2022 (7) TMI 1094 - HC - Income Tax

High Court directs prompt processing of tax refund applications under Income Tax Act, ensuring timely resolution

Jones Lng Lasalle Property Consultants (India) Private Limited Versus The Deputy Commissioner Of Income Tax, TDS Circle 75 (1) And Anr.

The High Court set aside the rejection of the Petitioner's application under Section 197 of the Income Tax Act, directing authorities to decide ... Application u/s 197 - Certificate for deduction at lower rate - seeking a withholding certificate at a lower tax rate of 1.74% - HELD THAT:- This Court finds that the Petitioner’s application seeking withholding certificate at a low tax rate has been rejected by Respondent No.1 on the ground that there exists huge outstanding demand on their internal portal. However, in the very first paragraph of the impugned order, the Officer takes note of the observation of the PAN Assessing Officer that a number of rectification applications of the assessee are pending and once they are decided, the demand against the assessee is likely to be reduced to NIL. Consequently, this Court finds that the very foundation for rejection of the application filed by the Petitioner under Section 197 is self-contradictory. Accordingly, this Court set asides the impugned order dated 16th May, 2022 and directs the Respondent No.2 to decide the rectification applications filed by the Petitioner, in accordance with law within six weeks. Needless to state that if any refund is due and payable to the Petitioner, the same shall be refunded not later than eight weeks from today, in accordance with law. This Court clarifies that it has not expressed any opinion on the merit of rectification application. Further, the Respondent No.1 is directed to once again decide the Petitioner’s application u/s 197 of the Act qua Sections 194A and 194J of the Act, within two weeks of disposal of the rectification applications. Issues:Challenge to order rejecting application under Section 197 of the Income Tax Act, 1961 for Assessment Year 2022-23, seeking withholding certificate at a lower rate for Financial Year 2022-23, and refund applications for Assessment Years 2008-09 to 2014-15 and 2016-17 to 2018-19.Analysis:Issue 1: Rejection of Application under Section 197The Petitioner challenged the rejection of their application under Section 197 of the Income Tax Act, seeking a withholding certificate at a lower tax rate. The Respondent rejected the application citing a substantial outstanding demand on the Petitioner's PAN. However, the court noted that the PAN Assessing Officer had acknowledged that pending rectification applications could reduce the demand to NIL. The court found the rejection self-contradictory as the very basis for refusal was questionable. The court set aside the impugned order and directed the authorities to decide the rectification applications within six weeks, emphasizing that any due refunds should be processed within eight weeks.Issue 2: Refund Applications for Previous Assessment YearsThe Petitioner had filed refund applications for Assessment Years 2008-09 to 2014-15 and 2016-17 to 2018-19, amounting to INR 92,36,00,000/- (excluding interest). The Petitioner contended that incorrect outstanding demands persisted on the Department's portal despite multiple representations seeking rectification. The court directed the authorities to process the refund applications promptly if found due and payable to the Petitioner, ensuring compliance with the law.Issue 3: Application under Sections 194A and 194JThe court directed Respondent No.1 to reconsider the Petitioner's application under Section 197 of the Act concerning Sections 194A and 194J within two weeks of disposing of the rectification applications. The court emphasized that any subsequent application for withholding certificate should be reviewed on its merits after the rectification orders are finalized.In conclusion, the High Court's judgment addressed the challenges faced by the Petitioner regarding the rejection of their application under Section 197, outstanding refund applications, and the need for prompt resolution of rectification requests. The court provided clear directions to the authorities to ensure timely and lawful processing of the Petitioner's requests and applications.