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2020 (2) TMI 1282 - HC - Income Tax


Issues Involved:
1. Legitimacy of auto-generated response as an order under Section 241A of the Income Tax Act.
2. Delay in releasing the refund by the Assessing Officer.
3. Merits of the Assessing Officer's decision to withhold the refund.
4. Compliance with the requirements of Section 241A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legitimacy of Auto-generated Response:
The petitioner argued that the auto-generated response by the Central Processing Centre (CPC) of the Income Tax Department cannot be considered an order envisaged under Section 241A of the Act. The court found merit in this argument, noting that the auto-generated communication dated 24.3.2019 did not satisfy the legal requirements for an order under Section 241A. It was not passed by the Assessing Officer, lacked written reasons, and did not have the prior approval of the Principal Commissioner or Commissioner. The court emphasized that the essence of passing an order under Section 241A is the application of mind by the Assessing Officer, which cannot be replaced by a computerized system.

2. Delay in Releasing the Refund:
The petitioner contended that for over six months, the Assessing Officer did not take any steps to release the refund. The court noted that unjustifiable delays in processing returns and issuing refunds are not acceptable. It referred to previous judgments and CBDT instructions emphasizing the need for expeditious processing of returns and issuance of refunds. The court found the delay in this case to be unjustifiable and contrary to the principles of the tax administration being an assessee-friendly regime.

3. Merits of the Assessing Officer's Decision to Withhold the Refund:
The Assessing Officer withheld the refund citing several reasons, including the substantial loss declared by the assessee for the assessment year 2017-18 compared to the income declared in the previous year, and pending issues such as revenue share license fees, non-deduction of TDS on discounts to prepaid distributors, international roaming charges, and other issues pending before the ITAT. The court found these reasons insufficient to justify withholding the refund. It noted that the mere fact that the assessee declared a loss in the current year compared to a profit in the previous year does not justify doubting the return's contents. Additionally, even if all the additions suggested by the Assessing Officer were made, the petitioner would still have a loss return, meaning no tax liability would arise.

4. Compliance with Requirements of Section 241A:
The court examined whether the Assessing Officer's actions complied with Section 241A, which allows withholding a refund if it is likely to adversely affect revenue recovery, provided reasons are recorded in writing and approved by the Principal Commissioner or Commissioner. The court found that the Assessing Officer's order dated 21.8.2019, which cited reasons for withholding the refund, did not meet the requirements of Section 241A. The reasons provided were not sufficient to form a bona fide opinion that granting the refund would adversely affect revenue recovery. The court also noted that the Deputy Commissioner (TDS) had permitted deduction of tax at source at a 'NIL' rate for the assessment year 2017-18, indicating a prima facie belief that no tax demand would arise for the assessee.

Conclusion:
The court set aside the orders impugned in both petitions, directing the respondents to release the refund along with statutory interest within three weeks. The petitions were allowed and disposed of accordingly.

 

 

 

 

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