9911796707
TMI Blog2019 (11) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... a detailed reasoned order under Section 241A of the Income Tax Act (hereinafter referred to as "the Act‟). The said order reads as follows: "We have heard learned counsels at length. Learned counsel for the respondents has produced, before us, the relevant file which contains the proforma enlisting the reasons for issuance of notice under Section 143(2) of the Income Tax Act to the petitioner which, she states, were the reasons looked at by the Assessing Officer while putting up his proposal to the Principal Commissioner of Income-Tax for withholding of the refund under Section 241 A. A copy of the relevant documents has been retained. Considering the nature of the controversy and since the preparation of the detailed order is likely to take some time, in view of the urgency, we proceed to dictate the operative part of the order. We find that the exercise undertaken by the respondents under Section 241A of the Act is not in consonance with Section 241A inasmuch, as the Assessing Officer has not given due regard to the facts of the case and he has not applied his mind as to why the refund is likely to adversely affect the revenue. There are no reasons recorded in writing b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t without awaiting any further orders, the respondents shall transmit the amount of Rs. 4,79,93,740/- with interest to the petitioner, upon the petitioner furnishing an undertaking that the said amount shall forthwith be deposited with the GST Authorities. We have laid down the aforesaid time line considering the fact that the refund was found payable as early as on 16.03.2019. In the eventuality of the respondents recording any reasons for withholding a part of, or the entire amount due for refund to the petitioner under Section 143(1), the reasons thereof as approved by the Principal Commissioner of Income Tax shall be provided to the petitioner forthwith. Needless to state that the reasons recorded for withholding of refund under section 241A would only amount to a tentative view and would not come in the way of the Assessing Officer to frame the assessment under section 143(3) of the Act. The petition stands disposed of in the aforesaid terms. The detailed reasons/ order shall be recorded separately. " 3. In continuation thereof, by way of this order, we are recording detailed reasons for issuing the said directions. Brief facts 4. Briefly stated, facts of the case as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing notice, or assessment order in terms of Section 143 (3) of the IT Act. Since Petitioner was facing acute financial crunch on account of blockage of funds in the form of excess TDS and delay in processing of tax refund, it filed an online complaint dated 12.11.2018 on the portal of Centralized Public Grievance Redress And Monitoring System and requested Director of Income Tax, Centralized Processing (hereinafter "Respondent No. 2") to expeditiously process the pending income tax return for AY 2017-18. 7. In the meantime, on 16.03.2019, Respondent No. 2 issued an intimation processing the income tax return filed by the Petitioner under Section 139 of the IT Act, wherein the tax liability of the Petitioner was assessed as Rs. 68,45,266 and the refund amount due to the Petitioner Company for the AY 2017-18 was determined as Rs. 4,79,93,740 along with eligible interest under the section 244A of the Act. 8. Petitioner claims that, similarly, for the Assessment Years 2018-19; AY 2019-20 and AY 2020-21, Petitioner has been filing applications under Section 197 of the IT Act requesting for lower rate of TDS, however, such applications have not been accepted and instead higher rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Remarks: The case of assessee is under scrutiny u/s. 143(3). Thereis possibility of generation of additional demand which may be adjusted against therefund in future. 2. 11300268_RANGE Remarks: The proposal of AU u/s 241A to with hold refund till regular assessment u/s 143(3) is submitted for kind approval. 3. 11200044_ CIT Remarks: Assessment is pending and there is likelihood of creation of demand. Hence, refund may be withheld as proposed." 12. Mr. Amit Sibal, learned Senior Counsel appearing on behalf of the Petitioner has strongly urged that the Respondents have no justification for withholding the refund for AY 2017-18, as the return for the said year has been processed under Section 143(1) of Act vide intimation dated 16.03.2017, whereby the Petitioner has been found eligible for refund of Rs. 4,79,93,740/- along with eligible interest under Section 244A of the Act. He argued that the Respondent is, therefore, bound to release the refund amount for the said year. He submits that mere issuance of notice under section 143(2) of the Act in respect of the Assessment Year 2017-2018 cannot, ipso facto, provide a valid justification to withhold the payment of the refundable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time as the Chief Commissioner or Commissioner may determine" 16. After the omission of the aforesaid provision, process of refund was governed by Section 143(1D) of the Act. The said provision as it existed prior to the amendment by the Finance Act 2017 w.e.f 01.04.2017 (hereinafter "the 2017 amendment"), read as under:- "(1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary before the expiry of the period specified in the second proviso to sub-section (1), where a notice has been issued to the assessee under sub-section (2): Provided that such return shall be processed before the issuance of an order under sub-section (3)." 17. After the amendment, the said provision 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 asssessee under sub-section (2): Provided that the provisions of this sub-section shall not apply to any return furnished for the assessment year commencing on or after the 1st day of April, 2017." 18. The aforenoted amendment was simultaneous to the insertion of Section 241A by the Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the revenue. Reference may be made to the decisions in Ashwin D Mehta (HUF) v. Commissioner of Income Tax, (1995) 215 ITR 411(Gujarat), Naurata Ram v. Commissioner of Income-tax, (1998) 100 TAXMAN 266 (PUNJ. & HAR.), Shreyans Industries Ltd. v. Commissioner of Income-tax, (1998) 101 TAXMAN 498 (PUNJ. & HAR.), Pioneer Sports Works (P.) Ltd. v. Commissioner of Income Tax, (1997) 94 TAXMAN 29 (PUNJ. & HAR.). 22. The question, that arises for consideration is the present case, is as to the scope and ambit of the newly inserted provision- Section 241A. The same has been elaborately discussed by the Gujarat High Court in Corrtech International (P) Ltd. v Deputy Commissioner of Income Tax, (2017) 86 Taxmann.com 156 (Gujarat), relevant portion whereof is extracted hereinbelow: 15. A combined reading of the said provisions and in particular, sub-section (1D) of section 143 would demonstrate that once a notice under sub-section (2) of section 143 is issued, it would be discretionary for the Assessing Officer to process the return under section 143(1). The time limit envisaged in the further proviso to sub-section (1) would not apply but that the same can be done only before issuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the grant of refund is likely to adversely affect the Revenue." (Emphasis supplied) 23. On a perusal of the new proviso added to sub-section (1D), it becomes evident that said sub-section providing for extension of time limit for processing of return in cases where section 143(2) notice has been issued, will not apply to any return furnished for the assessment year commencing on 01.04.2017. The intention of introducing Section 241A simultaneous with the insertion of the afore-noted proviso was to address the grievance of the assessees relating to delay in issuance of refund in genuine cases which are routinely selected for scrutiny assessment. However, at the same time, to address the concern of recovery of revenue in doubtful cases, the legislature introduced Section 241A,which enables the Assessing Officer to withhold the refund in favour of the assessee which becomes due in terms of sub-section (1) of section 143, if he is of the opinion that having regard to the fact that a notice has been issued under section 143(2), the grant of refund is likely to adversely affect the revenue. He would, however, do so by recording reasons in writing and with previous approval of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held therein that every refund where dues consequent on an order giving rise to a refund cannot be considered as adversely affecting the revenue. Looking at the decisions in Consolidated Petrotech Industries v. Assistant Commissioner of Income Tax, (1993) 202 ITR 306 (Guj), Shreyansh Industries Ltd. v. Commissioner of Income Tax, MANU/PH/0987/1998 and Gannon Dunkerley& Co. Ltd. v Sales Tax Officer, (2003) 133 STC 534, the Court observed as follows: "67. Pasayat, J. (as His Lordship then was) in Gannon Dunkerley & Co. Ltd. (supra) observed that an opinion means a judgment, belief or conviction resulting from what one think on a particular question. This should be passed on grounds short of proof. If one is to form an opinion and the opinion is to govern, he must form it himself on such reasons and grounds as seen good to him. Mere filing of an appeal or pendency of further proceedings under the Act can not per se be a ground for withholding a refund. The opinion that grant of refund is likely to adversely affect the revenue must be formed. In the facts of the case before it the Orissa Division Bench in Gannon Dunkerley & Co. Ltd. concluded that the revenue/assessing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the approval of higher authority), appears to be that the assessing authority ought not exclusively be conferred the discretion, as the exercise of such discretion in the event of the eventual success of the assessee would mulct the exchequer with the liability to interest for the period the refund is withheld." (Emphasis supplied) CONCLUSION 28. With this backdrop, we now consider the situation at hand. Here the return has been filed on 25.10.2017 for AY 2017-2018 and, therefore, the amended provisions would be applicable. In our considered opinion, the AO has completely misunderstood the refund mechanism and the import of Section 241A of the Act. The legislative intent is clear and explicit. The processing of return cannot be kept in abeyance, merely because a notice has been issued under section 143(2) of the Act. Post amendment, sub-section (1D) of section 143 is inapplicable to returns furnished for the AY commencing on or after 1st Day of April 2017. The only provision that empowers the AO to withhold the refund in a given case presently, is section 241A.Now the refunds can be withheld only in accordance with the said provision. The aforesaid provision is applicable to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and inequitable for the AO to withhold the refund, by citing the reason that the scrutiny notice has been issued.Such an interpretation of the provision would be completely contrary to the intent of the legislature. The AO has been completely swayed by the fact that since the case of the assessee has been selected for scrutiny assessment, he is justified to withhold the refund of tax. 32. The power of the AO has been outlined and defined in terms of the Section 241A and he must proceed giving due regard to the fact that the refund has been determined. The fact that notice under section 143(2) has been issued, would obviously be a relevant factor, but that cannot be used to ritualistically deny refunds. The AO is required to apply its mind and evaluate all the relevant factors before deciding the request for refund of tax. Such an exercise cannot be treated to be an empty formality and requires the AO to take into consideration all the relevant factors. The relevant factors, to state a few would be the prima facie view on the grounds for the issuance of notice under section 143(2); the amount of tax liability that the scrutiny assessment may eventually result in vis-a-vis the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
