2024 (9) TMI 1382 - HC - Income Tax

Seeking quashment of the order and refund of tax - functionality of adjustment of refund against the outstanding (TAN/PAN) demand - Rejection of request for refund for the relevant assessment year can be raised, only if the assessee files its application on the TRACES Portal in the prescribed form i.e. Form 26B and secondly there is no provision available on the TRACES portal to adjust the outstanding demand of PAN or TAN against the pending refunds of the TAN and requested the petitioner to deposit the aforesaid demand HELD THAT - Section 243 provides payment of interest on delayed refunds that shall start accruing after the expiry of the period of three months from the date of the order granting the refund. Section 241A has been inserted by Finance Act,2001 w.e.f.01.04.2017 about the withholding of refunds in certain cases but the same would not apply in this case because these assessments are in respect of years 2010-11 and 2011-12. Section 245 also provides a set off of refunds against tax remaining payable which says that where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeal), Commissioner (Appeals) or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may, in lieu of payment of refund, set off the amount to be refunded or any part of that amount, against the sum, after giving in an intimation in writing to such person of the action proposed to be taken under this section. Therefore, in view of the above, after the order passed by ITAT, the respondents are bound to refund the amount to the petitioner with interest without there being any formalities to be completed by the petitioner. The non-functionality of the TRACES Portal shall not be grounds for denying the benefit arising out of the statutory provision under the Income Tax Act. TRACES is nothing but a online Portal of the Income Tax Department to connect all the stockholders involved in the administration and implementation of TDS and TCS. The TDS is a Centralized Processing Cell created for TDS reconciliation analysis and correction enabling system which cannot run contrary to the provision of the Income Tax Act. The rights which have been given to the assessee under the Income Tax Act cannot be withheld due to the nonfunctionality of the TRACES.Let the entire exercise be completed within 30 days from the production of a certified copy of this order.

Summary

Issues:
1. Quashment of order dated 11.07.2023 and refund of tax amount
2. Assessment proceedings under Section 201 (1)/(1A) of the Income Tax Act
3. Appeals before CIT (A) and ITAT regarding tax liability
4. Refund request and rejection by Income Tax Officer
5. Non-functionality of TRACES Portal for refund adjustment
6. Legal provisions regarding refunds, interest, and set off

Analysis:
The petitioner filed a Writ Petition seeking to quash an order and obtain a tax refund following a series of assessment proceedings. The Assistant Commissioner initiated proceedings under Section 201 (1)/(1A) of the Income Tax Act, assessing significant tax liabilities for various financial years due to non-deduction of tax at source. The petitioner challenged these assessments before the CIT (A) and subsequently before the ITAT, which set aside the orders and remitted the matter back for reassessment.

After complying with the ITAT's order, the Income Tax Officer passed an order for a refund, but the petitioner's request was rejected due to procedural reasons related to the TRACES Portal. The respondent argued that the Portal's functionality did not allow for the adjustment of refunds against outstanding demands, citing Section 243 of the Income Tax Act and asserting that interest should not be paid due to delays attributable to the petitioner.

The Court noted the finality of the ITAT's order and emphasized the statutory provisions governing refunds, interest payments, and set off against tax liabilities. It highlighted Section 240, which mandates the Assessing Officer to refund amounts due as a result of appeal orders without the assessee needing to claim them. Additionally, Section 243 provides for interest on delayed refunds, and Section 245 allows for set off of refunds against remaining tax payable.

The Court held that the non-functionality of the TRACES Portal should not hinder the petitioner's statutory rights under the Income Tax Act. It stressed that the Portal's purpose is to facilitate stakeholders and ensure compliance with the Act, not to impede statutory duties. The Court directed the respondents to refund the amount to the petitioner with interest, emphasizing that the Portal's limitations should not prevent the exercise of statutory rights.

In conclusion, the Court disposed of the Writ Petitions, instructing the Income Tax Officer to complete the refund process within 30 days of the order. The judgment underscores the importance of upholding statutory rights and ensuring timely refunds in accordance with the Income Tax Act.