2016 (11) TMI 333 - HC - Income Tax

Validity of notices issued under Section 143 (2) and 142 (1) - petitioners are aggrieved by the notices which according to them were issued with the sole purpose of preventing them from payment of refund claims pending before the concerned Assessing Officers for various assessment years on account of excess withholding of amounts paid towards estimated tax liability - Held that - This Court is of the opinion that the submissions of the revenue vis-a-vis Section 237 is partly correct in the sense that undoubtedly it provides for refund claim to the assessee wherever the circumstances warrant and the assessment completed yields results in excess amounts repayable. At the same time, it is hard to accept the wide proposition that the revenue seeks to place having regard to Section 237. Section 237 in one sense locates the restitutionary principle which is part of the larger right of every citizen. That it is part of the Income Tax Act and, therefore, itself in the taxation universe, does not in any manner undermine the restitutionary principle and the reasonableness inherent in it. In other words, if such provision does not exist then the assessee would still have a right to claim excess amount in law unrestricted in any manner with respect to procedural formalities dictated by the Act. As far as the submission with respect to the manner in which discretion is to be exercised is concerned, there is nothing in the judgment in Tata Teleservices Ltd. (2016 (5) TMI 724 - DELHI HIGH COURT ) to indicate to the contrary. It goes without saying that however the Assessing Officer has to reasonably construe every refund claim in the light of the objective material available at the time when the refund claim is made, this objective material and the circumstances would include the nature of the business, the pattern of the previous years income or incomes given the advance tax payments and other assessments etc. In other words, there cannot be a blind or blatant mandate upon certain rights. Thus we are of the opinion that there is no need to examine the challenge to the validity of Section 143 (1D). AO are directed to examine the refund claims and pass appropriate orders

Summary

Issues:
1. Challenge to notices issued under Section 143 (2) and 142 (1) preventing payment of refund claims.
2. Interpretation of Section 143 (1D) and Circular of the CBDT dated 13.01.2015.
3. Legality of Instruction No.1 of 2015 dated 13th January 2015 issued by the CBDT.
4. Discretion of the Assessing Officer in processing refund claims.
5. Validity of Section 143 (1D).
6. Examination of refund claims by Assessing Officers.

Analysis:

The petitioners challenged notices under Section 143 (2) and 142 (1) alleging they were issued to block refund claims. They argued based on Section 143 (1D) and a Circular by CBDT that the return processing should not occur after a notice under sub-section (2) of Section 143. The court referred to a previous case and held that the Circular cannot restrict the discretion of the Assessing Officer regarding refund processing. The court quashed the Circular and directed Assessing Officers to decide on processing refund claims at their discretion.

The revenue argued that Assessing Officers have the discretion to process refund claims or wait for final decisions post notices under Section 143 (1) or 142 (2). They contended that refund claims should be objectively evaluated, and Section 237 allows for conditioning refund claims as per Section 143 (1D). The court agreed partially with the revenue, acknowledging Section 237's provision for refund claims but emphasized the citizen's right to restitution. The court stressed that Assessing Officers must reasonably assess refund claims based on objective material and business circumstances.

The court concluded that there was no need to question the validity of Section 143 (1D). It directed Assessing Officers to review refund claims and make decisions within six weeks. Consequently, the writ petitions were allowed to the extent mentioned, emphasizing the Assessing Officers' responsibility to evaluate refund claims fairly and promptly in line with the judgment's directives.