TaxTMI 
TaxTMI 
2017 (12) TMI 1525
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....Processing of Return Scheme, 2011 published under the notification SO­16E dated 4th January 2012 and especially the processing of the returns which are transmitted by the Centralised Processing Centre (for short "the Centre") to Assessing Officers having jurisdiction in accordance with sub clause (iii) of clause (8) of the Centralised Processing of Return Scheme,2011 (for short "the said Scheme of 2011"). The petitions also concern issue of interpretation of sub­section 1(D) of section 143 of the said Act as existing on the relevant date. 2. Writ Petition No.2051 of 2017 and WP(L) 2498 of 2017 have been filed by the same Company. Writ Petition No.2051 of 2017 concerns the assessment year 2015­16 and Writ Petition (L) No.2498 of 2017 concerns the assessment year 2016­17. In the case of assessment year 2015­16, return was filed by the petitioner­company on 30th November 2015 claiming refund. A revised return was filed on 9th January 2016 claiming higher refund. Both the returns were filed electronically. In relation to the said returns filed for the assessment year 2015­16, a notice under sub­section 2 of section 143 of the said Act was issued by th....
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..... 10,88,85,962/­. Thereafter, a representation was made requesting the second respondent to issue the refund. As no action was taken by the respondents, this petition was filed seeking a writ of mandamus enjoining the respondents to issue the refund of the amount already determined by the Assessing Officer after manually processing the return. 4. As far as Writ Petition No.782 of 2017 is concerned, the relief sought in this writ petition under Article 226 of the Constitution of India is in relation to the returns filed by the petitioner company for the assessment years 2014­15 to 2016­17. An order was passed on 25th October 2016 (Exhibit­A to the petition). The said order is under section 119 of the said Act which notes that the returns containing claims for refund for the assessment years 2012­13, 2013­14, 2014­15 were not processed within the time frame prescribed under sub­section 1 of section 143 of the said Act. It was pointed out that as a result of this delay the Tax Payers were deprived of legitimate refund. By the said order, the power under section 119 was exercised by the Central Board of Direct Taxes by which the time frame prescrib....
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....y to be released by the end of October 2017. Thus, all concerned departments were aware at least on 27th September 2016 that the said software was not available for the year 2016­2017. That is the status which continues till today." 7. A direction was issued in paragraph 3 of the said order which reads thus: "3 We direct the appropriate Officer of the Income Tax Department to file an affidavit setting out as to why there is a gross delay in providing ITR software for the year 20162017. The affidavit will also state what action the Government of India proposes to take against those who are guilty of dereliction of duty. Today, we are not passing any order directing that the manual process be adopted as the learned ASG stated that the software will be released by the end of this order and the processing of return of 2016­2017 will be completed by end of November 2017. The affidavit shall be filed by 30th October 2017." 8. An Affidavit in response to the said direction is filed by K. Ravi Ramachandran, Additional Commissioner of Income­tax ­ 2(3), Mumbai. On the basis of the said order, clarifications were sought by him which have been reproduced in paragraph ....
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....ssessment till 31st December 2017 and therefore, if refund is due, the same will be granted latest by 31st December 2017. 10. As far as Writ Petition no.782 of 2017 is concerned, there is no affidavit in reply filed by the respondents. 11. Before we advert to the submissions made across the bar, certain more factual aspects which are relevant will have to have noted. As far as Writ Petition No.2051 of 2017 is concerned which deals with the Assessment Year 2015­16, a notice under sub­section (2) of Section 143 was served only on 19th September, 2016. As regards Writ Petition (st) no.2498 of 2017, a notice under sub­section (2) of Section 143 of the said Act was issued for the Assessment Year 2016­17 on 16th August, 2017. 12. In all the three petitions, various issues are canvassed. The first issue canvassed especially in the Writ Petition relating to the Assessment Year 2016­17 is regarding the failure of the department to provide proper software under ITBA for processing the returns which were forwarded by the Centre to AO for processing. Reliance is placed on various orders passed by this Court from time to time. The crux of the submission is that ther....
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....on 3rd October, 2017 and it is stated that the module will be ready for implementation by 31st October, 2017. Thus, the returns filed for the Assessment Year 2016­17 which were forwarded to the AOs for processing were not processed at least till 31st October, 2017 only on the ground that the module in ITBA was not ready. The consequence of this delay is that the returns which were pushed to AOs remained pending and could not be processed. It is in this context that the issue of non­availability of proper software assumes importance. 15. Section 143 of the said Act as it exists today, reads thus:­ 143. [(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the return; or (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (b) the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a); (....
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....ovided, for the purpose of giving effect to the scheme16 made under sub-section (1A), the Central Government may, by notification16 in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification; so, however, that no direction shall be issued after the 31st day of March, [2012]. (1C) Every notification issued under sub-section (1B), along with the scheme made under sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of Parliament.] [(1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2).] [(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall,- (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve 20 on the assessee a notice specifying pa....
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....10; (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) of clause (23C) of section 10, which is required to furnish the return of income under sub-section (4C) of section 139, no order making an assessment of the total income or loss of such 26[research association], news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, unless- (i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be, by such [research association], news agency, association or institution or fund or trust or university or other educational inst....
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....D) Notwithstanding anything contained in sub­section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub­section (2).]" 16. When returns are filed either under Section 139 or pursuant to a notice under sub­section (1) of Section 142, sub­section (1) of Section 143 mandates that the returns shall be processed in the manner laid down in clauses (a) to (e) thereof. Thus, the processing of a return involves determination of total income or loss, tax and interest, if any, payable and sum payable by, or the amount of refund due to the assessee. Clause (d) of sub­section (1) lays down that an intimation shall be prepared or generated and sent to the assessee specifying the sum determined payable by, or the amount of refund due to the assessee under clause(c). Clause (e) of sub­section (1) further provides that the amount of refund due in pursuance of the determination under clause (c) shall be granted to the assessee. If the proviso to subsection(1) of section 143 is read, it mandates that the intimation as provided in clause (d) has to be issued before the expiry of one year from the end of t....
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....143(2) of the Act, then the legislature ought to have used express language and not the expression "shall not be necessary". By the device of issuing an instruction in purported exercise of its power under Section 119 of the Act, the CBDT cannot proceed to interpret or instruct the income tax department to 'prevent' the issue of refund. In the event that a notice is issued to the Assessee under Section 143(2) of the Act, it will be a matter the discretion of the concerned AO whether he should process the return. 24. Consequently, the Court is of the view that the impugned Instruction No.1 of 2015 dated 13th January, 2015 issued by the CBDT is unsustainable in law and it is hereby quashed. It is directed that the said instruction shall not hereafter be relied upon to deny refunds to the Assessees in whose cases notices might have been issued under Section 143(2)of the Act. The question whether such return should be processed will have to be decided by the AO concerned exercising his discretion in terms of Section 143(1D) of the Act." (emphasis added) 18. Thus, the legal position which emerges from the decision of the Delhi High Court is that, it is the discretion of....
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.... 2016. First, he does not deem it proper to inform the petitioner in writing why he cannot deal with the application and after the petitioner moves the Court, the stand taken is that no direction can be given to him till 31st March, 2017 which is the last date to process the return under Section 143(1) of the Act. This attitude on the part of the Assessing Officer is preposterous. 10. The action of the officer on the ground urged seems to be in complete variance with the higher echelons of administration of the tax administration being an assessee friendly regime. In fact, the CBDT has itself issued Instruction No.7/2012, dated 1st August, 2002 wherein they have specifically directed the officers of the Revenue to process all returns in which refunds are payable expeditiously. Similarly, as late as in 2014 in the Citizen's Charter issued by the Income Tax Department in its vision statement states that the Department aspires to issue refunds along with interest under Section 143(1) of the Act within 6 months from date of electronically filing the returns. In this case, the return was filed on 29th November, 2015, yet there is no reason why the Assessing Officer has not proces....
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.... been lodged with the ITBA help desk highlighting the issue so as to enable the said office to process the returns of income for the Assessment Year 2016­17. There are specific statements made that due to the technical errors, the return of Assessment Year 2016­17 of the petitioner cannot be processed. It appears that on the same day in the evening, after the submissions were heard, an attempt was made to process the return of the petitioner. From the snapshot of the relevant page of ITBA which is tendered across the bar by the income tax department, it is clear that this exercise was done on 20th November, 2017 at 6.25 p.m. which records that the return is submitted successfully. Perhaps, only after the submissions were heard that some efforts was made to process the return. 22. We made a query to the learned ASG whether there is any policy of the department as regards priority to be given to the returns which are to be processed AOs. The returns are required to be processed by AO under the said scheme of 2011 either by reason of a notice having been issued under sub­section (2) of Section 143 or because the returns are pushed to AOs for processing for other reasons....
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....­section (1A) of Section 143 lays down that for the purpose of processing returns under subsection (1), the Board may make a scheme for centralized processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee as required sub­section (1) of Section 143. Thus, the object of providing for centralized process of returns is to avoid delay in the processing of the returns. 25. The said Scheme of 2011 and in particular clause 7 provides for setting up as many centralized processing Centres as it may deem necessary. Accordingly, the Centre has been established at Bangalore. Clause 8 of the said Scheme 2011 is relevant which reads thus:­ "8. Processing of Returns. (i) The Centre shall process a valid return of income in the following manner, namely: - (a) the sum payable to, or the amount of refund due to, the person shall be determined after credit of such Tax Collected at Source (TCS), Tax Deducted at Source (TDS) and tax payment claims which can be automatically validated with reference to data uploaded through TDS and TCS statements by the deductors or the collectors, as the case may be, and tax payme....
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....tice under Section (2) of Section 143. 27. Notification no.17E dated 4th January, 2012 (for short the "the second notification") has been issued in exercise of powers conferred under subsection (1B) of Section 143 for giving effect to the scheme framed under sub­section (1A) of Section 143. Sub­section (1B) confers powers on the Central Government to direct that any of the provisions of the said Act relating to processing of returns, shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification published in the Official Gazette. A careful perusal of the second notification and in particular clause 3 thereof will show that there is no modification made to the provisions of Section 143. Sub­clause(v) of clause (3) contains a similar provision that wherever a return cannot be processed in the Centre for any reason, the Commissioner shall arrange to transmit such return to the AO having jurisdiction for processing. Neither in the said Scheme of 2011 nor in the second notification, it is provided that in certain cases, such return can be re­transmitted by AO to the Centre. Both the notifications clearly prov....
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.... in running of the software. Only after the petition was filed that a statement made by the learned ASG on behalf of the respondent that the system was functional. Paragraphs 3 and 4 of the said order reads thus:­ "3. In terms of Section 143(1) of the Act, the Assessing Officer is required to process a return of income by making adjustment as specified thereunder and sending an intimation to the assessee. This intimation is required to be sent before the expiry of one year from the end of the financial year in which the return of income is filed, if any demand is payable or an amount is refundable to an assessee. In terms of Section 143(1D) of the Act, the Assessing Officer has a discretion whether to process or not a return of income under Section 143(1) of the Act, where notices have already been issued under sub­section(2) to Section 143 of the Act. In the facts of this case, the Assessing Officer is unable to process the return of income not of his volition but because the technology employed by the Income Tax Department fails him and the Act. On being asked, Mr. Malhotra, learned counsel appearing for the Revenue, on instructions, states that the systems difficulty ....
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....processed till 1st November, 2017. Therefore, immediate directions ought to have been issued for permitting the manual processing of the returns by the AOs. One must note here that the refund claims attract liability to pay interest. 32. We, therefore, hold that whenever returns are transferred by the Centre to AOs for processing, if the returns cannot be processed immediately because of lack of availability of proper software, or because of technical difficulties in functioning of the software, the returns must be permitted to be processed manually. There will not be any illegality attached to it. If at all software is not provided to deal with the returns of a particular year, there is no embargo imposed by law which prevents AOs from processing the returns manually. If returns cannot be processed due to system failure and if the errors cannot be rectified and system cannot be made functional within a reasonable time, the Commissioner ought to permit the AOs to process the returns manually. 33. The learned ASG was at pains to point out that in the era of digitization/computerization, taking such a view may not be proper. We are taking this view firstly because in law we see....
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....ncome Tax (Systems), the issue of manual refunds is permitted in certain cases subject to safeguards provided in clause (6). 35. Other departmental instructions issued on 15th March 2016 are also placed on record. It record that certain returns filed during the financial year 2014­15 are pending for process under section 143(1) wherein the last date for processing is 31st March 2016. The said instructions takes a note that certain returns could not be processed on AST due to various technical reasons. 36. There is another letter placed on record by the learned ASG addressed by the Directorate of Income Tax (Systems) to all Principal Chief Commissioner of Income Tax, Principal Directorate of Income Tax and Principal Commissioners of Income Tax. The same is regarding ITBA for processing e­filed returns transferred by the Centre to ITBA. The said letter proceeds on the footing that module provided under ITBA will function. It only lays down the manner in which processing of returns sent to the AOs will be done under ITBA. Therefore, none of these letters establish that it is not open for AOs to process the returns manually either when a proper software is not available o....