2021 (12) TMI 712 - HC - Income Tax

Refund claim after adjustment of the tax liability for the aforesaid assessment year - petitioner had not filed returns either under Section 139(1) or within the extended period under Section 139 (4) - Mandation to issue notice u/s 147 - petitioner filed an application u/s 119 for condoning the delay in filing the return so as to claim refund of the excess amount of tax - HELD THAT - Reading of Section 237 makes it clear that there is no limitation prescribed for filing a refund of income tax. As far as filing of returns beyond the period of limitation prescribed under Section 139 (1) and 139 (4) for efficient management of the work of assessment and collection of revenue, The Central Board of Direct Taxes may issue general or special order under Section 119 of the IT Act, 1961 - The Central Board of Direct Taxes has issued circulars Under Section 119 of the IT Act, 1961 from time to time. The facts on record indicate that the petitioner, being an income tax assessee had failed to file returns in time. The second respondent or the Jurisdictional Assessing Officer ought to have issued notice under Section 148 of the IT Act, 1961 on or before 31.03.2018 for the assessment year 2011-12 as there would have been a prima-facie presumption that income had escaped assessment for the aforesaid assessment year. The petitioner initially made an attempt to file a return belatedly before the second respondent on 26.02.2015. This return naturally could not have been accepted as it was beyond the period of limitation prescribed under Section 139 of the IT Act, 1961. In this case, the petitioner has approached the first respondent under Section 119 of the IT Act, 1961 on 29.08.2018 with a request for adjustment of the tax Directorate source and for refund of the amount. It would have been different if the application under Section 119 was made to claim exemption for the first time after the returns were filed in time and after the period prescribed for revising the assessment had expired, where the assessment had attained finality. Where no return was filed, it was incumbent on the part of the second respondent or the Jurisdictional Assessing Officer as was expected to have issued a notice under Section 148 to the petitioner within the time prescribed under the Act, in which case, the question of the petitioner filing an application before the first respondent under Section 119 of the IT Act, 1961 would have arisen at all. Since the law mandates a particular thing to be done in a particular manner, it was incumbent on the part of the second respondent or the Jurisdictional Assessing Officer ought to have issued a notice under Section 148 to determine the tax liability of the petitioner. As this was not done, case deserves to be remitted back to the second respondent to first finalize the assessment of the petitioner for the assessment year 2011-12 within a period of three months from the date of receipt of copy of this order. Failure to issue a notice under Section 148 of the IT Act, 1961, cannot be to the prejudice of the petitioner, if ultimately it is found that petitioner was entitled to a refund. However, liberty is given to penalise the petitioner for failure to file returns in time and for levy of interest if any. Respondents are therefore, directed to examine the refund claim independently and pass appropriate orders within a period of three months from the date of receipt of copy of this order. WP allowed.

Issues Involved:
1. Refund claim for the assessment year 2011-12.
2. Delay in filing returns and condonation under Section 119 of the IT Act, 1961.
3. Applicability of Section 237 of the IT Act, 1961 for refund claims.
4. Relevance of Board's Circular No. 9/2015 for condonation of delay.
5. Jurisdiction and procedural requirements under Section 148 of the IT Act, 1961.

Detailed Analysis:

1. Refund Claim for the Assessment Year 2011-12:
The petitioner sought to quash the impugned order dated 07.12.2018, which rejected their request for a refund of ?36,94,940/- deducted as tax for the assessment year 2011-12. The petitioner claimed entitlement to a refund after adjusting the tax liability of ?8,61,892, resulting in an excess payment of ?37,20,790/-.

2. Delay in Filing Returns and Condonation under Section 119 of the IT Act, 1961:
The petitioner failed to file returns within the prescribed period under Section 139(1) or the extended period under Section 139(4). An application for condonation of delay was filed on 19.11.2018 under Section 119, seeking to claim the refund. The petitioner argued that the impugned order incorrectly applied the Board's Circular No. 9/2015, which stipulates a six-year limit for condonation applications. The petitioner contended that Section 237 is an independent provision for refund and should not be constrained by the circular.

3. Applicability of Section 237 of the IT Act, 1961 for Refund Claims:
The petitioner relied on judicial precedents, including R. Seshammal vs. Income Tax Officer, which clarified that Section 237 allows for a refund if excess tax is paid, irrespective of an assessment order. The court emphasized that Section 237 does not require an assessment order or a tax liability for claiming a refund.

4. Relevance of Board's Circular No. 9/2015 for Condonation of Delay:
The respondents argued that the petitioner's application was beyond the six-year limit prescribed by the circular, which governs the condonation of delay in filing returns for refund claims. The circular mandates that no condonation application for refund claims shall be entertained beyond six years from the end of the assessment year. The court acknowledged the circular's guidelines but also noted the petitioner's argument regarding the independent nature of Section 237.

5. Jurisdiction and Procedural Requirements under Section 148 of the IT Act, 1961:
The court noted that the petitioner had failed to file returns in time, and the jurisdictional assessing officer should have issued a notice under Section 148 before 31.03.2018 to determine if income had escaped assessment. The petitioner initially attempted to file a return on 26.02.2015, which was beyond the limitation period. The court highlighted the necessity of issuing a notice under Section 148 to finalize the assessment and determine the tax liability or refund entitlement.

Conclusion:
The court directed the second respondent or the jurisdictional assessing officer to finalize the assessment for the assessment year 2011-12 within three months from the date of receipt of the order. If the petitioner is found entitled to a refund, it should be processed within three months thereafter, with appropriate penalties for late filing. The writ petition was allowed with these directions, and no order as to costs was made.

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