Bombay High Court raises alarm over growing interest burden on exchequer due to delayed tax refunds

The Bombay High Court recently expressed concerns over the growing interest burden on the public exchequer due to delays in processing income tax refunds [Bloomberg Data Services (India) Pvt. Ltd. vThe Deputy Commissioner of Income Tax, Circle 6(1)(2), Mumbai & Ors]..The Bench comprising Justices G S Kulkarni and Advait M Sethna expressed serious concern over the recurring issue of tax refunds being delayed leading to unnecessary interest payments and burdening the public exchequer."Once the taxpayer is entitled to the refund and when there are no proceedings against the assessee in that regard intended to be taken by the Revenue, the refund of the tax amount, if any, ought to be immediately granted to the assessee, needs to be the rule," the Court said. It further highlighted that these delays are primarily due to negligence or laxity on the part of tax officials, ultimately burdening the public exchequer with substantial interest payments..The Court made these remarks in response to a petition filed by Bloomberg Data Services (India) Pvt. Ltd. challenging the delay in receiving refunds for the assessment years 2013-14 and 2016-17, which amounted to ₹77.64 crore.Bloomberg had claimed that the tax refund had been unfairly withheld. It sought a writ to quash the adjustment of the refund for the year 2023-24 and also prayed for a direction to the authorities to promptly release the refund along with applicable interest for the said years.The petitioners argued that despite a significant amount being due to them, the refund had not been processed or released in a timely manner. They also pointed out that after the Court's intervention, a partial refund of ₹77.64 crore was made on November 29, 2024 which was adjusted to subsequent assessment years but the interest due on this amount was still pending..Senior Advocate Percy Pardiwalla, appearing for Bloomberg, stressed that the interest payable for the assessment years 2016-17 and 2013-14, amounting to ₹3.10 crore, was yet to be granted. He argued that this delay in payment of refunds was not only affecting the petitioner but was also adding a significant financial burden on the public exchequer which has to bear the cost of interest on the delayed refund..The Court noted that it had routinely observed similar cases where refunds were either not processed or if processed, were not released for no apparent reason. It further emphasized that the interest burden on the Government of India and the public exchequer "keeps mounting every passing day" due to these delays which could be easily avoided with prompt action from the concerned tax officials..In light of these issues, the Court issued a stern order directing the Revenue to take prompt action on the release of the pending interest payments. The Bench also expressed concerns about the lack of an effective internal control mechanism to prevent such delays. "If already the rules are not in place, such rules would be required to be framed and if any rules are already framed, as to why such rules are not being strictly adhered to," the Court said. It also suggested that accountability should be fixed on the officers whose actions lead to the delay in the release of refunds, ultimately increasing the burden on the Government of India.The bench urged the authorities to address these issues, as the delays not only burden the government but also deprive taxpayers of their rightful refunds and cause serious prejudice to them.The matter was adjourned to December 10 when the tax department is expected to present a detailed response on the status of refunds.Senior Advocate Percy Pardiwalla instructed by advocates Harsh R Shah, P Savla appeared for Bloomberg.Advocate Akhileshwar Sharma appeared for Income Tax Department..[Read Order]