Cooner Institute of Health Care and Research Centre Pvt. Ltd. Vs. Income Tax Officer, Ward-6(3) - (High Court of Delhi) (27 Jul 2020)

Refund claim cannot be withheld on mere basis that, a notice has been issued under Section 143(2) of IT Act

MANU/DE/1425/2020

Direct Taxation

Present writ petition under Article 226 of the Constitution of India, 1950 seeks mandamus for directing the Respondent to grant refund as determined under Section 143(1) of the Income Tax Act, 1961 (IT Act). Petitioner, a company providing hospital services to the general public, filed its return of income for the Assessment Year ('AY') 2018-19 on 29th October, 2018 claiming refund of Rs. 1,43,48,810 on account of excess deduction of tax at source. Revenue selected the case of the Petitioner for limited scrutiny under Section 143(2) of the IT Act vide notice dated 22nd September, 2019. Subsequently, the 'Centralised Processing Centre' processed the return of income vide order dated 12th November, 2019 under Section 143(1) of the IT Act which resulted in refund of Rs. 1,57,83,688. However, since the said refund was not granted, Petitioner submitted various representations in this respect.

Thereafter, in a personal hearing granted to the Petitioner, it was informed that, the refund had been withheld under Section 241A of the IT Act. Neither the copy of the order nor the reasons for withholding the refund were provided to the Petitioner and accordingly, the present writ petition has been filed seeking directions in this regard.

It is apparent that, only ground for withholding refund is that, since case of the Petitioner has been selected for scrutiny for AY 2018-19, under Section 143(2) of the IT Act, the assessment is yet not complete and therefore genuineness of the refund claimed by the Assessee is yet to be verified. The aforesaid reason is inherently flawed and contrary to the views expressed by present Court in aforesaid two cases i.e. Maple Logistics Private Limited v. Principal Commissioner of Income Tax and Ericsson India Private Limited vs. Additional Commissioner of Income Tax, Special Range-3 and Ors.

In the case of Maple Logistics Private Limited v. Principal Commissioner of Income Tax, the Court had specifically stated that, merely because a notice has been issued under Section 143(2) of the IT Act, it is not a sufficient ground to withhold refund under Section 241A and the order denying refund on this ground alone would be laconic.

Further, in the case of Ericsson India Private Limited vs. Additional Commissioner of Income Tax, Special Range-3, it was observed that, 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 lie in retaining the collected taxes in excess of what is justified, since the excess collection cannot even be properly termed as "revenue."

The exercise of withholding of refund under Section 241A of the Act, pursuant to notice under Section 143(2) of the IT Act, without recording justifiable reasons, is not in consonance with the legislative intent and mandate of the aforesaid provision. The reasons cited do not support the finding that refund would adversely affect the Revenue. The reasoning given by the Income-Tax Officer is contrary to Section 241A of the IT Act. Accordingly, the impugned communication/order is set aside.

Respondent is granted three weeks' time to re-consider the aspect whether the amount found due to be refunded, or any part thereof, is liable to be withheld under Section 241A of the IT Act in line with the decisions of present Court. The writ petition is accordingly allowed.

Relevant : Maple Logistics Private Limited v. Principal Commissioner of Income Tax and Ericsson India Private Limited vs. Additional Commissioner of Income Tax, Special Range-3 and Ors. MANU/DE/0763/2020

Tags : PENDING ASSESSMENT REFUND ENTITLEMENT