TaxTMI 
TaxTMI 
2015 (10) TMI 1770
X X X X Extracts X X X X
X X X X Extracts X X X X
....ke actual refund under section 240 and 244(1) along with interest @ 15%." 2. Very briefly put, the case of respondent No. 1 / writ petitioner was as follows: On 18.07.2014, the Income Tax Appellate Tribunal, Delhi Bench, in three appeals, passed a judgment and allowed the appeals filed by the writ petitioner and dismissed the appeals filed by the Income Tax Department (hereinafter referred to as the "Department") holding that the provision of Section 194A(1) of the Income Tax Act (hereinafter referred to as the "Act") is not applicable to the SRF deposit made. On 30.07.2014, on the basis of the said judgment, writ petitioner applied for refund of Rs. 44,36,57,686/- with interest, which the Department had coercively recovered from the writ petitioner. It is necessary to notice that recovery was effected by proceedings dated 29.03.2014, by which the Department attached the account of the writ petitioner with RBI in a sum of Rs. 44 and odd crores, which amount related to 2013-2014. Writ petitioner further sent communication dated 08.09.2014 (Annexure No. 4) seeking refund. It is, thereafter, that the impugned letter dated 04.12.2014 (Annexure No. 5) was issued, which reads as fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 97,85,38,937/- has been deleted against the assessee/Bank seems to be correct. Since, it is not within the knowledge of Mr. Hari Mohan Bhatia, learned counsel for the Revenue, as to whether order dated 03.03.2015 has been passed by the Commissioner of Income Tax (Appeals), therefore, in the peculiar facts and circumstances of the case, I direct that on the applications of the petitioner seeking refund, an appropriate decision shall be taken within two weeks positively and if it is found that vide order dated 03.03.2015 amount of Rs. 97,85,37,937/- has been deleted against the assessee, amount of Rs. 44,36,57,686/- shall be refunded to the petitioner Bank along with interest as provided under Section 240 read with Section 244 of the Income Tax Act. It is, however, clarified that unless and until order passed by the Income Tax Appellate Tribunal has been stayed or set aside by the higher Forum, refund shall not be denied to the petitioner. Petition stands disposed of accordingly." 5. It is feeling aggrieved by the same that the appeal has been filed. 6. We heard Mr. Hari Mohan Bhatia, learned counsel appearing for the appellants and Mr. Bishwajit B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nda Bharati Sripadagalvaru & others vs. State of Kerala & another, reported in (1973) 4 SCC 225, as also by the Constitution Bench in Indira Nehru Gandhi vs. Shri Raj Narain & another, reported in AIR 1975 SC 2299, to be a basic feature of the Constitution. He would complain of arbitrariness on the part of the Department in refusing to grant refund of the amount, which was illegally attached. He would point out that, actually, there is only a single deposit made by ONGC with the Bank and, in regard to the said deposit, Section 194A of the Act is not applicable. He points out that, for Assessment Year 2013-2014, an amount of Rs. 44 and odd crores came to be recovered by the Department by attaching the account of the Bank. While so, the Income Tax Appellate Tribunal, vide judgment dated 18.07.2014 (Annexure No. 2 to the writ petition), allowed the appeals filed by the writ petitioner for the Assessment Years 2010-2011, 2011-2012 & 2012-2013. Thereafter, for Assessment Year 2014-2015, even though the matter stood concluded by the judgment of the Tribunal, the Assessing Officer, by order dated 15.09.2014, assessed the writ petitioner again in respect of the very same deposit made by ON....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as it were and, thereafter, the authority resorting to Section 245 of the Act for making adjustment. This is apart from his contention that, as far as the impugned order is concerned, there is no prior intimation as required under Section 245 of the Act. 10. In order to appreciate the contentions of the parties, we deem it necessary to refer to the scheme of the Act in regard to refunds. Refunds figure under Chapter XIX of the Act. Section 237 provides, inter alia, that, if a person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under the Act for that year, he shall be entitled to a refund of the excess. We need not be detained with Section 238. Section 239 provides for the form of the claim for refund and limitation. Section 240 being relevant, we extract the same as under: "240. Refund on appeal, etc. - Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e writ petitioner. 15. In Union of India & others vs. Ramlakshi Finance Corporation Ltd., reported in 1992 Supp (1) SCC 443, the Hon'ble Apex Court, inter alia, held as follows: "6. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers, in reaching in their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt in Glaxo Smith Kline Asia P. Ltd. vs. Commissioner of Income Tax & others, reported in (2007) 290 ITR 35 (Delhi). The judgment was rendered in a writ petition under Article 226 filed seeking a mandamus to the respondents to give effect to the order of the Tribunal and grant refund with interest. The petitioner therein entered into an agreement with a Company for providing various services. The petitioner was to reimburse the cost incurred by the Company for providing the services plus 5 per cent, which was referred to as "cross charges". There was no basis laid down for allocation of costs and the parties agreed to engage a firm of Chartered Accountants to determine the basis. For the Assessment Year 1998-1999, the cross charges were worked out. However, the Assessing Officer took the view that the increase in cross charges was not fully and exclusively for the purpose of the business of the petitioner and justifiable only to the extent of 7 per cent of the net sales. The order was confirmed by the appellate authority. Similar approach was taken in Assessment Year 1999-2000 also by the Assessing Officer and the appellate authority. The petitioner therein successfully appealed be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der dated 17.08.2006, the court had noticed that, for the Assessment Year 2001-2002, petitioner was entitled to refund of Rs. 11.79 crores; whereas, according to the Revenue, it was entitled to recover Rs. 10.69 crores for the Assessment Years 2002-2003 and 2003-2004. An excess amount of Rs. 1.10 crores was withheld without any justification. The said amount was directed to be refunded along with interest and the same was paid. Thereafter, the question related to the refund of Rs. 10.69 crores. The issue which finally fell for decision was, whether the petitioner was entitled to refund for the Assessment Year 2001-2002 of the amount already computed by the Revenue by its orders dated 28.12.2005 and 01.05.2006. The Revenue sought to adjust it against the subsequent Assessment Years 2002-2003 and 2003-2004. The court referred to Section 241, as it stood prior to 01.06.2001. The said provision was as follows: "241. Power to withhold refund in certain cases.- Where refund of any amount becomes due to the assessed as a result of an order under this Act or under the provisions of Sub-section (1) of Section 143, after a return has been made under Section 139 or in response to a n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te. If the Legislature had intended to prohibit the refund of the amount due to the assessed only on the ground that the Revenue has preferred an appeal/revision, etc., then Section 240 would have been couched in a different phraseology. Absence of specific provision in the statute providing for withholding of refund only on the ground of pendency of the proceedings is clearly indicative of the intention of the Legislature that pendency of proceedings will not by itself be a ground for withholding the refund." ....... 26. In our view, the power under Section 245 of the Act, is a discretionary power given to each of the tax officers in the higher echelons to "set off the amount to be refunded or any part of that amount against the same, if any, remaining payable under this Act by the person to whom the refund is due." That this power is discretionary and not mandatory is indicated by the word "may". Secondly, the set off is in lieu of payment of refund. Thirdly, before invoking the power, the officer is expected to give an intimation in writing to the assessed to whom the refund is due informing him of the action proposed to be taken under this section. 27....
X X X X Extracts X X X X
X X X X Extracts X X X X
....interpretation, and that the minute the demand is finalised at the very first level by the Assessing Officer for the particular assessment year, the requirement of Section 245 stands satisfied, this argument, cannot in the context of Section 245 itself, be accepted without qualification. The decision in S. RM. AR. RM. Ramanathan Chettiar v. AMI ITO [1956] 29 ITR 683 (Mad), upon which reliance was placed by the Revenue, was in a different context. The relevant provision considered in the said case was Section 49E, which read as under: "Section 49E : Where under any of the provisions of this Act, a refund is found to be due to any person, the Income-tax officer,... may, in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due." 31. It may be straightaway noticed that Section 49E of the Indian Income-tax, 1922 is not in pari materia with the power under Section 245. The latter power can be exercised only after prior intimation has been sent to the assessed of the action proposed to be taken by the Revenue. Therefore, the mere ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt years are pending in this court. However, having issued the refund voucher for the assessment year 2000-01 in respect of which also the appeal is pending in this court, there appears to be no justifiable reason for withholding the refund due in respect of the other assessment year 2001-02." 17. The said judgment, apparently, was followed in Maruti Suzuki India Ltd. vs. Deputy Commissioner of Income Tax, reported in (2012) 347 ITR 43 (Delhi). Following the aforesaid judgment, it was, inter alia, held that the pendency of appeal proceedings by itself cannot be a ground to not refunding the amount due and payable and it is not sufficient to pass an order of adjustment for demand on issues, which have been decided against the Revenue. Therein, the court was dealing with the question, whether Section 220(6) of the Act was applicable when appeal is preferred before the Tribunal. It was held that the Tribunal had power to stay recovery. It was, further, noted that Section 245 permits recovery of the demand of one year, which is pending, by adjusting the refund due for another year. It was a case, where the petitioner was entitled to refund of Rs. 122.57 crores and Rs. 107.41 crores ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Income-tax, but some facts are required to be brought on record to justify the withholding of refund. The mere fact and the only fact that the order is under challenge either before the High Court or before the Tribunal is no ground to withhold the refund or to reach a conclusion that the refund would adversely affect the Revenue. Held, that, in the present case, nothing had been brought out in the letter of the Assessing Officer justifying the withholding of the refund. The Commissioner of Income-tax (Appeals) deleted the total additions on the merits by holding that the assessee was carrying out the scientific research at his premises and that the reasons for reopening the assessment were not sufficient. The Assessing Officer in his letter only recommended the filing of the appeal against the order of the Commissioner of Income-tax (Appeals) and at the same time sought permission to withhold the refund as refunding the amount at this stage would adversely affect the interest of the Revenue. A huge amount had been withheld only on the ground that the appeal against the order of the Commissioner of Income-tax (Appeals) was pending before the Tribunal. No material was forth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rlier. However, the petitioner disputed filing of any Special Leave Petition. The court, further, took note of the proceedings before the Supreme Court. The Special Leave Petition could not be listed earlier for some reasons. No certificate was granted by the court under Section 261 making it a case fit for appeal to the Supreme Court. Therefore, the matter under Section 256(2) had come to an end and, thereafter, the court proceeded to find that, if the Revenue wanted to withhold the refund after the filing of the petition under Section 136, it has to obtain a stay from the Supreme Court and cannot rely on Section 241. There was nothing to show the pendency of the Special Leave Petition itself and thwarting the right of the petitioner to refund by merely filing a Special Leave Petition in the Registry after limitation had expired, was noted as grossly illegal. In regard to Section 245, the Bench took the following view: "There is nothing on the record or even in the letter to suggest that before passing the order, the provisions of section 245 were complied with. For the purpose of any set of an intimation has to be given in writing to the assessed of the action proposed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- Intimation under section 245 of the Income Tax Act - Regarding. Return of income for the assessment year 1996-97 was processed under section 143(1)(a) on March 19, 1997, and a refund of Rs. 16,27,64,936 has been determined to be refundable to you. The said refund is adjusted against the following demand:" Thereafter, the demand and the assessment years were set out. Thereafter, the Bench held as follows: "On a plain reading of section 245 of the Act, it would appear that this provision enables the Assessing Officer or other tax or appellate authorities to set off, after intimation to the claimant, the amount to be refunded or any part thereof, against any sum remaining payable under the Act by the person to whom the refund is due. In the Indian Income-tax Act, 1922 (for short "the 1922 Act"), similar provision regarding set-off existed in section 49E. Requirement regarding intimation to the assessee did not, however, find place in section 49E of the 1922 Act. Section 245 reproduces section 49E of the 1922 Act with the addition of the requirement that the Assessing Officer shall give intimation to the assessee before making the adjustment under this s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yable. - Where under any of the provisions of this Act, a refund is found to be due to any person, the Income-tax Officer, Appellate Assistant Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due." 24. We may, at once, notice the fact that, while there are a number of similarities in the provisions, it does contain differences. Apart from the fact that the persons, who may make use of the power, being different, which may not be relevant for our purpose; in the new incarnation, the law provides that the set off may be as against the sum, if any, remaining payable under the Act. Earlier in Section 49E, the amounts were specified expressly as the tax, interest or penalty, if any, remaining payable under the Act by the person to whom such a refund is due. The third difference is, undoubtedly, the requirement in Section 245 of giving intimation in writing to the person of the action proposed to be taken under this Section. The words used therein are "after giving an intimation in writ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... liability on the Central Government to pay the assessee simple interest at the rate of 15 per cent per annum on the amount of refund due from the date immediately following the expiry of three months to the date on which refund is granted. Coming back to Section 240, it significantly provides that, if the said Section is attracted, the amount is to be refunded even without any claim, except where it is otherwise provided under the Act. It is by way of bringing up the rear that Section 245 figures as the last provision in Chapter XIX. It is all embracing, as it takes in all cases, where refund is found due. It enables the setting off of any amount remaining payable under the Act by a person to whom the refund is due as against the refund, no doubt, after prior intimation in writing. We have already set out the provisions of Section 241, as it stood prior to its deletion. We are of the view that Sections 241 and 245 operate in different fields. The objects of the provisions are different. As far as Section 241 is concerned, it empowered the withholding of the refund in the circumstances mentioned therein. Undoubtedly, the power was to be exercised by the Assessing Officer; but only ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ception to this law to make the payment and, by way of effecting recovery of any amount remaining payable under the Act from the very same person, that Section 245 vests authority to adjust the refund against any sum remaining payable. Therefore, Section 245 is, essentially, intended for the purpose of enabling extinguishment of the right to the refund on the basis of adjusting the refund against the sum remaining payable from the same person. Quite clearly, the purport of Section 245 is different from Section 241, which, as we have explained, is intended to put things in a state of suspension in the contingencies provided therein, subject to the further superadded condition that the authority must take the view that, if the refund is not withheld, it will adversely affect the interest of Revenue. We do not see any scope for reading into Section 245 the conditions, which would have been germane under Section 241. 29. We must, further, examine what is the meaning of the words "in lieu of" found in Section 49E of the earlier enactment and also in Section 245 of the Act. Does Section 245 provide for a two-way traffic? In other words, does it enable the assessee to demand a set off ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not necessarily lead to the conclusion that there must be a prior adjudication. But this is not enough to sustain the claim of the appellant. It must still show that a refund is due to it. The words "found to be due" in section 49E may possibly cover a case where the claim to refund has been held barred under rule 5 of the Indian States Rules but that this is not the correct meaning is made clear by the expression "in lieu of payment". This expression, according to us, connotes that payment is outstanding, i.e., that there is subsisting obligation on the Income-tax Officer to pay. If a claim to refund is barred by a final order, it cannot be said that there is a subsisting obligation to make a payment. The expression "in lieu of" was construed in Stubbs v. Director of Public Prosecutions, (1890) 24 QBD 577. It was held there that where a liability has to be discharged by A in lieu of B, there must be' a binding obligation on B to do it before A can be charged with it. In our opinion, there must be a subsisting obligation to make the payment of refund before a person is entitled to claim a set off under S. 49E. In this case, in view of the orders of the Commissioner and the Cen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rnment becomes its imperative duty, inasmuch as, it sub serves the larger public good of arming the Government with the requisite funds to carry out various welfare schemes, apart from meeting its ever growing expenditure. Therefore, in situations where the matter is without much dispute, there cannot be anything wrong in resort being made to Section 245. By doing so, the Government would be freed from the situation of depriving itself of the funds, which it has in its hands, on the basis of the payment towards the refund, where the assessee, himself, owes money to the Government. 34. There may, however, be situations also, where the matter is seriously contested by the assessee. The assessee pursues the matter before the higher forum and, undoubtedly, he may obtain an order of stay, in which case, of course, there cannot be any scope for invoking the power to adjust the refund. We must keep in our minds that the effect of an adjustment under Section 245 is the extinguishment of the duty to refund the amount and the loss of the right of the assessee to refund. Therefore, when the assessment order, itself, is stayed, it could not then be said truly that the amount remains payable....
X X X X Extracts X X X X
X X X X Extracts X X X X
....action proposed to be taken" under that section. The authorities are not required to go beyond what the section itself requires them to do." 38. We may also notice the recent judgment of the Bombay High Court in Hindustan Unilever Limited vs. Deputy Commissioner of Income Tax-1(1) & others, reported in (2015) 279 CTR (Bom) 71. It was held in paragraph 15 as follows: "15. In view of the above, as held by this Court in A.H. Shaikh (supra) the giving of prior intimation under Section 245 of the Act is mandatory. The purpose being to enable the party to point out that there are factual errors or some further developments, if any, for example a stay of the demand, Supreme Court decision covering the demand which is still a subject matter of a pending appeal etc which would warrant not adjusting the refund against the pending demand. Thus when a party does raise such issues in response to a prior intimation, the officer of the revenue exercising powers under Section 245 of the Act must apply his mind to it and must record reason why the objection is not sustainable and also communicate it to the party. This before or at the time of adjusting the refund. This alone would ensur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such as factual disputes, which may strike at the very root of the action proposed under Section 245. Thirdly, it may be open to the assessee to point out that the assessee has pursued the matter in appeal and, in fact, obtained interim order of stay, which may not be even known to the competent authority acting under Section 245. The assessee may even bring to the notice of the authority any recent pronouncement of a binding superior court, which will have the effect of rendering the assessment completely vulnerable in law and in a matter where he is pursuing the statutory remedies within the time. He may point out that, though an order of stay was not granted by the appellate authority, it is not so granted on the basis that the appeal, itself, will be heard on a very near date. When there is no interim order obtained, then, certainly, in terms of the assessment order passed, the amount, as per law, when it falls due, will become payable and, therefore, legally, there cannot be any illegality as such in the amount being adjusted. But, even there, the authority would stay its hands on various relevant considerations. It may include the consideration that an identical issue, as ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....non-applicability of Section 194A to the deposit and, every year, the issue will remain the same and, therefore, there cannot be a resort to Section 245. 40. We must remind ourselves that there is an assessment order passed for the Assessment Year 2015-2016. That assessment order is not challenged before us. It is not even before us. In fact, it is not the subject matter of the writ petition itself. The learned Single Judge was also not made aware of the said assessment. The learned Single Judge, in fact, proceeded mainly on the basis that, in regard to the impugned order, where the refund was sought to be adjusted against the amount assessed for the year 2014-2015, as the assessment itself was cancelled by the appellate authority, nothing further remained in the way of the grant of refund. No doubt, the learned counsel for the Revenue did make a statement that, if it is found that the assessment for 2014-2015 had been cancelled, the amount would be paid. In that sense, under normal circumstances, in the light of the fact that it is admitted that the assessment for 2014-2015 was, indeed, cancelled by proceeding dated 03.03.2015, as contended by the learned Senior Counsel for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted out the circumstances, in which, the assessee could, in fact, demand, as a matter of right, to adjust the refund against any assessment, which he accepts; and, if the refund is not barred, as was held by the Hon'ble Apex Court in Hindustan Construction Co. Ltd. vs. V.S. Gaitonde, Income Tax Officer, Companies Circle I(3), Bombay & another, reported in (1965) 56 ITR 241, the Department may not be justified in refusing to accede to the request. We cannot possibly pronounce on the legality of the assessment for the year 2015-2016. We cannot even, in any manner, pronounce on the question whether the assessment is to be sustained or not. In fact, an appeal is pending consideration before the appellate Assistant Commissioner. There is no order of stay obtained by the writ petitioner. But, at the same time, there is a clear case that the issue at hand is one squarely covered, as things stand, at the hands of the appellate Tribunal in favour of the assessee and there is absolutely no difference in facts. As already noted, the effect of set off of refund under Section 245 against the sum remaining payable would be the extinguishment of the right to refund. It is also clear that an order....