2020 (7) TMI 73 - HC - Income Tax

Withholding of Refund - as per respondents since huge outstanding demand has been pending against the petitioner, the AO has initiated proceedings u/s 241A against the petitioner to withheld the refund after following prescribed procedure laid down in the Act - HELD THAT - It is not in dispute that as on today, there is no determination of any further tax liability for any other assessment year which liability can be adjusted against the admitted refundable amount determined by the respondent No.1 assuming Section 241A is applicable or otherwise. Even otherwise no approval is granted by the Principal Commissioner or Commissioner as the case may be to withhold the refund up to the date on which the assessment is made. In this case, the assessment order under Section 143(1) for the assessment year 2014-2015 has already attained finality resulting in refund of amount in view of the judgment delivered by Hon ble Supreme Court on 29th April, 2020 and the order dated 28th May, 2020 passed by the respondent no.1. Insofar as the reliance placed by the learned counsel for the respondents on the judgment of the Delhi High Court in the case of Maruti Suzuki India Ltd. V/s. Deputy Commissioner of Income Tax 2011 (11) TMI 312 - DELHI HIGH COURT the said judgment is not even remotely applicable to the facts of this case. Reliance placed by the learned counsel on the said judgment is totally misplaced. The respondents are directed to refund a sum of ₹ 833,04,88,000/- to the petitioner within two weeks from the date of uploading of this order without fail.

Summary

Issues Involved:
1. Refund of ?833,04,88,000 to the petitioner.
2. Adjustment of tax dues against the refund.
3. Applicability of Section 241A of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Refund of ?833,04,88,000 to the petitioner:
The petitioner sought a Writ of Mandamus for the refund of ?1009,43,88,637, with an admitted refund of ?833,04,88,000 as per the rectification order dated 28th May 2020. The petitioner had initially filed its return of income on 30th September 2014, which was revised twice. An assessment order dated 31st October 2019 determined a refund of ?733,80,83,366. Despite the Supreme Court's order on 29th April 2020 directing the refund of ?733 Crores, the respondents did not comply. The High Court directed the respondents to refund ?833,04,88,000 within two weeks from the date of the order.

2. Adjustment of tax dues against the refund:
The respondents argued that they were entitled to set off the refund against outstanding tax dues under Section 245 of the Income Tax Act. The petitioner objected to the intimation under Section 245, arguing that the refund due for the assessment year 2014-15 could not be adjusted against outstanding demands for other years. The High Court noted that the respondents had already invoked Section 245, and the adjustment of ?176,3900,637 was made in the order dated 28th May 2020. The Court held that the respondents could not withhold the admitted refundable amount of ?833,04,88,000 based on potential future tax liabilities.

3. Applicability of Section 241A of the Income Tax Act, 1961:
The respondents invoked Section 241A to justify withholding the refund, arguing that the grant of the refund would adversely affect the revenue. The petitioner contended that Section 241A was not applicable for the assessment year 2014-15, as it applies only from the assessment year 2017-18 onwards. The High Court agreed with the petitioner, stating that Section 241A could not be invoked for the assessment year 2014-15. The Court also noted that no approval from the Principal Commissioner or Commissioner was obtained to withhold the refund.

Conclusion:
The High Court directed the respondents to refund ?833,04,88,000 to the petitioner within two weeks, rejecting the applicability of Section 241A for the assessment year 2014-15 and the adjustment of future tax liabilities against the refund. The Court emphasized that the respondents could not withhold the admitted refundable amount based on anticipated tax determinations.