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2011 (9) TMI 206 - HC - Income TaxRevision of an order u/s 263 - Whether the order passed by the Assessing Authority giving credit to the amount paid by way of tax deducted at source and consequently directing refund when the assessee has not claimed the said amount in the returns filed under the purported exercise of power under Section 154 of the Act is valid? - Held that - there is no scope for assessee to file an application seeking for refund of amount which he has not claimed in the original return. However, the Parliament taking note of the hardship that is being faced by the assessee in cases of deduction made in accordance with the provisions of Sections 192 to 194 and other provisions of the Act, where certificates under Section 203 are not furnished to them - In a result, credit is not given for the tax so deducted, introduced new sub-section 14 of Section 155 to provide relief to such persons. In the instant case the period of assessment is 1999-2000. - the assessee did not claim credit for a sum of Rs. 19,44,672-00 as he was not in possession of the TDS certificate. - an application is filed under Section 154 of the Act enclosing the TDS certificate numbering 72, claiming credit for a sum of Rs. 19,44,672-00 and seek refund of the said amount. The Assessing Authority in purported exercise of his power under Section 154 of the Act, accepted the said claim, amended the order of assessment dated 14.11.2000 and directed refund of the said amount by his order dated 12.06.2001. Held that - The order of AO was not erroneous - The said amount was not a lawful amount to the Government. It was an amount which should have been refunded to the assessee. - revision by the CIT is without jurisdiction.
Issues Involved:
1. Validity of the Assessing Authority's power under Section 154 of the Income-tax Act, 1961. 2. The legitimacy of the refund claim for tax deducted at source (TDS) not claimed in the original return. 3. The applicability and interpretation of Section 263 of the Income-tax Act regarding the Commissioner's revisional powers. 4. The impact of the amendment introducing sub-section 14 of Section 155 on the case. Issue-wise Detailed Analysis: 1. Validity of the Assessing Authority's power under Section 154 of the Income-tax Act, 1961: The Assessing Officer initially processed the return of income under Section 143(1)(a) and later passed an order under Section 154 rectifying the intimation by giving credit to a sum of Rs. 1,45,98,652-00 towards TDS, including an amount of Rs. 19,44,672-00 not claimed in the original return. The Commissioner, exercising his power under Section 263, found fault with this rectification, arguing that there was no mistake apparent from the records warranting such rectification. The Tribunal, however, held that TDS partakes the character of advance tax, and the assessee is entitled to a refund under Section 237. The Tribunal concluded that there was no error in the order under Section 154 nor any prejudice caused to the Government by giving credit for the TDS. 2. The legitimacy of the refund claim for TDS not claimed in the original return: The assessee did not claim the TDS amount of Rs. 19,44,672-00 in the original return filed on 29.12.1999 due to the unavailability of the relevant TDS certificates. Upon receiving the certificates, the assessee requested rectification under Section 154. The Assessing Officer accepted the claim and ordered a refund. The Tribunal supported this decision, stating that the credit was given for sums already deducted from the assessee's income and paid to the Government's credit, thus causing no prejudice to the Revenue. 3. The applicability and interpretation of Section 263 of the Income-tax Act regarding the Commissioner's revisional powers: Section 263 allows the Commissioner to revise any order passed by the Assessing Officer if it is erroneous and prejudicial to the interests of the Revenue. The Tribunal held that the order of the Assessing Officer was neither erroneous nor prejudicial to the Revenue. The Supreme Court's interpretation in Malabar Industrial Co. Ltd. v. CIT clarified that for the Commissioner to exercise jurisdiction under Section 263, both conditions-error and prejudice to the Revenue-must be satisfied. The Tribunal found that the refund was legitimate and not prejudicial to the Revenue, as it was an amount that should have been refunded to the assessee. 4. The impact of the amendment introducing sub-section 14 of Section 155 on the case: The amendment to Section 155(14), effective from 01.06.2002, allows the Assessing Officer to rectify an order if the TDS certificate is produced within two years from the end of the assessment year. Although the original order under Section 154 was passed before this amendment, the Tribunal noted that by the time the Commissioner exercised his revisional jurisdiction on 31.07.2002, the amendment was in effect. Therefore, the Tribunal concluded that the order passed by the Assessing Officer was not erroneous under the amended law. Conclusion: The High Court dismissed the appeal, stating that the substantial question of law was answered in favor of the assessee and against the Revenue. The court held that the order passed by the Assessing Officer under Section 154 was valid, and the Commissioner's exercise of revisional jurisdiction under Section 263 was not justified, as there was no error or prejudice to the Revenue. The appeal was dismissed, and each party was ordered to bear its own costs.
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