2023 (11) TMI 128 - HC - Income Tax

Benefit of Refund - Retention / withholding of refund in anticipation of demand - Status of the enforceability of the demand for the assessment years - Proceedings are still pending before DRP and yet to be adjudicated - HELD THAT - As there is no recoverable demand from the petitioner as of today, and the readjustment is in anticipation of the conclusion of a particular proceeding in a possible manner without due process. At this stage, Respondents /Sri E. I. Sanmathi submits that the Ao could give due credit to the amounts refundable in terms of the order dated 28.02.2023 when the Ao will have to pass Orders-to-Give-Effect to the directions by the DRP. However, he is not able to point out any provision in the statute or otherwise to justify the retention in the peculiarities of this case. In the absence of the statutory provisions or the enablement otherwise in law, the retention of the amount in anticipation of conclusion of the DRP proceedings, and to give credit to this amount while giving-effect to the orders thereafter cannot be accepted. There would be no justification for denying the petitioner the advantage of the refund. It is too salient that a levy cannot be unless it is with the authority of law and therefore, there has to be a direction to the first respondent to ensure that steps are taken to affect refund in terms of the order dated 28.02.2023 to the petitioner. The next question for consideration is the reasonable time that must be accorded to the first respondent in the circumstances of the case, and after hearing both sides, this Court is of the considered view that the first respondent must be allowed six weeks from the date of receipt of certified copy of this order to extend the benefit of refund to the petitioner. The petition is allowed. The first respondent is directed to identify and take all steps to refund to the petitioner a sum of Rs. 380,39,86,658/- within six 6 weeks from the date of receipt of a certified copy of this order.

Summary

Issues Involved:
The petitioner sought a direction for the refund of a specific amount due to them pursuant to a previous order. The main issue revolved around whether the amount was rightfully refundable or if it had been adjusted against other demands without proper notice to the petitioner.

Judgment Summary:

Issue 1: Refund of Amount
The petitioner had various orders in their favor, leading to a determination that a significant sum was refundable to them for a specific assessment year. The communication from the Income-Tax department indicated that demands for certain years were not enforceable, except for specific assessment years including the one in question. The petitioner argued that there was no recoverable demand from them currently, justifying the refund. The respondent, however, claimed that the refundable amount had been adjusted against demands for a different assessment year. It was highlighted that the readjustment was done without notice to the petitioner, which was contested by the petitioner's counsel. The court found that there was no justification for denying the petitioner the refund, emphasizing that a levy must be with the authority of the law. The court directed the first respondent to take necessary steps to refund the specified amount to the petitioner within six weeks from the date of the court order.

Issue 2: Adjustment of Refund
The respondent argued that the refundable amount had been adjusted against demands for a different assessment year where proceedings were pending. The petitioner contended that such readjustment without notice was not permissible under the law. The court agreed with the petitioner, stating that retention of the amount in anticipation of certain proceedings without legal backing was not acceptable. The court held that the petitioner was entitled to the refund as per the previous order and directed the first respondent to ensure the refund within the specified time frame.

Conclusion:
The court allowed the petition, directing the first respondent to refund the specified amount to the petitioner within six weeks. The judgment emphasized the importance of following legal procedures and ensuring that refunds are made in accordance with the law.