a refund of Rs.28,81,185/-. Immediately thereof, the Principal Commissioner of Income Tax, Kochi issued a certificate in Form-5 on 24.11.2021 under sub-Section (2) of Section 5 of the Act. Thereafter, on 29.11.2023, the Assistant Commissioner of Income Tax, Central Circle-I, Kozhikkode passed Ext.P4 order giving effect to the refund, but however denying interest. Aggrieved by the said order, the assessee filed a grievance petition on 8.1.2024 which was answered by stating that any amount paid in pursuance of a declaration made under Section 4 shall not be refundable under any circumstances. In these circumstances, the assessee approached the writ court seeking for the following reliefs:

“i). Issue a writ or directions in the nature of or similar to writ of certiorari to quash the Exhibit-P4 so far as it not allowed interest on refund dated 29.11.2023 and also to set aside the Exhibit-P6 and P8 Communication dated 01.02.2024 and 10.04.2024 issued by the Assistant Commissioner of Income Tax Central Circle-1 Kozhikode, to the petitioner.

ii) Issue a Writ of Mandamus or any other appropriate Writ, Order or Direction directing the 1st to 2nd Respondents to reconsider the Exhibit-P5 grievance application of the petitioner afresh and pass order to giving effect issuing applicable interest on refund issued from the date of issuance of Form No.5 dated 24.11.2021, in a time bound manner.

iii) Pass such other and further directions in favour of the petitioner as this Hon'ble Court may deem fit and proper.”

3. The learned Single Judge, who considered the writ petition negated the contention of the Revenue that interest on such excess payment is not payable because of a specific exclusion of the provision of Section 244A of the Income Tax Act, 1961 by virtue of Section 7 of the Act. The learned Single Judge proceeded to hold that the requirement of imposing interest on delayed refunds is a matter of accountability of the Department and a measure of recompense for the person who was deprived of the money. It is aggrieved by these findings that the present appeal is preferred by the Revenue.

4. Heard Sri.Jose Joseph, the learned Standing Counsel appearing for the appellants, and Sri.S.Saju, the learned counsel appearing for the 1^st respondent-assessee.

5. The learned counsel for the appellants primarily contended that the Direct Tax Vivad se Vishwas Act, 2020 being a special enactment, the provisions thereof will have to be given a strict interpretation. He further pointed out that with reference to Section 7 of the Act, when the provision of Section 244A of the Income Tax Act, 1961 has been specifically excluded, the assessee cannot claim any interest on the amount of refund.

6. We have considered the rival submissions r