2017 (2) TMI 37 - HC - Income Tax

Refunds of tax due to regular assessment proceedings - assessed tax is lower than returned tax - amount of tax recovered without any authority of law - Held that - The contention raised by the appellant that on acceptance of the scrutiny, if he is entitled for other benefits which he has not claimed, the same be refunded to him i.e. after the proceeding if it is found that assessee is entitled for refund, the same should be refunded as the State cannot recover the tax more than what is due to it. The issue is answered in favour of the assessee and against the department.

Summary

Issues Involved:
1. Whether the Income Tax Appellate Tribunal overlooked and ignored the provision contained in Section 254(1) of the Income Tax Act in non-granting relief to the assessee and affirming the order of the Commissioner of Income Tax (Appeals)?
2. Whether the Income Tax Appellate Tribunal overlooked the legal and Constitutional provision that no amount of tax can be recovered without any authority of law, and therefore, the Union could not have been permitted to retain the excess amount of tax paid by the assessee?

Detailed Analysis:

Issue 1: Ignoring Section 254(1) of the Income Tax Act
The appellant argued that the Income Tax Appellate Tribunal failed to grant relief as per Section 254(1) of the Income Tax Act. Section 254(1) empowers the Tribunal to pass such orders as it thinks fit after giving both parties an opportunity to be heard. The appellant referenced several cases to support their argument:
- S.R. Koshti Vs. Commissioner of Income Tax: The Gujarat High Court emphasized that authorities must act in accordance with the law and ensure that only legitimate taxes are collected.
- Commissioner of Income Tax Vs. Bakelite Hylam Ltd.: The Andhra Pradesh High Court discussed the scope of Section 143(3) and concluded that the Assessing Authority has the power to determine refunds during regular assessments.
- Commissioner of Income Tax Vs. Vali Brothers: The Allahabad High Court held that if the tax paid exceeds the amount chargeable, the excess should be refunded.
- Seshammal (R.) Vs. Income-tax Officer: The Madras High Court ruled that the Act is not intended to allow the State to retain monies not payable under the Act.
- Gujarat Gas Co. Ltd. Vs. Joint Commissioner of Income-tax (Assessment): The Gujarat High Court noted that the Assessing Officer must exercise independent judgment and not be bound by circulars.
- Commissioner of Income Tax Vs. Bharat General Reinsurance Co. Ltd.: The Delhi High Court stated that there is no estoppel in the Income Tax Act, and the department must assess income correctly.
- Jute Corporation of India Ltd. Vs. Commissioner of Income Tax: The Supreme Court highlighted that the appellate authority has plenary powers and can modify assessments based on additional grounds.
- National Thermal Power Co. Ltd. Vs. Commissioner of Income-tax: The Supreme Court affirmed that the Tribunal has broad powers to ensure correct tax liability.
- Ahmedabad Electricity Co. Ltd. Vs. Commissioner of Income-tax: The Bombay High Court clarified that the Tribunal can consider the entire proceeding to determine tax liability.
- Commissioner of Income-Tax (Central), Madras Vs. Indian Express (Madurai) Pvt. Ltd.: The Madras High Court emphasized that the Tribunal's role is to adjust the taxpayer's liability correctly.

Issue 2: Retention of Excess Tax Without Authority of Law
The appellant contended that the Tribunal overlooked the constitutional provision that no tax can be recovered without legal authority. The argument was supported by the following cases:
- Commissioner of Income Tax Vs. Vali Brothers: The Allahabad High Court ruled that if no amount is chargeable, the entire amount paid as advance tax should be refunded.
- Seshammal (R.) Vs. Income-tax Officer: The Madras High Court ruled that the State cannot retain monies not payable under the Act.
- Gujarat Gas Co. Ltd. Vs. Joint Commissioner of Income-tax (Assessment): The Gujarat High Court noted that the Assessing Officer must exercise independent judgment and not be bound by circulars.

Conclusion:
After considering the arguments and precedents, the court concluded that if the assessee is entitled to a refund after the proceedings, the same should be refunded as the State cannot recover more tax than what is due. The issue was decided in favor of the assessee and against the department. The appeal was allowed, and the judgment was to be placed in each file.