2012 (8) TMI 544 - HC - Income Tax

Condonation of delay in seeking refund - based on the demand raised, for the failure to deduct tax at source, his employer had paid the tax under section 201(1) of the Income-tax Act along with interest under section 201(1A) of the Income-tax Act, which was subsequently recovered by the employer from the respective employees employees seeking refund of the TDS amount with admissible interest - Held that - Once the deduction of tax at source was held to be not in accordance with law, the amount of tax recovered should have been refunded - it is an obligation cast on the Revenue to effect the refund, without calling upon the assessees to apply for refund the claim. Moreover, the contention of the learned standing counsel that the Chief Commissioner has no power to condone the delay and the assessees should have approached the Board cannot be sustained in view of the decision of the hon ble Supreme Court in the earlier round of litigation. Order of the Karnataka High Court in S. Thigarajan s case (2009 (8) TMI 531 - KARNATAKA HIGH COURT) followed.

Summary

Issues involved:
1. Writ appeals against orders allowing writ petitions for issuance of a writ of certiorarified mandamus.
2. Refund of tax amount with interest due to failure to deduct tax at source.
3. Challenge to the decision based on Karnataka High Court judgment.
4. Power of Chief Commissioner of Income-tax to condone delay in refund.

Analysis:

Issue 1:
The writ appeals were filed challenging the orders allowing writ petitions seeking a writ of certiorarified mandamus for refund of tax amounts. The writ petitions were filed by employees for the refund of TDS amounts along with interest by quashing the orders passed by the authorities. The employees relied on the decision of the Karnataka High Court and the decision of the court in challenge in the writ appeals.

Issue 2:
The case involved the failure to deduct tax at source in respect of the perquisite value of stock options allotted to employees, leading to a demand raised by the Assistant Commissioner of Income-tax. The employer paid the tax amount under section 201(1) of the Income-tax Act, subsequently recovered from employees. The employees sought refunds, challenging the demands raised by the Deputy Commissioner of Income-tax. The Tribunal held that allotting shares to employees did not amount to a perquisite requiring tax deduction at source.

Issue 3:
The learned single judge allowed the writ petitions following the Karnataka High Court's decision, which held that the Revenue had an obligation to effect refunds without requiring the assessees to apply for refund claims. The standing counsel for the Revenue contended that the decision was not applicable to the present case, but the court disagreed, stating there was no reason to interfere with the learned single judge's order.

Issue 4:
The standing counsel argued that the Chief Commissioner of Income-tax lacked the power to condone the delay and that the assessees should have approached the Board. However, the court held that the Chief Commissioner did have the power to condone the delay, citing a decision of the Supreme Court in an earlier round of litigation. The court dismissed the writ appeals and confirmed the orders of the learned single judge, directing the refund of amounts with interest as per the provisions of the Act.

In conclusion, the High Court dismissed the writ appeals, confirming the orders allowing the writ petitions for refund of tax amounts with interest. The court upheld the decision based on the Karnataka High Court judgment and rejected the contention that the Chief Commissioner lacked the power to condone the delay. The appellants and respondents were directed to refund the amounts to the assessees concerned within a specified period.