2017 (12) TMI 365 - HC - Income Tax

Process of assessee s return u/s 143 - refund claim - eligible interest under Section 244A - period of limitation - Held that - For the assessment year 2015-16 the case was selected for scrutiny and notice under Section 143 (2) was issued on 04.07.2016. Apart from that the time limit of one year from the end of the financial year is over and the question of issuing an intimation under Section 143 (1) does not arise as there is a statutory prohibition under second proviso to Section 143 (1). This is so because the return of income was filed by the assessee on 28.11.2015 and the period of one year expired on 31.03.2017. Application/representation dated 13.07.2017 given by the petitioner for grant of refund was received by the respondent on 20.07.2017 after issuance of notice under Section 143 (2) of the Act. However that does not mean the return needs to be endlessly kept pending. In fact this aspect was also considered in Group M. Media India (P) Ltd. (2017 (1) TMI 1149 - BOMBAY HIGH COURT) wherein the Court observed that CBDT has issued notification vide Instruction No.7 of 2002 dated 01.08.2002 wherein they specifically directed the Assessing Officer of the Revenue to process all returns in which refunds are payable expeditiously. Reference was also made to the Citizen s Charter issued by the Income Tax Department in its vision statement published in 2014 that the Department aspires to issue refund along with interest under Section 143 (1) of the Act within six months from the date of electronically filing the returns. Writ Petitions are disposed of with the following directions - i) The respondent is directed to consider the petitioner s Application/representation dated 13.07.2017 (which was received by the respondent on 20.07.2017) for the assessment year 2016-17 and process the return filed for the said assessment year under Section 143 (1) of the Act and pass appropriate orders within a period of six weeks from the date of receipt of a copy of this order. ii) So far as the scrutiny assessment for the year 2015-16 is concerned the petitioner is directed to extend full cooperation in the assessment proceedings and the Assessing Officer is directed to complete the scrutiny assessment as expeditiously as possible.

Issues Involved:
1. Expeditious processing of refund claims for assessment years 2015-16 and 2016-17.
2. Validity and impact of CBDT Instruction No.1 of 2015.
3. Discretionary powers of the Assessing Officer under Section 143(1D) of the Income Tax Act.
4. Statutory time limits for processing returns and issuing refunds.
5. Previous errors in assessments and their rectification.

Issue-wise Detailed Analysis:

1. Expeditious Processing of Refund Claims for Assessment Years 2015-16 and 2016-17:
The petitioner, a Private Limited Company, sought a direction to the respondent to process the refund claims for the assessment years 2015-16 and 2016-17 under Section 143(1) of the Income Tax Act, 1961. The petitioner contended that despite having substantial TDS credits due to losses in successive years, the respondent failed to process the returns and issue refunds. The petitioner had repeatedly requested the respondent to expedite the refund process, but no action was taken, leading to the filing of these writ petitions.

2. Validity and Impact of CBDT Instruction No.1 of 2015:
The petitioner argued that the CBDT Instruction No.1 of 2015, which stated that processing of returns cannot be undertaken after issuing notice under Section 143(2), was quashed by the Delhi High Court in Tata Teleservices Ltd. v. CBDT. The petitioner cited this judgment to argue that the instruction should not be used to deny refunds. The court noted that the instruction was indeed quashed and should not be relied upon to deny refunds.

3. Discretionary Powers of the Assessing Officer under Section 143(1D):
The petitioner contended that Section 143(1D) gives the Assessing Officer discretionary powers to process returns and grant refunds even if scrutiny assessment has been initiated. The court referred to the language of Section 143(1D), which states that processing of return "shall not be necessary" where notice under Section 143(2) has been issued, implying discretion rather than a prohibition. The court held that the Assessing Officer should exercise this discretion and not deny refunds solely based on the issuance of scrutiny notices.

4. Statutory Time Limits for Processing Returns and Issuing Refunds:
For the assessment year 2015-16, the statutory time limit for processing the return under Section 143(1) had expired, preventing the respondent from processing the return. However, for the assessment year 2016-17, the time limit had not expired, and the court directed the respondent to process the return and issue the refund within six weeks.

5. Previous Errors in Assessments and Their Rectification:
The petitioner highlighted a previous error by the respondent for the assessment year 2014-15, where a substantial refund was initially denied due to an error in treating losses as income. The error was rectified in 2017, and a refund was granted. The court took note of this error and emphasized the need for the respondent to expedite the refund process to avoid similar issues.

Judgment:
The court issued the following directions:
1. The respondent was directed to process the return for the assessment year 2016-17 under Section 143(1) and issue the refund within six weeks.
2. For the assessment year 2015-16, the petitioner was directed to cooperate with the scrutiny assessment, and the Assessing Officer was directed to complete the assessment expeditiously.
3. No order as to costs, and the connected writ miscellaneous petitions were closed.

The court emphasized that the Assessing Officer should not rely on the quashed CBDT Instruction No.1 of 2015 and should exercise discretion under Section 143(1D) to process returns and issue refunds.

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