2021 (4) TMI 978 - HC - Income Tax

Refund claim rejected in view of the provisions contained in section 239(2)(c) - assessee seeks refund of withholding tax concerning the assessment year - petitioner is involved in charitable activities as defined under Section 2(15) - whether Section 239 of the Act, as it obtained prior to its amendment, would apply in this case? - HELD THAT - We are, presently, of the view that even if the stand taken by Mr. Sharma is presumed to be correct, the petitioner could, perhaps, seek condonation of delay in failing to move for refund, within time, in the manner prescribed by law by triggering the provisions of Rule 41 of the Income Tax Rules, 1962 ( Rules ). Therefore, for the moment, we are inclined to grant liberty to the petitioner to file an application under the aforesaid Rule, before the concerned officer of the Income Tax Department, to seek condonation of delay. The concerned officer will deliberate on the said application, and dispose of the same, as per law, after giving an opportunity of personal hearing to the authorized representative of the petitioner. Mr. Krishnan says that he will move such an application, for the said purpose, within 10 days from today. The concerned officer will be at liberty to hear the authorized representative of the petitioner, via the videoconferencing mechanism, given the fact that the Union Territory of Delhi is reeling under the pressure of the coronavirus cases. Thereafter, the concerned officer will pass a speaking order qua the application moved by the petitioner. The decision rendered in the petitioner s application will be transmitted to the petitioner.

Summary

Issues:
1. Refund of withholding tax for the assessment year 2013-2014.

Analysis:
The petitioner sought a refund of withholding tax for the assessment year 2013-2014, claiming exemption under Sections 11 and 12 of the Income Tax Act, 1961, due to its involvement in charitable activities. The assessing officer had assessed the petitioner's income as 'NIL' for the said year, recognizing its charitable nature and eligibility for exemption. However, the request for refund was declined citing Section 239(2)(c) of the Act, which was amended in 2019. The petitioner argued that the provision was not in force when the refund request was rejected, emphasizing that withholding tax is a collection mechanism, not an actual tax. The revenue contended that the petitioner failed to file income tax returns under Section 139 of the Act, thus making the refund unavailable. The main issue was whether the pre-amendment or post-amendment Section 239 of the Act would apply in this case.

The Court acknowledged the arguments presented by both parties and considered the possibility of condoning the delay in seeking the refund. It granted the petitioner the liberty to file an application under Rule 41 of the Income Tax Rules, 1962, seeking condonation of delay. The concerned officer was directed to review the application, provide a personal hearing to the petitioner's representative, and issue a decision within three weeks. The petitioner was given ten days to submit the application, and the entire process was to be conducted via video conferencing due to the prevailing COVID-19 situation in Delhi. The matter was scheduled for further hearing on a specified date.

This judgment highlights the importance of procedural compliance in claiming tax refunds, the distinction between withholding tax and actual tax liabilities, and the significance of timely applications for condonation of delay. It also underscores the Court's consideration of practical challenges, such as conducting proceedings via video conferencing during the pandemic, to ensure justice is served efficiently.