1991 (9) TMI 7 - HC - Income Tax

Summary

Issues involved:
The petitioners claimed a refund of tax for the assessment year 1989-90, including tax deducted at source by two companies. The tax deducted at source was paid into the treasury in the assessment year 1990-91. The petitioners were not given credit for this tax and were required to pay it, resulting in double recovery of tax on the same income.

Judgment Details:

Issue 1: Refund of Tax Deducted at Source
For the assessment year 1989-90, the petitioners sought a refund of Rs. 49,65,878, representing tax deducted at source by two companies. The tax was later paid into the treasury in the assessment year 1990-91 due to a court order. However, the petitioners were not given credit for this amount for either year, and were even required to pay this tax, effectively leading to double recovery of tax on the same income. The court held that the respondents had retained the sum received from the companies and also withheld it from the petitioners' refund, resulting in unjust enrichment. The court directed the respondents to refund the sum of Rs. 49,65,878 to the petitioners, emphasizing that the refund should be granted at the initial stage of assessment u/s 143(1)(a)(ii) as per the amended provisions, rather than at the final assessment stage.

Issue 2: Compliance with Tax Refund Procedures
The respondents argued that the refund would be given at the final assessment stage, but the court noted that as per the amended section 143(3) and the Central Board of Direct Taxes Circular, the refund should be granted at the stage of section 143(1)(a)(ii). The court directed the respondents to refund the amount to the petitioners before a specified date, highlighting the necessity to adhere to the prescribed refund procedures and timelines to avoid confusion and ensure compliance with the statutory provisions.

Conclusion:
The court's decision emphasized the importance of following the prescribed procedures for tax refunds and avoiding double recovery of tax on the same income. The judgment clarified the timeline and process for granting refunds u/s 143(1)(a)(ii) and underscored the need for timely compliance with the statutory requirements to uphold fairness and prevent unjust enrichment.