Refund of tax paid on original assessment becomes due on date when Commissioner passes order u/s 263. - Income Tax - 1012/CBDT

INSTRUCTION NO. 1012/CBDT Dated : September 24, 1976 Section(s) Referred: 263 Statute: Income - Tax Act, 1961 The Board have recently examined the question whether in a case where the Commissioner cancels or sets aside an assessment order u/s 263 and directs the framing of a fresh assessment, refund of tax paid on the original assessment becomes due on the date when the Commissioner passes the order u/s 263. 2. The Board have been advised that an order of the Commissioner u/s 263 is an integral order and effect has to be given to both the parts of the order, i.e. cancellation of the assessment as well as completion of fresh assessment. U/S 237, a person is entitled to refund only when it is established that excess payment of tax has been made. In a case where an assessment is cancelled u/s 263 for reframing the assessment, the facts prima facie show that the assessee had on the contrary paid less tax than what was due from him and the quantum of tax payable by him was still to be determined. In view of this, the assessee could not be said to be entitled to refund merely because of the cancellation or setting aside of the original assessment u/s 263 of the Act with a direction to make a fresh assessment. In a situation like this, there is no legal obligation cast on the Income-tax Department to pay back the tax already paid by the assessee. 3. U/S 153(2A) of the Act, a fresh assessment can be made in such cases within 2 years from the end of the financial year in which the order u/s 263 is passed by the Commissioner of Income-tax. However, the Board desire that where assessments are cancelled or set aside u/s 263 to be made afresh, the fresh assessments should be completed expeditiously. Commissioners are requested to keep a watch over the completion of such assessments.