2023 (12) TMI 1092 - HC - Income Tax

Refund claim with Interest u/s 244A - Withholding of refund without recording an opinion on whether grant of refund would likely affect the revenue adversely u/s 241A - HELD THAT - As consideration falls short of the requirements under the provisions of Section 241A of the IT Act, which stipulate that the Assessing Officer, having regard to the fact that notice has been issued under sub-section (2) of Section 143, must record in writing an opinion with reasons on how the revenue s interest would be adversely affected if refund is allowed. The withholding of the refund in the manner as now considered by the Assistant Commissioner of Income Tax, ReAC (AU)-1(2)(1), Surat cannot be accepted, and there must be interference by this Court. This Court must record that it is undisputed that the petitioner has claimed refund for the Assessment Years prior to the Assessment Year 2021-22. The Principal Commissioner of Income-tax (AU)-1 has granted approval recording the details of the carry forward losses for the corresponding years, and consequentially, the petitioner is admitted to refund for the Assessment Years 2018-19, 2019-20 and 2000-21 respectively. The petitioner has reported a carry forward loss to the tune of Rs. 3,325.85/- Crores for the present Assessment year. The Revenue as against the principal sum of Rs. 29,35,11,360/- will have to pay interest in excess of Rs. 2,00,00,000/-, imposing a burden on the exchequer, if there is a delay. Further, if indeed a reference to the transfer pricing officer is under investigation, it would suffice for this Court to observe that if the adjudication, after due process, results in a demand, the petitioner will have to answer the demand, but in anticipation of a conclusion for a demand without even recording the reasons, the petitioner cannot be denied the refund. There are overwhelming circumstances as established by the undisputed facts. In the light of the above, the petition must be allowed directing the respondents to refund a sum along with interest as is permissible in law within a timeframe without prejudice to recover demand on the conclusion of the pending proceedings. The petition is allowed. The first and the fifth respondents National Faceless Assessment Centre through the Commissioner of Income Tax-1 and Central Processing Cell through the Commissioner of Income Tax , are directed to take appropriate action for refund of a sum of Rs. 29,30,46,736/- along with permissible interest under Section 244A.

Summary

Issues involved:
The petitioner sought directions for a refund of Rs. 9,30,46,736/- along with applicable interest under Section 244A of the Income Tax Act, 1961. The main issue revolved around the withholding of the refund by the respondents for the Assessment Year 2021-22, based on concerns regarding a reported loss and pending scrutiny assessment.

Summary of Judgment:

Issue 1: Refund Direction
The petitioner filed a petition seeking directions for the refund of a specified amount along with interest. The respondent had withheld the refund citing concerns over the reported loss and pending scrutiny assessment. The petitioner argued that the refund was being withheld without proper opportunity and opinion recording as required by Section 241A of the IT Act.

Issue 2: Legal Considerations
The petitioner relied on legal precedents to argue against unjustified withholding of refunds. Reference was made to the decision in Ericsson India (P.) Ltd. Vs. Additional Commissioner of Income Tax, emphasizing that pending assessments cannot be a valid reason for withholding refunds. The Assessing Officer was required to record an opinion on adverse revenue impact with cogent reasons before withholding refunds.

Issue 3: Court's Analysis
The Court examined the provisions of Section 241A of the IT Act, which mandate that the Assessing Officer must record in writing an opinion on how the revenue would be adversely affected by granting the refund. The Court found that the reasons provided by the Assistant Commissioner fell short of the legal requirements, and there was a lack of proper justification for withholding the refund.

Issue 4: Decision
The Court acknowledged the petitioner's claims for refunds in previous assessment years and the significant burden on the exchequer due to delayed refunds. It was noted that if a demand arises from ongoing investigations, the petitioner would have to address it, but withholding refunds without proper reasoning was deemed unjustified. The Court allowed the petition, directing the respondents to refund the specified amount along with interest within a set timeframe, without prejudice to any future demand resulting from pending proceedings.

In conclusion, the Court ruled in favor of the petitioner, emphasizing the importance of following legal procedures and providing adequate justifications for withholding refunds under the IT Act. The respondents were instructed to refund the specified amount promptly, ensuring the petitioner's entitlement to the refund as permitted by law.