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2016 (5) TMI 724 - DELHI HIGH COURT

2016 (5) TMI 724 - DELHI HIGH COURT - [2016] 386 ITR 30 - Withholding of refund - Instruction No. 1 of 2015 dated 13th January 2015 issued by the Central Board of Direct Taxes challenged - refunds were declined for the reason that the case was pending scrutiny and that in the light of Section 143(ID) and the Instructions of the CBDT, refund could not be processed for the said AYs - Held that:- The Court finds that it is this very impugned instruction which is being relied upon by the Department .....

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ice has been issued to the Assessee under Section 143(2) of the Act. If the legislative intent was that the return would not be processed at all once a notice is issued under Section 143 (2) of the Act, then the legislature ought to have used express language and not the expression “shall not be necessary”. By the device of issuing an instruction in purported exercise of its power under Section 119 of the Act, the CBDT cannot proceed to interpret or instruct the income tax department to "prevent .....

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e cases notices might have been issued under Section 143(2) of the Act. The question whether such return should be processed will have to be decided by the AO concerned exercising his discretion in terms of Section 143 (1D) of the Act. - W.P.(C) 12304/2015 & CM 32604/2015 - Dated:- 11-5-2016 - S. MURALIDHAR & VIBHU BAKHRU JJ. For the Appellant: Mr. Tarun Gulati, Mr. Sparsh Bhargava, Ms. Rachana Yadav, Mr. Shashi Mathews, Mr. Ankit Sachdeva, Advocates. For the Respondent: Mr.Ashok K Manchanda .....

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ee assessment years (AYs) 2012-13, 2013-14 and 2014-15. The refunds were declined for the reason that the case was pending scrutiny and that in the light of Section 143(ID) of the Income Tax Act, 1961 ("Act") and the Instructions of the CBDT, refund could not be processed for the said AYs. 2. The facts in brief are that the Petitioner is engaged in the business of providing telecom services. It is stated that the Petitioner has over the years accumulated losses in excess of ₹ 31, .....

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53 Total 733,73,93,553 3. It is pointed out that the refunds arose mainly on account of the tax deducted at source ("TDS") by the payers and deposited with the Government towards an anticipated income tax liability of the Petitioner. It is pointed out that the payers continued to deduct TDS despite the fact that the Petitioner has been incurring losses year after year. It is pointed out that the Petitioner is an eligible undertaking under Section 80IA(2A) of the Act and is eligible for .....

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ion. 4. Section 143(1) of the Act states that every return made under Section 139 of the Act or filed in response to a notice under Section 142 (1) of the Act, would be processed in the following manner: "143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely:- (i) any .....

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lief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest; (d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of t .....

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which states that the amount of refund due to the Assessee, pursuant to the determination of the tax under sub-clause (c) computed shall be granted to the Assessee . 6. By the Finance Act, 2012, with effect from 1st July 2012, sub-section (1D) was inserted in Section 143 and it reads as under: (1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2) . 7. The Memorandum to th .....

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fore proposed to amend the provisions of the income-tax Act to provide that processing of return will not be necessary in a case where notice under sub-section (2) of Section 143 has already been issued for scrutiny of the return. This amendment will take effect from the 1st day of July, 2012." 8. It is evident that Section 143 (1D) in the manner it is worded gives a discretion to the Assessing Officer ( AO ) to decide whether the return of income has to be processed where a notice has been .....

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nues the element of discretion in the AO when it states that the processing of return shall not be necessary . In other words, it does not expressly state that the return shall not be processed where a notice has been issued to the Assessee under Section 143(2) of the Act. 9. However, despite terming the language of Section 143(1D) to be "unambiguous" the CBDT felt that it required clarification. This led to the CBDT issuing the impugned Instruction dated 13th January 2015 under Sectio .....

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proceeds to state as under: 4. Considering the unambiguous language of the relevant provision and the intention of law as discussed above, the Central Board of Direct Taxes, in exercise of the powers conferred on it under section 119 of the Act hereby clarifies that the processing of a return cannot be undertaken after notice has been issued under sub-section (2) of section 143 of the Act. It shall, however, be desirable that scrutiny assessments in such cases are completed expeditiously. 5. Th .....

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efund, that the Respondent No. 2 declined to issue the refund by the impugned communication dated 8th September 2015. 11. While directing notice to be issued in the present petition on 23rd December 2015, the Court inter alia noted that as far as the AY 2015-16 is concerned no notice under Section 143(2) of the Act had been issued till that date and therefore directed that the returns for the said AYs should be processed at the earliest . The Court also expected the assessments in relation to th .....

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n is, accordingly, dismissed. However, we request the High Court to dispose of the writ petition expeditiously, preferably with a period of three months from the date of production of copy of this order before the High Court. The time stipulated by the High Court for completing the assessments, as directed by the High Court, for the years for which notices under Section 143 (2) of the Income Tax Act, 1961 (in short 'the Act') have already been issued, is extended by a month from today. N .....

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and 2014-15 and the refunds for each of those AYs have also been computed. He points out that there is a slight discrepancy in the actual refund figures but the Petitioner has filed a rectification application under Section 154 of the Act. To the extent that the Petitioner s returns have now been processed and the assessment orders have been passed for the aforementioned AYs, one of the grievances of the Petitioner in the present writ petition stands redressed. 15. Nevertheless, the Petitioner .....

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ned Instruction, notices under Section 143(2) of the Act in respect of the returns filed by the Petitioner were issued as a matter of routine thus, obviating the need for the Department to process its returns. The net result is that the refund would be either denied or delayed and this is hurting the Petitioner since its losses are mounting year after year. 16. Indeed, as already noticed at the time the present petition was filed, a aggregate figure of the refund that the Petitioner was owed for .....

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rtain limitations. One such limitation is provided in a proviso to Section 119(1) of the Act. The other limitation is under Section 119(2) of the Act where it is mentioned that the direction or instructions issued by the CBDT should not be prejudicial to assessees . 17. The idea of vesting the CBDT with the above power is to ensure that there is an ease of administration of the Act and that ambiguities in the practice and procedure may get clarified. At the same time it has to be ensured that su .....

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y the CBDT regarding inclusion of the interest accruing on 'sticky' loans, the recovery of which was doubtful, in the Assessee‟s taxable income. The Supreme Court clarified the legal position as regards the nature of such circular issued in terms of Section 119(1) of the Act as under: In Keshavji Ravji and Co. v. Commissioner of Income Tax (1990) 183 ITR 1 (SC), a Bench of three judges of this Court has also taken the view that circulars beneficial to the assessee which tone town t .....

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cannot impose on the tax-payer a burden higher than what the Act itself, on a true interpretation, envisages. The task of interpretation of the laws is the exclusive domain of the courts. However, the Board has the statutory power under Section 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute and such circulars would be binding on the authorities administering the Act. 19. It was reiterated that: .....

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tral Excise, Bolpur, v. Ratan Melting & Wire Industries (2008) 13 SCC 1 was interpreting the circulars/instructions issued by the Central Board of Excise and Customs under the corresponding provision of the Central Excise Act, 1944. The Court observed as under: 7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, i .....

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Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. 21. It is sought to be explained by Mr. Ashok K. Manchanda, learned Senior Standing counsel for the Revenue, that what has been issued by the CBDT on 13th January 2015 is only an 'instruction' and not a 'circular' and that the impugned instruction was only for the internal guidance of the officers of the Department. 22. The Court finds that it is this very impug .....

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