Refund of tax on a valid block return denied after quashing of notice because payment remained statutory

Tax paid on a return filed in response to a section 158BC notice was held not refundable after the initiation notice for block assessment was quashed on the ground of short time. The return was treated as a valid, voluntary declaration, and the refund mechanism under section 240 read with its proviso applied only to the extent tax became refundable on the basis of that valid return and the assessment outcome. The claim under Article 265 also failed because the payment was made under the statutory framework on the return filed. Refund was therefore rejected.

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Issues: Whether tax paid on the income declared in a return filed in response to a notice under section 158BC remained refundable after the notice initiating block assessment proceedings was quashed.

Analysis: The return was filed after the statutory period and was treated as a valid return. The earlier quashing of the notice on the ground of short time did not make the return non est. Refund under section 240 read with its proviso applies only to the extent tax is found refundable on the basis of a valid return and the assessment outcome. The authorities distinguished cases where the return itself was held invalid and relied on the principle that tax paid on a voluntary and valid declaration does not become refundable merely because the notice or assessment proceedings were later set aside on technical grounds. The claim under Article 265 also failed because the tax had been paid under the statutory mechanism on the basis of the return filed.

Conclusion: The refund claim was rejected and the tax paid on the return filed under section 158BC was held not refundable.

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