2022 (8) TMI 917 - HC - Income Tax

Court Orders Refund of Excess Tax Paid, Emphasizes Right to Timely Relief

The Court directed the respondents to refund the excess tax paid by the petitioner along with interest within four weeks of the order to prevent unjust ... Refund claim along with interest u/s 244A - Time for processing of the return - whether AO failed to process the return filled by petioner within prescribed time - what is deemed intimation u/s 143(1) ? - HELD THAT:- This Court is of the view that after filing of the return (under Section 139 of the Act) along with due verification (under Section 140 of the Act) and paying taxes as per return (under Section 140A of the Act), a tax-payer has to simply wait for the refund (as computed in the return) unless the same is disputed by the Tax Department through notices under Sections 142(1) or 143(2) or a defect memo under Section 139(9) of the Act. Since, in the present case, the Assessing Officer has failed to process the return of the petitioner filed in accordance with law within the prescribed time, this Court is of the opinion that the return as declared/filed will have to be treated as ‘deemed intimation’ and an order under Section 143(1) of the Act. (See: Court on its own Motion vs. Union of India [2013 (3) TMI 316 - DELHI HIGH COURT] This Court is also of the view that an assessee cannot be penalised for inaction on the part of the respondent-department. Concept of ‘intimation’ under Section 143(1) of the Act and ‘refund’ are entirely different - Second proviso to Section 143(1) of the Act deals with the issue of intimation and not refund as contemplated under Clause (e) of Section 143(1) of the Act. In fact, the concept of ‘refund’ has been separately dealt with under Chapter XIX of the Act. Separate claim for refund - This Court is of the view that the assessee need not file any separate claim for refund as the same is deemed to have been incorporated in the return filed by the assessee itself. Further, prior to expiry of time for processing of return or failure of the respondent to process the return within the stipulated and or extended time, the petitioner has no right to expect refund. In fact, upon respondent’s failure to process an assessee’s return within time, the right to refund arises by operation of law. Application of Rajesh Jhaveri Stock Brokers Private Limited [2007 (5) TMI 197 - SUPREME COURT] - The judgment of the Supreme Court in Rajesh Jhaveri Stock Brokers Private Limited (supra) has no application to the facts of the present case inasmuch as it deals with the case of re-assessment and makes a distinction between ‘intimation’ and ‘assessment’ under Section 143(1) and 143(3) of the Act. If the submission for Income Tax Department, as articulated in the instructions received by him from the Assessing Officer is accepted, then it would amount to unjust enrichment on the part of the State, which is legally impermissible - It is pertinent to mention that the principle of unjust enrichment proceeds on the basis that it would be unjust to allow a person to retain a benefit at the expense of another person. Supreme Court in a nine Judges Bench judgment in Mafatlal Industries Ltd. vs. Union of India [1996 (12) TMI 50 - SUPREME COURT] has held that once unjust enrichment is proved, restitution is the answer i.e. the person must be given back that benefit. If the respondents do not refund the amount immediately due and payable to the assessee, then interest on the said amount would accrue at the expense of the tax payer. Consequently, the respondents are directed to refund the excess amount paid as tax by the petitioner along with the interest within four weeks of receipt of this order. Issues:1. Delay in issuing refund for Assessment Year 2015-16 under Section 244A of the Income Tax Act, 1961.2. Interpretation of Section 143(1) of the Act regarding refund and intimation.3. Application of legal principles on unjust enrichment and interest accrual on delayed refunds.Issue 1: Delay in Issuing RefundThe petitioner filed a writ petition seeking directions to issue the refund claimed in the return of income for Assessment Year 2015-16. The Assessing Officer failed to process the return within the prescribed time, leading to delays in issuing the refund. The petitioner's refund claim was not processed due to technical reasons, not attributable to the assessee, resulting in the matter being transferred to different authorities over time.Issue 2: Interpretation of Section 143(1) of the ActThe Court analyzed the concept of 'deemed intimation' under Section 143(1) of the Act and emphasized that the right to refund arises by operation of law if the return is not processed within the stipulated time. The judgment in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers Private Limited was cited to distinguish between 'intimation' and 'assessment' under Section 143(1) and 143(3) of the Act. The Court clarified that the assessee need not file a separate claim for refund as it is deemed to be included in the return filed.Issue 3: Unjust Enrichment and Interest AccrualThe Court rejected the Tax Department's submission that would lead to unjust enrichment on the part of the State, citing the principle that restitution is necessary in cases of unjust enrichment. Refusal to refund the amount due immediately would result in interest accruing at the expense of the taxpayer. Therefore, the Court directed the respondents to refund the excess tax paid by the petitioner along with interest within four weeks of the order to prevent unjust enrichment and ensure timely relief to the taxpayer.This judgment highlights the importance of timely processing of refund claims, the distinction between intimation and assessment under the Income Tax Act, and the legal principles governing unjust enrichment and interest accrual on delayed refunds.