Income-tax refund cannot be withheld merely because challenges to annulment orders remain pending

Income-tax refund became payable once the assessee's assessments were annulled, and the assessing authority could not withhold it merely because proceedings challenging the annulment orders were still pending. The mere pendency of a reference or appeal against the annulment did not, by itself, justify invocation of any withholding power. As the refund had accrued under the refund provision on annulment of the assessments, continued retention of the amount was unjustified. The assessee was therefore entitled to receive the refund, and the Department was restrained from withholding it on the ground that the annulment orders were under challenge.

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Issues: Whether the assessing authority could withhold income-tax refund payable upon annulment of the assessee's assessments merely because proceedings challenging the annulment orders were still pending.

Analysis: The refund became due to the assessee under the refund provision once the assessments were annulled. The existence of pending reference or appeal against those annulment orders, by itself, did not furnish a valid basis for withholding the refund. The statutory power to withhold could not be exercised on the sole ground that the Department had questioned the correctness of the annulment orders and those proceedings were not yet concluded.

Conclusion: The withholding of refund was unjustified. The assessee was entitled to receive the refund, and the respondents were directed not to withhold it on the ground that challenges to the annulment orders remained pending.

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