2019 (5) TMI 197 - HC - Income Tax

Petition for refund - refund is admittedly payable to the Petitioner - demand u/s 201(1) - error of TDS mismatch in the computer system - HELD THAT - Due to human error, the Petitioner had shown payment to HSBC under old as well as new TAN giving rise to TDS mismatch. AO himself agrees that this is an error and the demand should be deleted from the system. Despite this communication from the AO, the computer system of the department has not taken steps to delete the demand. As a result of which, the Petitioner s sizable tax refund in access of ₹ 21 Crores is held up. Department cannot withhold the refund of the Petitioner. Firstly, the computer system cannot override the factual aspects. If the refund is payable, whether the computer systems accepts or not, is of no consequence. In the present case, according to the department itself, the error had to be rectified. Had this be done timely, there would have been no delay in releasing the Petitioner s refund. Petition is disposed of the Respondent shall release the refund of the Petitioner arising out of the assessment for the assessment years 2007-2008 to 2010-2011 with statutory interest latest by 15/05/2019. Department shall take steps to rectify the error of TDS mismatch in the computer system pertaining to the Petitioner. This may be done as expeditiously as possible. However, the refund of the Petitioner shall not be linked with the rectification of the error.

Summary

Issues:
1. Delay in releasing tax refund to the Petitioner.
2. Error in the department's computer system causing withholding of refund.
3. Rectification of TDS mismatch issue.
4. Legal remedy sought by the Petitioner.

Analysis:

1. The primary issue in this case revolves around the delay in releasing a tax refund amounting to ?21,45,54,980 to the Petitioner by the Income Tax Department. The refund was confirmed as payable to the Petitioner based on the communication issued by the Assessing Officer, highlighting the history of demands, appeals, and subsequent deletions of demands for various assessment years. The department acknowledged the refund due to the Petitioner but cited an error in the system as the reason for non-release.

2. The second issue stems from the error in the department's computer system, specifically an amount of ?20,02,034, which the Assessing Officer deemed as not due and payable by the Petitioner but a rectifiable error. The error arose from a TDS mismatch due to the Petitioner inadvertently showing a payment to HSBC under both old and new TAN, leading to a demand that the Assessing Officer agreed should be deleted. Despite this acknowledgment, the system failed to rectify the error, resulting in the withholding of the Petitioner's refund.

3. The third issue pertains to the rectification of the TDS mismatch issue causing the withholding of the refund. The Assessing Officer directed the TRACES Team to delete the erroneous entry causing the mismatch, emphasizing that the demand was incorrect and should be removed from the system. However, despite this directive, the system did not reflect the necessary corrections, leading to the delay in releasing the refund.

4. The legal remedy sought by the Petitioner was for the High Court to intervene and direct the department to release the refund without further delay. The Court, after considering the factual background and the acknowledgment of the error by the department, disposed of the petition with specific directions. The Court ordered the immediate release of the refund with statutory interest and instructed the department to rectify the TDS mismatch error promptly, emphasizing that the refund should not be linked to the error rectification process.

In conclusion, the judgment highlights the importance of timely processing tax refunds, rectifying errors in the department's systems promptly, and ensuring that taxpayers are not unduly burdened due to administrative lapses.