Advance tax paid after s.156 demand without timely assessment order must be refunded; s.214 interest at 12% awarded

Advance tax collected under s. 210 pursuant to a demand u/s 156 could not be retained where no assessment order was made within the prescribed period, since tax becomes due only on assessment and retention without authority violates Art. 265; the assessee was therefore entitled to refund. The Revenue's plea that the claim was time-barred u/s 239(2)(c) was rejected because the levy and retention were de hors the Act, making the limitation inapplicable; in any event, the refund request was within time treating the later filing as the valid return, so refund could not be denied on technicalities. Interest was held payable under s. 214 as the deposit was advance tax, and simple interest at 12% p.a. was directed until refund. Petition allowed.

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Issues Involved:
1. Entitlement to Refund of Advance Tax
2. Applicability of Limitation Period for Refund Claim
3. Interest on the Refund Amount

Issue-wise Comprehensive Details:

1. Entitlement to Refund of Advance Tax:
The primary issue was whether the assessee was entitled to a refund of Rs. 9,400 collected as advance tax u/s 210 and demand notice u/s 156 of the I.T. Act, 1961. The assessee argued that since no assessment order was passed within the prescribed period, no tax was due, and the retention of advance tax was without authority of law, violating Article 265 of the Constitution. The court supported this view, citing precedents like Purshottam Dayal Varshney v. CIT and R. Gopal Ramnarayan v. Third ITO, which emphasized that tax becomes due only after an assessment order is passed. The court concluded that without an assessment order, the Revenue could not retain the advance tax collected.

2. Applicability of Limitation Period for Refund Claim:
The Revenue contended that the refund claim was barred by limitation u/s 239(2)(c) as no application was moved within the prescribed period. The court rejected this argument, stating that the collection and retention of advance tax were de hors the Act and thus, the limitation provisions did not apply. The court further noted that even if s. 239(2) were applicable, the assessee's application for refund was within time, considering the return filed on October 1, 1971, as the valid return. The court emphasized that the prescribed form for refund applications was intended to facilitate the process, not to bar legitimate claims on technical grounds.

3. Interest on the Refund Amount:
The court deliberated on whether the interest provisions of s. 214 or s. 243 of the Act applied. It concluded that s. 214 was applicable as the tax was deposited as advance tax u/s 210. The court ordered that the refund amount should bear simple interest at 12% per annum till the date of refund, referencing decisions from the Madras and Delhi High Courts that supported this interpretation.

Conclusion:
The petition was allowed, directing the respondents to refund the amount with interest by October 3, 1983, with no order as to costs.

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