Tax refund cannot be denied due to non-functional TRACES portal under Section 245 Income Tax Act

MP HC held that tax refund cannot be denied due to non-functionality of TRACES portal. Court ruled that after ITAT order, respondents must refund amount with interest without requiring petitioner to complete formalities through TRACES portal. Section 245 allows set-off of refunds against outstanding tax, but TRACES portal limitations cannot override statutory provisions under Income Tax Act. Rights granted to assessee under Income Tax Act cannot be withheld due to technical portal issues. Refund process must be completed within 30 days.

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Issues:
1. Quashment of order dated 11.07.2023 and refund of tax amount
2. Assessment proceedings under Section 201 (1)/(1A) of the Income Tax Act
3. Appeals before CIT (A) and ITAT regarding tax liability
4. Refund request and rejection by Income Tax Officer
5. Non-functionality of TRACES Portal for refund adjustment
6. Legal provisions regarding refunds, interest, and set off

Analysis:
The petitioner filed a Writ Petition seeking to quash an order and obtain a tax refund following a series of assessment proceedings. The Assistant Commissioner initiated proceedings under Section 201 (1)/(1A) of the Income Tax Act, assessing significant tax liabilities for various financial years due to non-deduction of tax at source. The petitioner challenged these assessments before the CIT (A) and subsequently before the ITAT, which set aside the orders and remitted the matter back for reassessment.

After complying with the ITAT's order, the Income Tax Officer passed an order for a refund, but the petitioner's request was rejected due to procedural reasons related to the TRACES Portal. The respondent argued that the Portal's functionality did not allow for the adjustment of refunds against outstanding demands, citing Section 243 of the Income Tax Act and asserting that interest should not be paid due to delays attributable to the petitioner.

The Court noted the finality of the ITAT's order and emphasized the statutory provisions governing refunds, interest payments, and set off against tax liabilities. It highlighted Section 240, which mandates the Assessing Officer to refund amounts due as a result of appeal orders without the assessee needing to claim them. Additionally, Section 243 provides for interest on delayed refunds, and Section 245 allows for set off of refunds against remaining tax payable.

The Court held that the non-functionality of the TRACES Portal should not hinder the petitioner's statutory rights under the Income Tax Act. It stressed that the Portal's purpose is to facilitate stakeholders and ensure compliance with the Act, not to impede statutory duties. The Court directed the respondents to refund the amount to the petitioner with interest, emphasizing that the Portal's limitations should not prevent the exercise of statutory rights.

In conclusion, the Court disposed of the Writ Petitions, instructing the Income Tax Officer to complete the refund process within 30 days of the order. The judgment underscores the importance of upholding statutory rights and ensuring timely refunds in accordance with the Income Tax Act.

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