2022 (12) TMI 758 - HC - Income Tax

Refund claim - time limit for processing a return under 149(1) - Revenue states that since Section 149(1) of the Act itself provides nine months period which is to expire only on 91st December, 2022, no mandamus can be issued in exercise of powers under Article 226 of the Constitution of India, and, therefore, the Petitioner does not have any right to seek the processing of its return before the said period at this stage - HELD THAT - While it may be true that Section 149(1) of the Act does prescribe a period of nine months for the Assessing Officer (A.O.) to process the return filed by an assessee under Section 199(1), yet in our opinion the limit so prescribed is an outer limit, which does not in any manner prevent the A.O. from processing the case of the Petitioner at an earlier date. A.O. must come out with reasons, as to why the case of the Petitioner has not been processed, notwithstanding the fact that the period which is available to him is yet to expire on 91 st December, 2022. We are making this observation considering the anxiety of the Petitioner assessee that as against the tax liability of only Rs.2,17,80,008 /-, an amount of Rs.19,70,78,266/- is lying with the Revenue, out of which according to the Petitioner, an amount of Rs.17,52,98,260/- is due and payable to it as refund. Let an affidavit be filed by Respondent No. 9 Director of Income Tax, Centralised Processing Centre, Bengaluru giving reasons as to the date the return was filed by the Petitioner assessee and whether the same is under process or not, and if not, the reasons thereof.

Summary

Issues:
1. Interpretation of Section 149(1) of the Income Tax Act, 1961 regarding the processing of returns by the Assessing Officer.
2. Whether a mandamus can be issued under Article 226 of the Constitution of India for processing a return before the prescribed period.
3. Rights of the petitioner in seeking timely processing of the return and refund.

Analysis:

Issue 1: Interpretation of Section 149(1) of the Income Tax Act
The petitioner filed a return under Section 199(1) of the Income Tax Act, declaring a total income and tax paid. The Assessing Officer (A.O.) is required to process the return within nine months as per Section 149(1) of the Act. However, the court clarified that this period is an outer limit, and the A.O. can process the return earlier if warranted. The court emphasized that the A.O. must provide reasons if the processing is delayed, especially when a significant refund is due to the petitioner. This interpretation ensures that the petitioner's rights are protected and business operations are not adversely affected.

Issue 2: Mandamus under Article 226 of the Constitution
The respondents argued that since Section 149(1) provides a nine-month period for processing returns, no mandamus can be issued under Article 226 of the Constitution to expedite the process. However, the court disagreed, citing a previous judgment that supported the petitioner's stance. The court held that while the statutory period exists, it does not preclude the court from intervening if there are valid reasons for expediting the processing, especially when substantial amounts are involved.

Issue 3: Rights of the Petitioner
The petitioner sought timely processing of the return to receive a refund owed by the authorities. The court acknowledged the petitioner's concerns regarding the withholding of a significant amount by the Revenue, which impacted its rights and business operations. To address this, the court directed the Respondent Director of Income Tax to provide reasons for the delay in processing the return and update on its status. Failure to comply would result in further court action. This approach ensures transparency and accountability in the processing of returns and refunds.

In conclusion, the judgment clarifies the interpretation of Section 149(1) of the Income Tax Act, upholds the petitioner's rights to seek timely processing of returns and refunds, and allows for judicial intervention under Article 226 of the Constitution when warranted. The court's directive for the tax authorities to provide reasons for delays ensures fairness and efficiency in the tax assessment process.