2022 (3) TMI 1666 - HC - Income Tax

Statutory refund entitlement under section 143(1) requires credit with interest under section 244A unless Revenue substantiates withholding.

A refund determined by intimation under section 143(1) is a statutory entitlement that must be paid along with interest under section 244A unless the ... Refund of tax deducted at source - interest u/s 244A - withholding refund pending issuance of scrutiny notice Entitlement to refund determined u/s 143(1) and payment of statutory interest under Section 244A despite issuance of a notice u/s 143(2) - HELD THAT: - The Court recorded a prima facie conclusion that there was no justification shown for withholding the refund that had been determined under section 143(1). The respondents were directed to pay the refund for Assessment Year 2020-21 along with interest as applicable under Section 244A within six weeks. The Court permitted the respondents, within the same period, to file a counter affidavit disclosing any valid reason for withholding the refund or part thereof; no further time would be granted for that purpose. Refund for Assessment Year 2020-21 to be paid with interest under Section 244A within six weeks unless respondents, within that period, file a counter affidavit showing valid justification for withholding. Final Conclusion: The High Court directed payment of the refund determined under section 143(1) for Assessment Year 2020-21 with interest under Section 244A within six weeks, while allowing the respondents a single, time limited opportunity to justify any withholding by filing a counter affidavit. Issues: (i) Whether a refund determined under section 143(1) of the Income-tax Act, 1961 arising from excess tax deducted at source for Assessment Year 2020-21 can be withheld by the Revenue on the ground that a scrutiny notice under section 143(2) has been issued, and whether the refund along with interest under section 244A is required to be credited to the assessee.Analysis: The petition seeks direction for crediting the refund determined by intimation under section 143(1) and payment of statutory interest under section 244A. The facts show a withholding of the refund on the ground that a scrutiny notice under section 143(2) was issued. Relevant judicial authorities addressing the effect of a section 143(2) notice on a refund determined under section 143(1) were relied upon to assess whether withholding the refund is justified. The proceedings provide the Revenue an opportunity to demonstrate a valid justification for withholding the refund or a part thereof by filing a counter affidavit within the time directed. Absent a demonstrable and substantiated reason, the statutory entitlement to refund and interest under section 244A prevails and the refund is to be credited within the period directed by the Court.Conclusion: The refund determined under section 143(1) along with interest under section 244A is to be credited to the assessee unless the Revenue files a counter affidavit within the time directed establishing a valid justification for withholding the refund; direction issued in favour of the assessee.