2020 (8) TMI 193 - AT - Income Tax

Denial of refund of tax paid by the assessee while filing the return of income u/s 158BC - block assessment - refund u/s 240 is only in respect of the amount which has resulted due to the addition made by the AO during the assessment - main contention of the assessee is that once the assessment is quashed by the Hon'ble High Court, the tax paid by the assessee on the income declared in the return of income filed in response to notice u/s 158BC also becomes refundable - HELD THAT - In case of block assessment where the initiation of proceedings are quashed, the judgment of the Hon'ble Supreme Court in case of Shelly Products 2003 (5) TMI 4 - SUPREME COURT is applicable and consequently the refund of tax is limited only to the extent of the tax liability due to the addition made by the AO and not the tax paid by the assessee on the income declared by it while filing the return in response to notice under section 158BC. Declaration of income in the return filed by the assessee is a voluntary act and admitted by the assessee which cannot be retracted subsequently only because the initiation of proceedings under section 158 BC were quashed by the High Court due to technical defect in the notice issued under section 158BC. We have already noted that the return of income was filed by the assessee after 20 days of the notice issued under section 158 BC and, therefore, the mandatory period as provided under section 158BC was availed by the assessee in filing the return of income. Once the return of income was a valid return and there was no bonafide or apparent mistake in the said return, then the tax paid on the income declared in the return is not refundable in view of clause (b) of proviso to section 240 of the IT Act. Accordingly, the appeal of the assessee has no merit.

Summary

Issues Involved:
1. Refund of excess tax paid with interest.
2. Unjust enrichment by the revenue.
3. Validity and implications of the return filed under section 158BC.

Detailed Analysis:

1. Refund of Excess Tax Paid with Interest:
The assessee argued that the revenue should refund the excess tax paid, along with interest, following the quashing of proceedings under section 158BC by the High Court. The High Court had ruled that the notice issued under section 158BC was invalid due to the insufficient time granted for filing the return. Consequently, the assessee sought a refund of the tax paid based on the invalid return. The Tribunal noted that the return filed by the assessee was voluntary and valid, despite the notice's invalidity. The return was filed after the statutory period, making it a valid return, and thus, the tax paid was not refundable under section 240 of the IT Act.

2. Unjust Enrichment by the Revenue:
The assessee contended that retaining the tax paid on an invalid return amounted to unjust enrichment by the revenue. The Tribunal referred to the Supreme Court's decision in CIT vs. Shelly Products, which held that tax paid voluntarily in a valid return is not refundable, even if the assessment proceedings are later quashed. The Tribunal concluded that the tax paid was based on the assessee's voluntary declaration and could not be retracted merely because the notice was invalid.

3. Validity and Implications of the Return Filed under Section 158BC:
The Tribunal examined whether the return filed under section 158BC was valid and its implications. The assessee argued that the return was invalid, and thus, the tax paid should be refunded. The Tribunal, however, found that the return was filed after the statutory period and was considered valid. The Tribunal referred to the Supreme Court's decision in CIT vs. Shelly Products, which stated that the tax liability arises from the assessee's voluntary declaration in the return, and such tax is not refundable. The Tribunal also cited the Delhi High Court's decision in Shakti Bhog Foods Ltd. vs. DCIT, which supported the view that tax paid on a valid return is not refundable, even if the assessment proceedings are later nullified.

Conclusion:
The Tribunal dismissed the appeal, stating that the return filed by the assessee was valid and the tax paid on the declared income was not refundable. The decision was based on the principle that tax liability arises from the voluntary declaration in the return, and such tax is not refundable, even if the assessment proceedings are quashed due to technical defects in the notice. The appeal was dismissed, and the order was pronounced on 30/07/2020.