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2021 (3) TMI 848 - HC - Income TaxWithhold of refund exercising powers u/s 241A - HELD THAT - A plain reading of Section 241A shows that the mere issuance of the scrutiny notice under Section 143 (2) of the Act cannot stall the remittance of refund to the assessee. The refund can only be stalled if the conditions stipulated in Section 241A of the Act, to which we have made a reference above, are fulfilled, i.e., the A.O. records his reasons in writing as to why the release of refund is likely to affect the interests of the Revenue and that this step of the A.O. receives the imprimatur which obviously would mean prior approval of his superior officer, i.e., Principal Commissioner or Commissioner as the case may be. Revenue has brought nothing on record to show that an order under Section 241A of the Act has been issued. As a matter of fact, no counter-affidavit has been filed by the Revenue. The mandate of the law requires the Revenue to remit the amount determined in its order dated 02.10.2019 to the petitioner along with interest as required under the provisions of the Act. This is also the view of the coordinate Benches of this Court taken in Maple Logistics and Ericsson India Pvt. Ltd. 2019 (11) TMI 340 - DELHI HIGH COURT Prior to the A.O. passing an order under Section 241A of the Act, it may possibly be a constructive approach if the assessee is heard. There are several cases where assessees are looking for liquidity in the form of money received via refund and even if the A.O. is of the view that release of refund is likely to adversely affect the interests of the Revenue, the Revenue could, in a given case, take security in the form of bank guarantee or other solvent security as deemed fit and thus, in a sense, balance the interests of both the assessee and the Revenue. We have only given one illustration, there could be several situations of like nature and therefore, perhaps hearing the assessee at some stage, either before or after, the A.O. may help in resolving such disputes.
Issues Involved:
1. Delay in refund despite determination by the Revenue. 2. Issuance and effect of scrutiny notice under Section 143(2) of the Income Tax Act, 1961. 3. Legal provisions and conditions under Section 241A of the Income Tax Act, 1961 for withholding refunds. 4. Requirement for the Revenue to remit the refund along with interest. Detailed Analysis: 1. Delay in Refund Despite Determination by the Revenue: The petitioner’s main grievance is the non-remittance of a refund amounting to ?5,89,14,434/- for the AY 2018-2019, determined by the Revenue on 02.10.2019. Despite various correspondences and a complaint lodged on the E-Nirvan Grievance Portal, the refund was not processed. The petitioner approached the High Court due to the lack of resolution from the Revenue. 2. Issuance and Effect of Scrutiny Notice Under Section 143(2): The Revenue issued a scrutiny notice under Section 143(2) of the Act on 22.09.2019, preceding the refund determination. The Revenue argued that the faceless system hindered the AO from providing the necessary instructions. The Court noted that the issuance of a scrutiny notice alone does not justify withholding the refund unless conditions under Section 241A are met. 3. Legal Provisions and Conditions Under Section 241A for Withholding Refunds: Section 241A allows the AO to withhold refunds if the grant of refund is likely to adversely affect the Revenue, provided two conditions are met: - The AO must record reasons in writing. - The AO must obtain prior approval from the Principal Commissioner or Commissioner. The Court emphasized that the mere issuance of a scrutiny notice does not automatically stall the refund. The Revenue failed to produce any order under Section 241A or a counter-affidavit demonstrating compliance with these conditions. 4. Requirement for the Revenue to Remit the Refund Along with Interest: The Court referred to Section 143(1) of the Act, which mandates the processing of returns and determination of refunds. The Court reiterated that once the refund is determined, it must be granted unless legally withheld under Section 241A. The Court cited precedents from Maple Logistics (P) Ltd. and Ericsson India Pvt. Ltd., supporting the petitioner’s claim for the refund. Conclusion: The Court directed the Revenue to remit the determined refund amount along with the requisite interest within 10 days from the receipt of the judgment. The writ petition was allowed, and pending applications were closed. Additional Observations: The Court suggested that hearing the assessee before or after passing an order under Section 241A could be constructive. This approach could balance the interests of both the assessee and the Revenue, potentially involving security measures like bank guarantees. However, this suggestion was not the basis for the current decision but could be considered in future cases with similar facts.
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