Court dismisses petition challenging tax notice under section 148, limits refund under section 237.

The court dismissed the writ petition challenging the notice issued under section 148 of the Income-tax Act for the assessment year 1977-78 as it became infructuous due to the quashing of reassessment proceedings. The court ruled that only excess amounts over the sum properly chargeable under the Act could be refunded under section 237, rejecting the petitioner's claim for a full refund of pre-paid taxes. The parties were directed to bear their own costs, and the petitioner was allowed to dispute any adjustments of refunds with the Assessing Officer within two months.

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Issues Involved:
1. Quashing of notice issued u/s 148 of the Income-tax Act, 1961.
2. Refund of taxes deposited for the assessment year 1977-78.

Summary:

1. Quashing of Notice Issued u/s 148:
The petitioner sought the quashing of a notice issued u/s 148 of the Income-tax Act, 1961, for the assessment year 1977-78. The initial assessment was annulled by the Income-tax Appellate Tribunal as it was barred by time. Subsequently, the Assessing Officer initiated reassessment proceedings u/s 147/148, which were also quashed by the Tribunal. The court noted that due to the quashing of the reassessment, the petition challenging the notice u/s 147/148 had become infructuous and dismissed the writ petition for reliefs (a), (b), and (c) as such.

2. Refund of Taxes Deposited:
The petitioner contended that with the annulment of the assessments, there remained no liability for income-tax, and thus, the pre-paid tax of Rs. 12,43,780 should be refunded. The court referred to the judgment in Hari Nandan Agarwal (HUF) v. ITO [1986] 159 ITR 816, which stated that amounts deposited in pursuance of an assessment order become refundable if the assessment order is set aside. However, the court clarified that this did not apply to taxes paid voluntarily before the filing of the return.

The court cited the Supreme Court's ruling in CIT v. Chittoor Electric Supply Corporation [1995] 212 ITR 404, which held that no amount becomes refundable unless a fresh assessment is made. The court also referred to the Full Bench decision of the Gujarat High Court in Saurashtra Cement and Chemical Industries Ltd. v. ITO [1992] 194 ITR 659, which held that advance tax, tax deducted at source, and self-assessment tax represent the tax admittedly payable by an assessee and cannot be refunded merely because an assessment is annulled.

The court concluded that taxes paid voluntarily by the assessee, based on their own admission before filing the return, do not become unauthorised collections if an assessment is annulled. The court rejected the petitioner's contention that the entire pre-paid tax should be refunded and stated that only excess amounts over the sum properly chargeable under the Act could be refunded u/s 237.

Regarding any amounts paid in pursuance of the annulled assessment orders, the court noted that the Revenue did not deny the liability to refund such amounts and claimed that refunds had been adjusted as per section 241. The court allowed the petitioner to lay its claim before the Assessing Officer for any disputes regarding the adjustment of refunds, to be decided by a speaking order within two months.

Conclusion:
The writ petition was dismissed, and each party was ordered to bear its own costs.

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