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K. Nagesh Versus Assistant Commissioner of Income-tax, Bangalore

2015 (6) TMI 217 - KARNATAKA HIGH COURT

Refund the excess amount paid with interest - Held that:- The declaration of income furnished by the assessee under the revised return is declared to be invalid. In such circumstances, the provisions of self-assessment under Section 140-A of the Act, are not attracted. If the Assessing Officer is barred from framing a fresh assessment based on any invalid return, non-est in the eye of law, though is chargeable under Section 4 of the Act, Department, retaining that amount of tax paid on the basis .....

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has to be set aside. Since we are of the view that the tax amount paid on the invalid return has to be refunded the same analogy applies to the interest portion also. - Decided in favour of the assessee - IT APPEAL NO. 683 OF 2009 - Dated:- 20-4-2015 - VINEET SARAN AND MRS. S. SUJATHA, JJ. For The Appellant : Sri A. Shankar, Adv. and Sri M. Lava, Advs. For The Respondent : Sri K.V. Aravind, Adv. JUDGMENT This case has a chequered history and relates to the assessment year 1992-93. The facts rele .....

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t filed another return of income declaring an additional income of ₹ 2,50,000/- under the Immunity Scheme and ₹ 75,000/- as premium paid for the above amount i.e., an additional amount of ₹ 3,25,000/-. Thus, in the revised return, the appellant disclosed a total income of ₹ 3,82,810/- i.e., ₹ 3,25,000/, plus ₹ 57,810/- as disclosed in the original return dated 31.8.1992. The assessee-appellant paid tax of ₹ 2,53,761/- on the said return. It may be releva .....

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e said order dated 10.2.1995, the assessee filed an appeal before the CIT (A) which was allowed by order dated 3.12.2001, after holding that the return filed on 30.12.1993 could not be treated as a revised return under S. 139(5) of the Act as the revised return under S. 139(5) is based on the discovery by the Income Tax Department. It was further held that since the revised return was invalid under S. 139(5) of the Act, notice under S. 143(2) issued by the Assessing Officer was time barred, acco .....

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be refunded. The said amount was refunded to the assessee by another order dated 22.2.2002. The Deputy Commissioner, by order dated 20.6.2002, rectified the mistake under S.154 r/w S.240(b) of the Act and determined that the amount refundable to the assessee as ₹ 96,385/- out of which, ₹ 4,880/- had been refunded and the balance amount of ₹ 91,505/- remained to be refunded. In the meantime, the assessee challenged the order dated 22.2.2002 before the CIT (A) who, by his order .....

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ssee filed an appeal before the CIT (A) who, by order dated 21.10.2003, allowed the appeal. During this period, on 7.7.2003 another order was passed by the Assistant Commissioner under S.154 of the Act wherein it was determined that an excess amount of tax i.e., ₹ 96,385/- was refunded to the assessee and the same would now be payable by him to the Department. 4. Challenging the order of the CIT(A) dated 3.12.2001, appellant filed an appeal before the Tribunal for quashing the direction is .....

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ssessment has lapsed under the provisions of law, the Assessing Officer is precluded from reopening the same. Therefore, the CIT(A), under such circumstances, by using his wide powers also cannot direct reopening of such assessment'. The appeal filed by the assessee was allowed and the appeal of the Revenue was disposed of. 5. Then on 6.11.2003, without considering the order passed by the Tribunal, the Assessing Officer passed an order giving effect to the order of the CIT(A) dated 21.10.200 .....

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only the interest amount of ₹ 12,535/- under S. 244A of the Act was found refundable to the assessee. Challenging the said order, the assessee filed an appeal before the CIT(A) which has been dismissed by order dated 14.11.2008. Further, the appeal filed by the assessee before the Tribunal has also been dismissed by order dated 29.5.2009. Aggrieved by the aforesaid orders, this appeal has been filed. It is in this background of such complicated facts that we are required to consider the fo .....

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ng that the appellant is not eligible for any refund of the tax paid, when all authorities held that the revised return filed was void abinitio and non-est in the eye of law on the facts and circumstances of the case ?" 6. We have heard Sri A. Shankar, learned counsel appearing for the appellant and Sri K V Aravind, learned Counsel appearing for the revenue. 7. Learned counsel Sri A. Shankar contended that the revised return filed by the assessee on 30.12.1993 was an invalid return as held .....

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L.Mehta v. A.Balasubramaniam, CIT and Others [2004] ITR 269 page 1 3. S.R.Koshti v. CIT (Gujarat) [2005] ITR 276 page 165 4. Saraya Sugar Mills Ltd. v. ITO And Others [1997] ITR 226 page 475 5. Ajit Jain v. Union of India And Others [2000] ITR 242 page 302 8. The learned counsel Sri K V Aravind appearing for the revenue supported the order passed by the Tribunal and argued that in view of the authorities and the Tribunal having held that the revised return filed by the assessee on 30.12.1993 is .....

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ed that the assessee has filed the revised return on 30.12.1993 and paid a sum of ₹ 2,75,043/- including interest as admitted tax subsequent to the department detecting the said transaction which was not declared in the original return. The Assessing Officer, considering the said revised return filed by the assessee, framed the assessment under Section 143 of the Act. 10. Challenging the said assessment order, the assessee had preferred an appeal before the CIT (Appeals) wherein it was hel .....

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2.1993 is an invalid return, which has reached finality. The assessee is claiming refund of tax and interest paid on the revised return under Section 240 of the Act. Section 240 and the Proviso (b) is reproduced below for ready reference: "240. Refund on appeal, etc. - Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the [Assessing Officer] shall, except as otherwise provided in this Act, refund the amount .....

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reading of the said provision makes it clear that in cases where the assessment is annulled, the assessee is entitled to the refund only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee. 12. The word 'return' is not defined under the Act. In general, 'return' is a declaration of income. Section 139 of the Act provides for furnishing return of income. 13. In the case of New-Delhi Municipal Committee v. Kalu Ram and .....

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e Estate Officer could still insist that the said amount was payable. When a duty is cast on an authority to determine the arrears of rent, the determination must be in accordance with law. Section 7 only provides a special procedure for the realisation of rent in arrears and does not constitute a source or foundation of a right to claim a debt otherwise time-barred. Construing the expression "any money due" in section 186 of the Indian Companies Act, 1913 the Privy Council held in Han .....

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in which its occurs, means "legally recoverable." Admittedly a suit to recover the arrears instituted on the day the order under section 7 was made would have been barred by limitation. The amount in question was therefore irrecoverable. This being the position, the appeal fails and is dismissed with costs".' 14. In the case of Palayi Kizhakkekara Mathaiy's Son K M Mathew v. Pothiyill Mommutty's Son Hamsa Haji and others reported in AIR 1987 SC 1326, it is held at para .....

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intention of the legislature was to grant protection only to persons whose possession had a lawful origin in the sense that they had either bona fide believed the lands to be Government's lands of which they could later seek assignment or had taken the lands on lease from persons whom they bona fide believed to be competent to grant such leases or had come into possession with the intention of attorning to the lawful owners or on the basis of arrangements like varam etc. which were only in t .....

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99 SC 1305, it is held as under: There is no question, however, in the present case of any payment voluntarily made by a debtor being adjusted by his creditor against a time-barred debt. The provisions in the present case are statutory provisions for coercive recovery of "amounts due". Although the necessity of filing a suit by a creditor is avoided, the extent of the claim which is legally recoverable is not thereby enlarged. Under Section 70(2) of the Kerala Revenue Recovery Act the .....

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e amounts which have ceased to be legally recoverable on the date when recovery proceedings are undertaken. Under the Kerala Revenue Recovery Act such process of recovery would start with a written requisition issued in the prescribed form by the creditor to the collector of the District as prescribed under Section 69(2) of the said Act. Therefore, all claims which are legally recoverable and are not time-barred on that date can be recovered under the Kerala Revenue Recovery Act.' 16. In the .....

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ince, in the instant case, we have come to the conclusion that the search conducted on January 11, 1996, was without jurisdiction and was thus void ab initio, the imminent consequence would be that the provisions of Chapter XIV-B cannot be invoked against the petitioner, pursuant to the said search of his room at Chennai. Consequently, the block assessment order dated January 31, 1997, cannot be sustained. We accordingly quash the same." 17. Considering the scheme of the Act, the word ' .....

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turn', it would defeat the intent of the provision itself. It is clear from the said provision that the assessee is entitled to the tax paid in excess of the tax chargeable on the total income declared by the assessee in his return. No tax shall be levied or collected except with authority of law, as enjoined by Article 265 of Constitution of India. If the return itself is declared to be invalid by the authorities as well as by the Tribunal, such return does not exist. i.e., it is void ab in .....

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epartment is precluded from withholding the tax and interest paid by the assessee on the revised return which is held to be invalid in the eye of law. Even assuming, the assessee has admitted certain taxes in an invalid return, such admitted tax cannot be retained by the department unless it is supported by law. In the absence of any such provisions, withholding of the taxes admitted in an invalid return, amounts to tax collected without authority of law, offending Article 265 of the Constitutio .....

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at source or paid in advance or paid on self-assessment along with submission of the return are paid in discharge of legal liability and can be refunded only in accordance with the provisions of the Act. 19. It was a case of a valid return but in the case on hand, we are considering the taxes paid on the basis of an invalid return, as held by the authorities. If the tax and interest amount offered by the assessee is based on an invalid return, and, if that return itself is non est in the eye of .....

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er the earlier assessment made is set aside or nullified in appropriate proceedings? If the assessing authority cannot make afresh assessment in accordance with the provisions of the act it amounts to deemed acceptance of the return of income furnished by the assessee. In such a case the assessing authority is denuded of its authority to verify the correctness and completeness of the return, which authority it has while framing a regular assessment. It must accept the return as furnished and sha .....

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is, and in the event of the tax paid being in excess of the tax liability duly computed on the basis of the return furnished and the rates applicable, the excess shall be refunded to the assessee, since its retention may offend article 265 of the Constitution". 21. In the aforesaid case, the Apex Court was considering the case of a valid return. In that context it is held that even if the tax paid is found to be less than that payable, no further demand can be made for recovery of the balan .....

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such valid return, if there is excess of tax paid by the assessee, it has to be refunded to the assessee otherwise, it would offend Article 265 of the Constitution. 22. In the case of Nirmala L. Mehta (supra), Bombay High Court has held that "The problem arose because the petitioner in her return for the assessment year 1988-89 filed on June 30, 1988, offered the prize money of the lottery to tax rather a fundamental error of law on the part of the assessee, but that error of law once dete .....

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estoppel against the statute, article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law." 23. In the case of S.R. Koshti (supra), it is held that : "A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be col .....

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n the following terms: The Supreme Court has observed in numerous decisions, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361; State of West Bengal v. Administrator, Howrah Municipality, AIR 1972 SC 749, and Babhutmal Raichand Oswal v. Laxmibal R.Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have, a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude wh .....

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of Shelly Products Case (supra) in favour of the revenue. Section 156 of the Act deals with the notice of demand. When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Assessing Officer, serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. If no order would be passed under the Act by the Assessing Officer, no notice of demand would be issued in terms of Section 156 of the Act. It is the .....

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ring for the revenue. The declaration of income furnished by the assessee under the revised return is declared to be invalid. In such circumstances, the provisions of self-assessment under Section 140-A of the Act, are not attracted. If the Assessing Officer is barred from framing a fresh assessment based on any invalid return, non-est in the eye of law, though is chargeable under Section 4 of the Act, Department, retaining that amount of tax paid on the basis of an invalid return without there .....

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