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TMI Blog2020 (2) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions for exercise of such powers, such exercise under no circumstances can be taken over by computerized system. The very essence of passing of the order under Section 241A is application of mind by the Assessing Officer to the issues which are germane for withholding the refund on the basis of statutory prescription contained in the said Section. We must, therefore, deprecate the practice of the department in sending such auto-generated response to the assessees for withholding the returns. Merely because in the immediately preceding assessment year 2016-17, the assessee had declared a positive income as against substantial loss declared in the present assessment year, that by itself, cannot be a ground to doubt the contents of the return or the claim of the assessee with respect to the loss suffered. The reference to the several issues which are common in the present assessment year and which are pending before the Tribunal, also in facts of the case would not be a ground to withhold the refund. This is so for the following reasons. We are prepared to proceed on the basis that the Assessing Officer in relation to such issues, in case of the assessee for the earlier as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total refund worked out to ₹ 630.21 crores (rounded off). To complete the facts, we may record that the petitioner s revised return was processed by the Assessing Officer on 14.9.2019. Along with interest, this gave rise to refund of sum of ₹ 634.14 crores (rounded off). This would of course subsume the refund arising out of the original return. 4. The respondents, have, however, not released the refund. Firstly an intimation came to be generated on 24.3.2019 from the computer system by the Income Tax Department. This intimation contained a following recitation :- The refund determined u/s 143(1) in this intimation has been withheld as per the provisions of section 241A of Income Tax Act, 1961. The refund, if any, will be released on completion of assessment u/s 143(3)/144 as the case may be, along with interest u/s 244A and subject to adjustment of arrear demand, if any, u/s 245. Please contact the Assessing Officer for more detail. 5. On 21.8.2019, the Assistant Commissioner of Income Tax communicated to the petitioner an order passed by the Joint Commissioner of Income Tax under newly inserted Section 241A of the Act which is challenged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easing the refund of the petitioner. (3) Even otherwise on merits, the Assessing Officer has committed error in withholding the refund because: (i) Even if the additions were to be made in the hands of the assessee upon completion of the assessment, the assessee would have the right of appeal. Pending such appeal, as per the circular issued by CBDT, ordinarily recovery would be stayed upon depositing 25% of the disputed tax amount. In the present case, indirectly the Department would retain the entire tax even before the assessment is completed; (ii) The assessee has suffered huge losses during the year under consideration. Even if all additions which the Assessing Officer has indicated in his impugned order, which according to him require further scrutiny were to be made, the petitioner would still have a loss return. In other words, even if all grounds raised by the Assessing Officer in the impugned order are accepted, there would still be no tax liability in the hands of the assessee in the current assessment year; (iii) Learned counsel drew our attention to an order dated 30.3.2017 under Section 197 of the Act. This order was passed pursuant to an applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee will still not be converted into one of profit. In support of his contention, learned counsel relied on a decision of the Division Bench of the Delhi High Court in the case of M/s. Vodafone Mobile Services Limited Vs. Asst. Commissioner of Income Tax Anr. (Order dated 14.12.2018 in W.P.(C) 2730/18 CM Nos. 46054-55/2018) in which in the context of the provisions contained in Section 143(1D) of the Act, the Court had made following observations:- 39. A reading of the above judgements and the relevant provisions, clearly shows that Section 143(2) empowers, the AO to issue notice to the assessee to produce documents or other evidence, to prove the genuineness of the income tax return. Under section 143(1D) of the Act as introduced by the Finance Act, 2012 processing of a return under Section 143(1)(a) is not necessary where a notice has been issued under Section 143(2) of the Act. This provision has now been amended by the Finance Act, 2016 (with effect from the AY 2017-18) to provide that if scrutiny notice is issued under Section 143(2), processing of return shall not be necessary before the expiry of one year from the end of the financial year in which return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of such return, that the grant of the refund is likely to adversely affect the revenue, he may, for reasons to be recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, as the case may be, withhold the refund up to the date on which the assessment is made. 10. Section 143(1D) of the Act was also simultaneously substituted. Prior to its substitution, this subsection which was inserted by the Finance Act, 2012 w.e.f 1.7.2012 read as under:- (1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary before the expiry of the period specified in the second proviso to sub-section (1), where a notice has been issued to the assessee under sub-section (2): Provided that such return shall be processed before the issuance of an order under sub-section (3). 11. By virtue of Finance Act, 2017 w.e.f 1.4.2017, the substituted sub-section (1D) of Section 143 reads as under :- (1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2): ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2017-18 and subsequent years. 13. As noted, previously sub-section (1D) of Section 143 permitted non-processing of return under Section 143(1) of the Act before expiry of the period specified in second provision to sub-section (1) where a notice has been issued to the assessee under sub-section (2) of Section 143. A Division Bench of this Court, in case of M/s. Group M. Media India Pvt Ltd Vs. The Union of India Ors. 15 OS WP 2145-2172-19.doc , had occasion to examine the said provision in the light of the action of Assessing Officer in withholding the refund of the assessee arising out of return of income. In this background, it is observed as under:- 9. The only contention on behalf of the Revenue to oppose the petition is that as the Assessing Officer has time available to process the refund till 31st March, 2017, no mandamus can be issued till 31st March, 2015. We repeatedly asked of Mr. Mohanty, the learned Counsel for the Revenue, if there was any reason why the return could not be processed before 31st March, 2017. No reasons are forthcoming from the Revenue as to why the Assessing Officer will not able to dispose of the application for refund or proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to address the grievance of delay in issuance of refund in genuine cases which are routinely selected for scrutiny assessment, it was proposed that provisions of Section 143(1D) shall ceases to apply in respect of returns furnished for assessment year 2017-18 and onwards. However, to address the concern of recovery of revenue in doubtful cases, it was directed to insert a new section 241A to provide that, for the returns furnished for assessment year commencing on or after 1st Apfril, 2017, where refund of any amount becomes due to the assessee under Section 143(1) and the Assessing Officer is of the opinion that grant of refund may adversely affect the recovery of revenue, he may for the reasons recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, withhold the refund upto the date on which the assessment is made. 15. This Section, therefore, had two objects to achieve; firstly, to avoid the difficulties of delay in issuance of refund in genuine cases which are routinely selected for scrutiny assessment. Sub-section (1D) of Section 143 was, therefore, made inapplicable to the returns furnished for the assessment year 2017-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding return of the assessee for the assessment year 2016-17 in which the assesee had declared an income of ₹ 286.86 crores as against which in the present year, the assessee has declared huge loss. He, therefore, formed an opinion that the return for the assessment year 2017-18 needs thorough investigation. He also referred to several issues such as revenue share license fees, discount to prepaid distributors and non-deduction of tax at source on the same, international roaming charges and non-deduction of tax at source on such charges etc which are pending with the Income Tax Appellate Tribunal. He, therefore, concluded that there is likelihood of huge demand. In order to protect the interest of the revenue, he ordered withholding of the entire refund of the assessee arising from the processing of the return under Section 143(1) of the Act. 18. Merely because in the immediately preceding assessment year 2016-17, the assessee had declared a positive income as against substantial loss declared in the present assessment year, that by itself, cannot be a ground to doubt the contents of the return or the claim of the assessee with respect to the loss suffered. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be any tax demand from the assessee in the current assessment year. We have perused such material and are prima facie satisfied with the petitioner's contention in this respect. We may note that the assessee has declared loss of over ₹ 6000/- crores. 22. One another significant aspect of the matter is the application filed by the petitioner under Section 197 of the Act before the Deputy Commissioner of Income Tax (TDS) on 17.5.2016. As is well known, under sub-section (1) of Section 197 of the Act, it is open for the competent authority upon justification being made by the assessee to permit deduction of tax at source by the payees at a lower rate or provide that no deduction at all shall be made. For the present assessment year 2017-18, the assessee had in the said application dated 17.5.2016 cited grounds and stated reasons why such deduction of tax be waived. According to the assessee, the financial condition of the assessee did not justify deduction of such tax at source. Interestingly, the Deputy Commissioner (TDS) decided this application by an order dated 30.3.2017 permitting deduction of tax at source at NIL rate. We are conscious that considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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