AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 80
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....-. The return was not filed voluntarily but due to the pressure exerted by the officials of the respondent. Since the return was not voluntary, the petitioner did not pay any tax along with the said return. Thus, the said return was not valid in law, as it was not accompanied by the tax on the income declared in the return. Subsequently, the first respondent initiated proceedings for making assessment under Section 158 BD read with Section 143(3) and consequently, made an order of assessment on 27.08.1997. The petitioner challenged the said order of assessment in appeal before the Income Tax Appellate Tribunal. By order dated 30.03.2005, the Appellate Tribunal held that the assessment was barred by limitation. Thus, the Appellate Tribunal quashed the assessment order dated 27.08.1997. The said order of Appellate Tribunal was confirmed by this Court in T.C.No.1008 of 2015. On 15.06.2005, the second respondent made an order giving effect to the order passed by the Appellate Tribunal. In the aforesaid order, the second respondent, while calculating the reduction, adopted the tax as per the original order of assessment at Rs. 39,09,468/- and interest at Rs. 7,42,266/-, making a total i....
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....5, deleting the addition made of Rs. 41,11,451/- and determining the undisclosed income admitted by the assessee of Rs. 24,04,834/-, as its total income and computing the tax at Rs. 14,42,868/-. After discharging the tax payment of Rs. 19,.23,067/-, a sum of Rs. 6,46,454/- was quantified as the amount refundable along with interest. For making assessment, the basic requirement is the return of income filed. Once the return is filed, the total income admitted by the assessee is taken as the basis for completion of assessment proceedings. Thus, when an assessment is annulled by the Appellate Authority, only the addition made over and above the income admitted in the income returned gets deleted. In the present case, the income admitted in the return was Rs. 24,04,830/- and the addition made in the assessment order was Rs. 41,11,451/-. While giving effect to the order of the Appellate Tribunal, the addition made in respect of assessment order was deleted, retaining the admitted undisclosed portion of income furnished in the return of income. Accordingly, the tax liability as well as the excess tax payment refundable was determined. Therefore, nothing is erroneous on facts and law, whi....
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....s returned, can be refunded, in case, the assessment is set aside or annulled later. Accordingly, the excess tax paid by the petitioner over and above the tax paid on the returned income was already refunded to the petitioner. Therefore, the petitioner is not entitled for the full refund. 6. In support of his contention, the learned counsel relied on the decision of the Hon'ble Supreme Court reported in CIT vs Shelly Products and another, reported in 261 ITR 367. 7. Heard both sides. 8. The point for consideration is as to whether the petitioner is entitled to full refund of tax already paid, since the assessment was annulled later by the competent Authority and such annulment has become final and conclusive. 9. Though the learned counsel for the petitioner invited this Court various provisions under the Income Tax Act to elaborately go into the issue, the crux of the contentions so raised can be narrowed down simply as follows: a) The return filed by the petitioner pursuant to the notice under Section 158 BD did not accompany the tax payment and thus, the said return was not valid in law. b) Consequently, all the payment of tax, based on such invalid return, is liable ....
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....ch tax, do not have any significance. On the other hand, it is to be construed that such payment of tax was in respect of the return filed by the assessee containing disclosure of admitted income. Therefore, it is evident that the defective return filed earlier became valid later by the petitioner's own conduct of submitting to the assessment proceedings by paying the tax on demand. Thus, the petitioner is not justified in contending that the return filed by him without payment of tax is invalid one and consequently, subsequent payment of tax based on such return is liable to be refunded. 14.It is true that once the assessment is annulled, the assessee is entitled to refund of tax, as provided under Section 240 of the Income Tax Act, which reads as follows: "240. Refund on appeal, etc.: Where, as a result of any order passed in appeal or other proceeding the [Assessing] Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf: [Provided that where, by the order aforesaid,-- (a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund,....
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.... invalid on account of annulment of the assessment made, based on such return. 17. It is vehemently contended by the learned counsel for the petitioner that non payment of the tax along with the return makes the very return itself invalid and therefore, based on such invalid return, any tax paid thereunder, cannot be retained by the Revenue. I am unable to accept the said contention for the following reasons. 18. Section 139 of the said Act deals with return of income. Section 140A deals with Self-asessment, wherein a return filed under Section 158 BC is also included. Section 140A contemplates that any tax payable on the basis of any return required to be furnished under Section 158BC, etc., shall be paid together with interest and the return shall be accompanied by proof of payment of such tax. Section 140 A(3) further contemplates that if any assessee fails to pay the whole or any part of such tax or interest or both, in accordance with the provisions of sub section (1) of Section 140A, he shall be deemed to be an assessee in default in respect of the tax or interest or both, remaining unpaid. However, under Section 139, sub clause (9), the Assessing Officer may intimate the d....
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.... order of assessment, over and above the advance tax and self-assessment tax is undoubtedly refundable under section 240 of the Act. The only dispute is with regard to the refund of the advance tax and self-assessment tax which is paid by the assessee on his own assessment of his liability and is based on the return of income filed by him. According to the Revenue, the tax so paid represents the admitted liability of the assessee, and failure or inability to frame another assessment after the earlier assessment is set aside or nullified in appropriate proceedings, does not entitle the assessee to claim refund because to this extent the assessee has admitted his liability to pay tax in accordance with law. The tax liability is computed on the basis of the relevant Finance Act laying down the rate or rates at which the tax is payable and provides for other matters relevant to the computation of tax. Thus the tax is required to be paid in advance by the assessee, even before assessment is made, and he himself is required to compute his liability having regard to the rates and exemptions applicable. Thus, both the levy and collection of tax is in accordance with law. We find conside....
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....t in any event raise a demand for payment of further taxes. Accepting the income as disclosed in the return of income furnished by the assessee, it must refund to the assessee any tax paid in excess of the liability incurred by him on the basis of income disclosed. Even if the tax paid is found to be less than that payable, no further demand can be made for recovery of the balance amount since a fresh assessment is barred. In other words, the tax paid by the assessee must be accepted as it is, and in the event of the tax paid being in excess of the tax liability duly computed on the basis of return furnished and the rates applicable, the excess shall be refunded to the assessee, since its retention may offend Article 265 of the Constitution." 20. The Hon'ble Supreme Court in the above decision has categorically observed that the liability to pay income tax chargeable under Section 4(1) of the Act, does not depend upon the assessment being made and that the liability to pay the tax arises, as soon as the Finance Act prescribes the rate or rates for any assessment year. It is further observed therein that if the Assessing Authority cannot make a fresh assessment after the earli....