2012 (6) TMI 285 - HC - Income Tax

Whether in a case where the Assessing Officer drops a proceeding under Section 147/148 of the Income Tax Act, 1961 after filing of return and on the basis of return then refund claimed in that return is required to be allowed to the assessee Held that - order passed by the Assessing Officer clearly indicates that the proceeding was dropped by the Assessing Officer on the basis of return submitted by the assessee and that return has duly been accepted by the Assessing Officer, Assessing Officer has not rejected the claim of assessee for refund while passing the impugned order, Revenue is required to refund the amount, the excess deposit of tax by the assessee, Commissioner of Income Tax committed error of law, in view of the fact that it failed to take note of the reason given in the order passed by the Assessing Officer and proceeded to decide the application of the assessee on assumption that it is a case of mere dropping of the proceeding, ignoring the fact why it has been dropped, writ petition is allowed and the respondents are directed to refund

Summary

Issues:
1. Interpretation of refund claim after dropping proceedings under Section 147/148 of the Income Tax Act, 1961.

Analysis:
The judgment involves a writ petition where the petitioner contested the rejection of a refund claim of Rs.29,830/- by the Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961. The petitioner, who initially did not file the return for the assessment year 1992-93, later submitted the return upon receiving a notice under Section 148 of the Income Tax Act. The Assessing Officer, after examining the return, dropped the proceedings under Section 147/148 without issuing a refund order. The petitioner argued that the return filed under Section 147/148 should be treated as a return under Section 139(1) and the excess tax amount should be refunded. On the other hand, the Revenue contended that dropping proceedings does not amount to assessment but signifies the absence of any escaped income triggering the proceedings.

The court analyzed the orders passed by the Assessing Officer and the Commissioner of Income Tax. It noted that the Assessing Officer dropped the proceedings based on the return submitted by the petitioner, indicating a refundable amount of Rs.29,830/-. The court emphasized that the Assessing Officer did not reject the refund claim, and the petitioner was entitled to the refund as per the return accepted by the Assessing Officer. The court highlighted that the Commissioner of Income Tax erred in not considering the reason for dropping the proceedings, which was the correctness of the return and the refund claim therein. Therefore, the court directed the Revenue to refund the amount of Rs.29,830/- along with interest to the petitioner.

In conclusion, the court allowed the writ petition, emphasizing that the dropping of proceedings under Section 147/148 was due to the correct return filed by the petitioner, warranting the refund claim. The judgment clarifies that a refund claim can be valid even after dropping proceedings if the return submitted is found to be accurate, emphasizing the importance of assessing the reasons for dropping proceedings before rejecting refund claims.