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2016 (5) TMI 724

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..... cessed 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" the issue of refund. In the event that a notice is issued to the Assessee under Section 143 (2) of the Act, it will be a matter the discretion of the concerned AO whether he should process the return. Consequently, the Court is of the view that the impugned Instruction No.1 of 2015 dated 13th January 2015 issued by the CBDT is unsustainable in law and it is hereby quashed. It is directed that the said instruction shall not hereafter be relied upon to deny refunds to the Assessees in whose 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. .....

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..... 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 100 percent deduction of its profits for the first five assessment years commencing any time during the block of 15 years from the year of launch of commercial services and 30% of its profit for next consecutive five years. However, on account of the enormous losses incurred by the Petitioner, it had no occasion to claim the Section 80IA deduction. It is further pointed out that the Petitioner is not expected to have any tax liability even if it is assessed at profits in any of the AYs in question. 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 f .....

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..... e taxpayer. Some returns of income are also selected for scrutiny which may lead to raising a demand for taxes although refunds may have been issued earlier at the time of processing. It is therefore 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 issued under Section 143 (2) of the Act. It is significant that sub-section (1D) was inserted in Section 143 subsequent to the insertion of sub-section (1A) which provides for centralised processing of returns. Under the Scheme framed by the CBDT in 2011 in terms of Section 143(1A), there is a computerized random selection of returns which might be taken up for scrutiny. Thus the discretion regarding picking up a return for scrutiny is no longer left with the AO. Section 143(1D), however, .....

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..... the returns for the said AYs should be processed at the earliest . The Court also expected the assessments in relation to the returns for the other AYs, namely 2013-14 to 2014-15, to be expedited. 12. A further detailed order was passed by this Court on 14th March 2016, in which inter alia it was noticed that against the order dated 23rd December 2015, the Revenue had filed Special Leave Petition (Civil) No. 6525 of 2016 in which the following order was passed by the Supreme Court on 9th March 2016: We do not find any ground to interfere with the interim order passed by the High Court. The special leave petition 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. Needless to say that in case the time for issuing notice under Section 143 .....

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..... is power of the CBDT is hedged in by certain 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 such instructions or orders do not add to the difficulties of the tax payers. Circulars, orders and instructions issued by the CBDT under Section 119 of the Act, to the extent they are beneficial to the Assessees are binding on the Department. If they are prejudicial to the tax payer, then they cannot prevail over the statute, which does not envisage such harsher measure. 18. In UCO Bank v. Commissioner of Income Tax (1999) 237 ITR 889 (SC), the Supreme Court interpreted one such circular issued by the CBDT regarding inclusion of the interest accruing on 'sticky' loans, the recovery of which was doubtful, in the Assessee‟s taxable income .....

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..... or the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. 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 impugned instruction which is being relied upon by the Department to deny refund, where notice has been issued under Section 143(2) of the Act. This is evident from the impugned letter dated 8th September 2015, addressed to .....

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