2012 (10) TMI 902 - HC - Income Tax

Refund u/s 237 - power of AO to investigate - Whether Petitioner is entitled to refund of Rs.1,70,691/- as claimed in its return filed on 01.09.2003 for the assessment year 2003-04 along with interest as provided under the Income Tax Act, 1961 Following the decision of court in case of Babu Ram Chandra Bhan v. ITO 1990 (9) TMI 34 - ALLAHABAD HIGH COURT while considering the provision of Section 237 held that a person becomes entitled to refund only when he satisfies the Assessing Officer that a certain amount is due to him. This satisfaction necessarily involves an inquiry where there is a dispute as to the entitlement to the amount to be refunded. While there is no specific provision empowering the Income-tax Officer or the Assessing Officer to investigate such a claim, such a power is implicit and inherent in him as would be evident from section 237 of the Income-tax Act, 1961 - petitioner is directed to appear before opp. party no.1-Income Tax Officer, Ward-2(2), Cuttack within a period of four weeks from today to satisfy him with supporting documents about his entitlement to get refund in terms of Section 237 of the Income Tax Act, the Assessing Officer is directed to grant refund immediately along with interest in accordance with law - writ petition is disposed of.

Summary

Issues Involved:
1. Entitlement to refund of excess tax paid.
2. Delay in processing the refund claim.
3. Requirement for reconciliation of income and TDS certificates.
4. Availability of alternative remedies for the petitioner.
5. Legal provisions and precedents regarding tax refunds.

Issue-wise Analysis:

1. Entitlement to Refund of Excess Tax Paid:
The petitioner filed a return for the assessment year 2003-04, claiming a refund of Rs. 1,70,691/-. The petitioner argued that the total tax payable was Rs. 1,14,800/-, against which Rs. 2,85,491/- was paid through TDS and advance tax. This excess payment entitled the petitioner to a refund. The court noted that under Section 237 of the Income Tax Act, a person is entitled to a refund if the tax paid exceeds the tax liability for that year. However, the entitlement is subject to the satisfaction of the Assessing Officer, who must verify the claim.

2. Delay in Processing the Refund Claim:
The petitioner sent reminders in July 2008, but no action was taken by the Income Tax Authorities. The court acknowledged the delay but also noted that the petitioner remained silent from September 2003 until July 2008. Despite the delay, the court chose not to dismiss the petition due to laches, considering the alternative remedy available to the petitioner.

3. Requirement for Reconciliation of Income and TDS Certificates:
The Income Tax Authorities argued that there were discrepancies in the petitioner's P&L Account and TDS certificates. Specifically, the P&L Account did not separately reflect interest income and contract receipts, and there was a discrepancy in the commission amount. The authorities had requested clarifications from the petitioner in June 2004, which were not provided. The court emphasized that the petitioner must reconcile the gross receipts from interest income, contract works, and commission as per the TDS certificates with the figures in the P&L Account.

4. Availability of Alternative Remedies for the Petitioner:
The court highlighted that the petitioner had an alternative remedy to produce the necessary reconciliation and supporting documents before the Assessing Officer. This would allow the authorities to ascertain the petitioner's entitlement to the refund. The court directed the petitioner to appear before the Income Tax Officer within four weeks and provide the required clarifications.

5. Legal Provisions and Precedents Regarding Tax Refunds:
Section 237 of the Income Tax Act states that a person is entitled to a refund if the tax paid exceeds the tax liability, subject to the satisfaction of the Assessing Officer. The court referred to the Allahabad High Court's decision in Babu Ram Chandra Bhan v. ITO, which held that the Assessing Officer has implicit and inherent power to investigate refund claims. The court reiterated that the Assessing Officer must conduct necessary inquiries and provide an opportunity to the assessee before deciding on the refund claim.

Conclusion:
The court directed the petitioner to appear before the Assessing Officer with supporting documents to prove the entitlement to the refund. If satisfied, the Assessing Officer was instructed to grant the refund along with interest as per law. The writ petition was disposed of with these directions.