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TMI Blog2023 (3) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 [hereinafter "the Act"]. Pursuant to a de-merger and to give effect to the Scheme of Arrangement, the Petitioner filed a revised return of Income Tax for AY 2020-2021 on 27.03.2021 [hereinafter "Revised Return"] declaring a loss of Rs.16,70,16,05,998/- and claiming a refund of Rs.43,91,40,294/-. 2.2 The Petitioner was subjected to a scrutiny assessment under Section 143(2) of the Act by notice dated 29.06.2021 which was responded to by the Petitioner with all the necessary clarifications as sought for, on 29.07.2021. 2.3 Subsequently, a notice under Section 142(1) of the Act was sent to the Petitioner on 14.12.2021, wherein detailed information and documents were sought by the Revenue. The Petitioner submitted a response to the same on 27.12.2021. On the same day, the Petitioner received an intimation under Section 143(1) of the Act which stated that a refund of Rs.33,05,84,840/- (inclusive of interest) has been calculated as due to the Petitioner [hereinafter "Refund Intimation"]. The Refund Intimation also stated that the refund shall be credited within a period of 15 days from that date. 2.4 Despite the lapse of several months after the passing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom FAU", no other details had been provided by the Respondents, until after the filing of the Petition. 4.1 It was submitted by the learned counsel for the Petitioner, that where refund has been withheld by the Revenue, the provisions of Section 241A of the Act require that reasons be recorded in writing by the concerned Officer to withhold the refund and also that the approval of Principal Commissioner or Commissioner is to be taken. Reliance was placed upon the Judgments of Coordinate Benches of this Court in the matter of Maple Logistics P. Ltd. And Anr. vs. Principal Commissioner of Income Tax and Ors. 2019 SCC OnLine Del 12366 and Ingenico International India Pvt. Ltd. vs. Deputy Commissioner of Income-Tax, Circle 10(1) and Others 2021 SCC OnLine Del 2969, to submit that the Revenue can stall the grant of a refund only in the circumstances as enumerated in Section 241A of the Act. 4.2 It was further submitted that the letter dated 30.05.2022 which has been produced by the Respondents does not provide substantive reasons to defend their decision to withhold the refund under the provisions of Section 241A of the Act. 5. Learned counsel for the Respondents on the other hand s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und cannot simply be withheld if an Assessee is selected for scrutiny assessment or where a notice has been issued under sub-section (2) of Section 143 of the Act. 8.1 A Coordinate Bench of this Court comprising one of us (Rajiv Shakdher, J.), in the matter of Ingenico International case (supra) has clarified this provision in the following manner:- "26. Therefore, a plain reading of Section 241A shows that the mere issuance of the scrutiny notice under Section 143 (2) of the Act cannot stall the remittance of refund to the assessee. The refund can only be stalled if the conditions stipulated in Section 241A of the Act, to which we have made a reference above, are fulfilled, i.e., the A.O. records his reasons in writing as to why the release of refund is likely to affect the interests of the Revenue and that this step of the A.O. receives the imprimatur [which obviously would mean prior approval] of his superior officer, i.e., Principal Commissioner or Commissioner as the case may be.... [Emphasis is ours] 8.2 Another Coordinate Bench of this Court in Maple Logistics case (supra), has held that the discretion vested with the AO to withhold a refund must be exercised judicious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grant of the refund is likely to adversely affect the Revenue". The reasons that are relied upon by the Revenue to justify the withholding of the refund in the present case, are abysmally lacking in reasoning. Except for reproducing the wordings of section 241A of the Act, they do not state anything more. The entire purpose of section 241A would be negated, in case the Assessing Officer was to construe the said provision in the manner he has sought to do. It would be wholly unjust and inequitable for the Assessing Officer to withhold the refund, by citing the reason that the scrutiny notice has been issued. Such an interpretation of the provision would be completely contrary to the intent of the Legislature. The Assessing Officer has been completely swayed by the fact that since the case of the assessee has been selected for scrutiny assessment, he is justified to withhold the refund of tax. 31. The power of the Assessing Officer has been outlined and defined in terms of section 241A and he must proceed giving due regard to the fact that the refund has been determined. The fact that notice under section 143(2) has been issued, would obviously be a relevant factor, but that cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Unit) [hereinafter "ReFAC(AU)"] state that the case was selected under Computer Aided Scrutiny Selection (CASS) and there were a large number of issues to be examined. A mention of Transfer Pricing is also made and it concludes that scrutiny assessment is presently in progress which may lead to a demand. This letter further states that the grant of refund likely to adversely affect the interest of Revenue. The relevant extract is below: 8. Reason of withholding of refunds The case was selected under CASS with large no. of issues to be examined. It is also referred to Transfer pricing. Scrutiny assessment is presently in progress in this case which may lead to raising of demand. Grant of refund is likely be adversely affect the revenue. It is therefore advisable that the refund in this case may be withheld u/s 241A of the I T Act. 9.1 The PCIT [ReFAC(AU)] by its letter dated 31.05.2022 granted the approval for withholding of refund of the Petitioner albeit till the date of finalization of assessment as follows: "Sub: Withholding of Refund u/s. 241A - regarding Kindly refer to the above. 2. In this connection, I am directed to convey that the PCIT (ReFAC)(AU) had ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und under the provisions of the Act. As has been held in Maple Logistics case (supra), it would be wholly unjust and inequitable for the AO to withhold a refund by citing the reason that a scrutiny notice has been issued and such an interpretation of the provision would be contrary to the intent of the legislature. The ReFAC(AU) has been completely swayed by the fact that the case of the Assessee has been selected by CASS for scrutiny assessment. 11.1 The Principal Commissioner of Income Tax (ReFAC)(AU) has also mechanically accorded permission to withhold the refund till the date of finalization of assessment without any application of mind in the matter. 12. In our view, the orders dated 30/31.05.2022 are bereft of cogent reasons and are not in consonance with the principles enunciated in Maple Logistics case (supra), and Ingenico International case (supra) and hence, cannot be sustained. 12.1 We, accordingly, set aside the order(s) dated 07.06.2022/30.05.2022. The Respondents shall conduct a de novo exercise bearing in mind the provisions of Section 241A of the Act and principles articulated hereinabove, within six weeks of receipt of a copy of the Judgment. We have laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X
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