2008 (10) TMI 254 - AT - Income Tax

Summary

Issues Involved:
1. Non-grant of refund due to TDS claim.
2. Applicability of reassessment proceedings for granting additional refund.
3. Limitation period for claiming refund u/s 239.
4. Relevance of DTAA provisions.

Summary:

Issue 1: Non-grant of refund due to TDS claim
The assessee, a foreign company governed by the DTAA between India and Mauritius, claimed a refund of Rs. 2,02,577 on account of TDS in the return filed u/s 148 on 30th July, 2004. The CIT(A) confirmed the AO's order denying the refund, citing that the claim was not made within one year from the last day of the assessment year u/s 239 of the IT Act.

Issue 2: Applicability of reassessment proceedings for granting additional refund
The CIT(A) upheld the AO's decision, stating that proceedings u/s 148 are initiated to tax income that escaped assessment, not for granting additional refunds. Reliance was placed on the Supreme Court decision in CIT vs. Sun Engineering Works (P) Ltd., which held that reassessment proceedings are for the benefit of the Revenue and not the assessee.

Issue 3: Limitation period for claiming refund u/s 239
The assessee argued that the refund claim was made within the time limit prescribed u/s 239, as the application for refund was filed on 31st March, 2004, before the expiry of the limitation period. The Tribunal found that the claim was indeed made within the prescribed time limit and that the CIT(A) erred in holding that the claim was barred by limitation.

Issue 4: Relevance of DTAA provisions
The Department's argument that the DTAA provisions were not applicable was dismissed by the Tribunal. The Tribunal noted that the AO himself had accepted the income as non-taxable in the hands of the assessee, making the DTAA argument irrelevant to the issue of refund.

Conclusion:
The Tribunal concluded that the assessee is entitled to the refund of Rs. 2,02,577. The decision of the CIT(A) was reversed, and the AO was directed to grant the necessary refund to the assessee. The Tribunal emphasized that tax authorities are obligated to act in accordance with the law and ensure that only legitimate taxes are collected, referencing the Gujarat High Court's decision in S.R. Koshti vs. CIT. The appeal filed by the assessee was allowed.