1980 (6) TMI 23 - HC - Income Tax

Court annuls tax assessment orders for failure to quantify tax as required by law, directs refund to petitioner

The court annulled the assessment orders for the years 1973-74 and 1975-76 due to the failure to quantify tax in the orders as required by the Income-tax ... Refund Issues Involved:1. Validity of the assessment orders.2. Entitlement to refund of tax paid.3. Interpretation of Section 240 of the Income-tax Act, 1961.4. Applicability of Article 265 of the Constitution.Summary:1. Validity of the Assessment Orders:The petitioner, a partner in 'Ramco Swadeshi,' challenged the assessment orders for the years 1973-74 and 1975-76. The Income-tax Appellate Tribunal annulled the assessment orders on the ground that the respondent-ITO failed to quantify the tax in the assessment order as required u/s 143(3) of the Income-tax Act, 1961. The Tribunal found that the tax was quantified in a separate sheet annexed to the assessment order, leading to the annulment of the orders.2. Entitlement to Refund of Tax Paid:Following the annulment of the assessment orders, the petitioner demanded a refund of the tax paid for the relevant assessment years. The respondent-ITO rejected this demand. The petitioner contended that without a valid assessment order, the tax retained by the respondent was without the authority of law and should be refunded u/s 240 of the Act.3. Interpretation of Section 240 of the Income-tax Act, 1961:Section 240 mandates the refund of any amount due to the assessee as a result of any order passed in appeal or other proceedings under the Act. The court held that the language of the section is wide and requires the revenue to refund the amount even without a demand. The court concluded that if a demand is properly made, it cannot be refused, and the tax paid without a valid assessment order must be refunded.4. Applicability of Article 265 of the Constitution:The court emphasized that no tax can be levied or collected without the authority of law as enjoined in Article 265 of the Constitution. The annulment of the assessment orders by the Tribunal meant there was no assessment in the eye of law. Consequently, the revenue could not retain the tax paid by the petitioner without a valid assessment order. The court cited several precedents, including the Supreme Court's decision in Patel India (P.) Ltd. v. Union of India, to support the principle that tax collected without jurisdiction must be refunded.Conclusion:The court issued a writ of mandamus directing the respondent-revenue to refund all amounts paid by the petitioner for the assessment years 1973-74 and 1975-76, whether as advance tax, self-assessment, or deducted at source. The respondent's refusal to refund the amount was quashed as being without jurisdiction and authority of law. The parties were directed to bear their own costs.