2020 (9) TMI 733 - HC - Income Tax

Withholding of refund u/s 241A - as per petitioner refund due to the petitioner was liable to be released at the time of issuance of the intimation order under Section 143(1) - HELD THAT - This Court is not able to appreciate the plea of lack of instructions as the counsel for the respondents had sufficient time to obtain instructions. Assessing Officer is based in Delhi and the present writ petition had been filed on 08th September, 2020 and was adjourned at the request of learned counsel for the respondents on 11th September, 2020 due to poor connectivity at his end. Despite issuance of scrutiny notice under Section 143(2) of the Act, 1961, the refund due to the petitioner is liable to be released at the time of issuance of the intimation/order under Section 143(1) of the Act, 1961 unless an order for withholding of refund has been passed under Section 241A. This Court is of the prima facie opinion that the significance and import of the mentioned judgments have not been appreciated by the AO and the same are being treated as water off a duck‟s back‟. If any order had been passed under Section 241A of the Act, 1961, this Court is of the view that the respondents had sufficient time to produce the same. In response to the petitioner s Grievance Application dated 11th May, 2020 seeking release of refund, the Assessing Officer, Circle 52(1), Delhi had vide letter dated 01st June, 2020 stated that The needful action has been taken by this office as per the communication received from the CPC. To obviate any mischief and as the petitioner s refund has been withheld for nearly ten months, this Court directs the concerned Assessing Officer to be personally present before us via video link tomorrow with all the relevant papers of the assessee.

Summary

Issues:
1. Refund of excess tax amount under Section 143(1) of the Income Tax Act, 1961.
2. Withholding of refund without passing an order under Section 241A of the Act.
3. Failure to establish indefeasible right to refund.
4. Lack of communication of reasons for withholding refund.
5. Significance of recent judgments on refund mechanism and Section 241A.

Analysis:

1. The petitioner filed a writ petition seeking a direction for the refund of excess tax amount of ?1,21,87,952/- for the assessment year 2018-2019 under Section 143(1) of the Income Tax Act, 1961. The petitioner argued that despite a scrutiny notice issued under Section 143(2) of the Act, the refund was due at the time of the intimation order under Section 143(1) unless an order under Section 241A was passed.

2. The respondents sought time to file a counter-affidavit, claiming the petitioner failed to establish an indefeasible right to the refund and questioned the court's jurisdiction to intervene. The court noted the delay in determining the jurisdiction of the Assessing Officer and the lack of clarity on whether an order was passed under Section 241A.

3. The court emphasized that the Assessing Officer must process refunds unless an order under Section 241A is issued, as highlighted in recent judgments. It was noted that the legislative intent was to ensure judicious exercise of discretion by the AO and that withholding refunds solely based on a scrutiny notice was not justified.

4. The court criticized the lack of reasoning behind withholding the refund and highlighted the necessity for transparent and reasoned decisions under Section 241A. It emphasized that the AO must consider all relevant factors, including the impact on revenue, before withholding refunds, and that mere issuance of a scrutiny notice is not sufficient grounds for withholding.

5. Referring to recent judgments, the court reiterated that withholding refunds without proper justification is against the intent of the law. The court directed the concerned Assessing Officer to appear with all relevant documents to address the withholding of the petitioner's refund, emphasizing the need for a fair and timely resolution in such matters.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the court's directives in a detailed manner.