TMI Blog2020 (3) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... pse in this regard tarnishes the image and credibility of the sovereign. It certainly cannot act like any unscrupulous businessman, who is seen to dodge his liabilities by resort to frivolous excuses and devious ways. In absence of any cogent reasons justifying withholding of the refund due to the petitioner under Section 143(1) for AY 2017-18, 2018-19, we find that the proposal as well as the approval granted by Principal Commissioner of Income Tax lacks consideration of the relevant and germane conditions. We, accordingly, set aside the order and direct the respondents to undertake the exercise afresh and pass an order under Section 241A. We, therefore, grant six weeks' time to the respondents to consider the aspect whether the amount found due to be refunded, or any part thereof, is liable to be withheld under Section 241A. The order must reflect due application of mind of the Assessing Officer while making a proposal whether, or not, to withhold any part of the refund amount. Such a proposal should be examined by the Principal Commissioner of Income Tax with due application of mind on all the aforesaid aspects. The entire consideration, with the approval of the Princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, the revenue issued a certificate on 04.07.2016 asking the deductors to deduct tax @5% on payments to be made to the Petitioner. As a result of delay in issuance of the certificate, TDS of ₹ 4,89,54,62,680/- was deducted by the deductors. Petitioner states that it has reported taxable loss in the income tax return for the AY 2017-18 and has claimed refund of ₹ 4,83,61,57,240/-. It is asserted that the refund is primarily on account of issuance of tax deduction certificates at considerably higher rate of 5%, in comparison to Petitioner s request of 3.12%. Besides, the delay in issuance of the certificates is also cited as a factor that has resulted in refund claim. 3. Complainant made a litany of requests to Respondent No.1 for grant of refund. It started with filing of representation on 30.10.2018, followed with personal visits and, making grievance with CPGRAM, explaining that the huge refund claim was causing acute shortage of funds to the Petitioner. Eventually, the revenue disposed of the grievance application on 12.03.2019 stating that the processing of return is in progress and further intimation would be sent in this regard. Despite this assurance, the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After orally discussing the resolution of the above CPGRAM, Petitioner filed a fresh grievance with CPGRAM on 12.10.2018 requesting to direct Respondent No. 1 to process the return and issue the refund at the earliest. The above grievance application was disposed on 25.10.2018, stating that since the return has been selected for scrutiny under section 143(2) of the Act, necessary refund would be issued only after completion of assessment proceedings. Petitioner again filed e-Nivaran application on 06.06.2019 for grant of necessary refund. The same was disposed of stating since the tax return has been picked up for scrutiny, refund will be released after scrutiny assessment. W.P. (C) NO. 10375/2019 7. This petition pertains to the AY 2018-2019 for which Petitioner filed return of income on 30.11.2018 declaring loss of ₹ 257,67,46,869, claiming TDS credit and refund of ₹ 349,43,13,330. For this year as well, Petitioner filed application under section 197 of the Act, for obtaining lower tax withholding certificates at 2.23% rate on 07.04.2017. The certificates under section 197 were issued on 04.05.2017, directing deductor to deduct tax @ 3.5% from payments to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 271G has been deleted. Petitioner contends that the tax officer has not passed an order giving effect to the order of this Court and the refund has not been issued. Mr. Bhatia, on instructions, assures this Court that the refund order has now been processed and the same would be issued. Taking his statement on record, we direct that the revenue shall, within a period of 30 days from today, issue the refund for AY 2011-12 along with applicable interest. 10. This brings us to AY 2016-17 in W.P.(C) 10374/2019, in relation to which Petitioner claims refund of ₹ 4,21,18,02,760/-. In the subject year, the Petitioner filed income tax return in November, 2016 and claimed a refund. The Petitioner has been regularly following up with the Assessing Officer for processing of the aforesaid return and grant of refund. Despite repeated follow ups, Petitioner's return has not been processed. Revenue has contended that the tax return could not be processed, since revenue had issued a notice under Section 143(2) of the Act and Petitioner s case is under scrutiny. The return cannot be processed and the same can be done once the scrutiny assessment is complete. Mr. Bhatia further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y) have examined the position that existed prior to 01.04.2017. In TATA Tele Services Ltd. (supra) the court was considering the challenge to an Instruction no. 1 of 2015 dated 13.01.2015 issued by Central Board of Direct Taxes (CBDT), whereby the Board sought to issue Instructions to clarify doubts expressed in view of the words shall not be necessary used in Section 143(1D) of the Act, interpreting the language of the said section as preventing the issue of refund once notice is issued under Section 143(2) of the Act. On the strength of the said Instructions, revenue on the basis of notices issued under Section 143(2) of the Act declined to issue the refund. In that context, the Court examined the legislative history relating to the introduction of Section 143(1) of the Act and held that the impugned Instructions were unsustainable in law, and consequently, quashed the same. The Court observed that the question whether return should be processed in cases where notices have been issued under Section 143(2) of the Act would have to be decided by the Assessing Officer concerned exercising his discretion in terms of Section 143(1D) of the Act. The relevant portion of the said j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same vein. Mr.Bhatia has argued that the decision in Vodafone (supra) distinguishes the decision of TATA Tele Services (Ltd.) and the decision of the Bombay High Court in Group M Media India (P) Ltd. (supra). We do not find the interpretation sought to be propounded by Mr. Bhatia to be correct. In Vodafone Mobile Services Ltd. vs. Assistant Commissioner of Income Tax (supra,) the Court has essentially stressed that it is up to the Assessing Officer to process the refund, wherever the possibility of issuing a notice under Section 143(2) exists, or where such notice has been issued. This necessarily means that the AO has to apply his mind and decide whether, given the nature of the return and the potential or likely liability, the refund can be given. The relevant portion of the said judgment reads as under: 44. Now in this case, acknowledgement or intimation had not been sent by the AO. There is no doubt that the period of one year indicated in the second proviso to Section 143(1). However, Section 143(1D) begins with a non-obstante clause that overbears that provision. Tata Teleservices (supra) and the Bombay High Court ruling in Group M Media India (supra) sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may arise but have not yet been determined due to ongoing scrutiny proceedings. 49. As far as the argument that the expiry of the one year period, per second proviso to Section 143(1) resulting in finality of the intimation of acceptance, this court is of opinion that the deeming provision in question, i.e. Section 143(1)(d) only talks of two eventualities: shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a). Secondly, that intimation or acknowledgement cannot confer any greater right than for the assessee to ask the AO to process the refund and make over the money; it is up to the AO-wherever the possibility of issuing a notice under Section 143(2) exists, or where such notice has been issued, to apply his mind, and decide whether given the nature of the returns and the potential or likely liability, the refund can be given. It does not mean that when an assessment pursuant to notice under Section 143(2) is pending, such right to claim refund can accrue. This court also recollects the decision of the Supreme Court in Deputy Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In these circumstances, the AO ought to have exercised his discretion objectively in good faith, by considering the relevant material and basing his decision thereon in a logical manner. The respondents have failed to process the returns amounting to more than ₹ 1300 crores due to the petitioner from the department accumulated over the years. On these refunds, interest costs under Section 244A of the Act are also being incurred by the revenue at the cost of the public exchequer. In addition to the above, we cannot lose sight of the fact that the petitioner would be facing fund shortage, taking into account the refunds that are withheld by the respondents. The revenue authorities cannot become a stifling force and a stumbling block for trade and commerce. They should realize and be sensitive to the fact that by their acts and omissions, they are impeding the growth of trade and commerce. They are filing the very hen that lays the golden egg. If businesses are not permitted to operate - by clocking the fund flow due to unjustified acts and omissions of the revenue authorities in not granting refunds where due, the very source of revenue generation i.e. taxable income would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 such cases where refund is found to be due to the Assessee under the provisions of Sub-Section (1) of Section 143, and also a notice has been issued under Sub-Section (2) of Section 143 in respect of such returns. However, this does not mean that in every case where a notice has been issued under Sub-Section (2) of Section 143 and the case of the Assessee is selected for scrutiny assessment, the determined refund has to be withheld. 29. The legislature has not intended to withhold the refunds just because scrutiny assessment is pending. If such would have been the intent, Section 241A would have been worded so. On the contrary, section 241A enjoins the AO to process the determined refunds, subject to the caveat envisaged under Section 241A. The language of section 241A envisages that the aforesaid provision is not resorted to merely for the reason that the case of the assessee is selected for scrutiny assessment. Suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 amount of tax refund due to the assessee; the creditworthiness or financial standing of the assessee, and all factors which address the concern of recovery of revenue in doubtful cases. 33. Therefore, merely because a notice has been issued under section 143(2), it is not a sufficient ground to withhold refund under section 241A and the order denying refund on this ground alone would be laconic. Additionally, the reasons which are to be recorded in writing have to also be approved by the Principal Commissioner, or Commissioner, as the case may be and this should be done objectively. 34. Thus in view of the foregoing discussion, the entire exercise under Section 241A has not been correctly undertaken by the respondents. The petition is disposed of and the directive portion of the judgment as recorded in the order dated as dictated in the open Court must be duly adhered by the parties. 16. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the revenue. 3. In view of the above facts, you are requested to kindly grant approval to withhold the refund for the AY 2018-19 in the case of the above mentioned assessee company under Section 241A of the Income Tax Act, 1961 till the date on which the assessment is made. 4. Submitted for your kind approval and further necessary directions please. Sd/- 17. The aforesaid orders, are legally unsustainable and not in consonance with the observations made by us in Maple Logistics Private Limited and Another vs. Principal Chief Commissioner of Income Tax and Others (supra). We are unable to discern any reasons for denying the refunds, except for the reproduction of the phraseology of section 241A. Such orders, in light of the observations made in Maple Logistics Private Limited and Another vs. Principal Chief Commissioner of Income Tax and Others (supra) cannot be sustained and, accordingly, the said orders are set aside. 18. The refund of amounts claimed where they appear justified, by itself cannot be said to be adverse to the interest of the revenue. The interest of revenue lies in collecting revenue in a legal and justified manner. It does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax with due application of mind on all the aforesaid aspects. The entire consideration, with the approval of the Principal Commissioner of Income Tax to the withholding of the refund amount, or any part thereof, should be completed within six weeks from today, failing which, we direct that without awaiting any further orders, the respondents shall transmit the amount of ₹ 48,361,57,240/- (for AY 2017-18), ₹ 421,18,02,760/- (for AY 2016-17) and ₹ 349,41,45,020/- (for AY 2018-19) with interest to the petitioner. 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. It shall be open to the petitioner to take remedial steps in respect of any orders for withholding of refund that may be passed. 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. 20. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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