AJANTA MANUFACTURING LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX - MORBI CIRCLE

By this petition under Article 226 of the Constitution of India, the petitioner seeks the following substantive reliefs :

It is the case of the petitioner that in relation to assessment years 2007-08 to 2012-13, it became entitled to the following refunds as a result of the orders of Commissioner of Income Tax (Appeals) allowing the appeals against the assessment orders and the assessment order for assessment year 2012-13 :- Sr. No. Assessment Year Refund Due (Rs.) Date of Appellate order of the CIT (A) Period for which refund is due 1. 2007-08 2,20,22,351 29.12.2010 4 years 8 months 2. 2008-09 27,22,485 28.03.2013 2 years 5 months 3. 2009-10 9,00,80,173 28.03.2013 2 years 5 months 4. 2010-11 2,37,90,191 04.09.2014 1 year 5. 2011-12 2,99,18,470 29.01.2015 6 months 6. 2012-13 23,44,681 15.04.2015 (date of adjustment of refund of A.Y. 2013-14 3 months

Pursuant thereto, the petitioner addressed letters to the respondent to give refund of the amount payable pursuant to the said orders. However, no reply was received in relation to any of the said letters. Having regard to the fact that the Assessing Officer did not give any refund despite many letters from the petitioner, the petitioner, ultimately, addressed a letter dated 5.5.2015 to the Chief Commissioner of Income Tax stating, inter-alia, that it has become entitled to the above refunds which are not being granted despite several and continuous entreaties, plus it has become entitled to substantial interest under section 244A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). It appears that the petitioner did not receive any reply from the Chief Commissioner of Income Tax but saw a letter addressed by the Chief Commissioner to the Assessing Officer instructing him to refund the above amounts before 15.6.2015. However, no such refund was granted till 15.6.2015 or even later but on the contrary, the petitioner received two notices under section 154 of the Act dated 31.7.2015 for assessment years 2007-08 and 2008-09 and two notices under section 271(1)(c) dated 27.7.2015 for assessment years 2010-11 and 2011-12. The petitioner gave its reply to all the notices and received the replies from the Assessing Officer stating that the penalty proceedings could not be kept in abeyance as requested by the petitioner. It is the case of the petitioner that the entire effort of the Assessing Officer by issuing the notices under sections 154 and 271(1)(c) of the Act is to raise a demand and defeat the payment of refund. It is in these circumstances that the petitioner has filed the present petition.

Mr. J. P. Shah, learned counsel for the petitioner invited the attention of the court to section 240 of the Act which provides for refund on appeal, etc. and lays down that where, as a result of any order passed in appeal or other proceeding under the Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in the Act, refund the amount to the assessee without his having to make any claim in that behalf. It was submitted that despite the fact that the refund of the amount in question is since long payable to the petitioner, the respondent Assessing Officer in clear breach of the provisions of section 240 of the Act is not granting such refund.

1 Reliance was placed upon an earlier decision of this court in the case of Vasantlal Tulsidas Agrawal v. Commissioner of Income Tax, (2002) 254 ITR 255, wherein the court had ordered the Assessing Officer to give refund within a specified period, failing which he was ordered to pay the sum with interest at the rate of 24%. It was submitted that the respondent has no legal authority to retain the amount which is to be refunded to the petitioner and, therefore, necessary directions be issued to the respondent to forthwith refund such amount. It was further urged that the respondent be restrained from proceeding further with the notices issued under section 154 and section 271(1)(c) of the Act till such refund is granted, inasmuch as, such notices have been issued only with the oblique view of raising a demand to defeat the rightful claim of the petitioner.

Opposing the petition, Mr. Pranav Desai, learned senior standing counsel for the respondent invited the attention of the court to the affidavit-in-reply filed by the respondent to point out that while it is true that refund of an amount of Rs.17,08,78,351/- is due to the assessee, various demands are likely to arise in view of the proceedings under section 271(1) (c) of the Act as well as under section 143(3) read with section 115JB in relation to subsequent assessment years. It was submitted that, therefore, a demand of Rs.12,56,90,319/- is likely to arise in relation to assessment years 2010-11, 2011- 12 and 2013-14 which would be required to be adjusted against the amount of refund due to the petitioner. It was submitted that under the circumstances, there is no warrant for interference by this court and that the petition deserves to be dismissed.

This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the record of the case. As is apparent from the facts stated in the memorandum of petition, the petitioner has claimed that refund of an amount of Rs.17,08,78,351/- is due and payable to the petitioner pursuant to the orders passed by the Commissioner of Income Tax (Appeals) on various dates from 29.12.2010 to 15.4.2015. A perusal of the averments made in the affidavit-in reply filed by the respondent, reveals that the respondent has clearly admitted that refund of the amount as claimed by the petitioner is due. However, such amount of refund is sought to be retained by the respondent on the ground that the demand of Rs.12,56,90,319/- as stated in the affidavit in reply is likely to arise in respect of proceedings initiated in relation to assessment years 2010-11 and 2011-12. 7. In this regard, during the course of hearing of the petition, the court had called upon the learned counsel for the respondent to point out as to whether there was any provision under the Act which permits the respondent to retain the refund amount towards demand which are likely to arise and which had not yet arisen. The learned counsel for the respondent is not in a position to point out any such provision which permits the respondent to retain the amount of refund due to the petitioner under the provisions of the Act.

A perusal of the provisions of section 240 of the Act reveals that when refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in the Act, refund the amount to the assessee without his having to make any claim in that behalf. Therefore, it is the duty of the Assessing Officer, except where he exercises power under section 245, to set off refunds against tax remaining payable, to refund such amount to the assessee without his having to make any claim in that behalf. In the present case section 245 of the Act would not be attracted inasmuch as it is not the case of the respondent that he is required to set off the amount to be refunded in lieu of payment of the refund, against the sum, if any, remaining payable under the Act by the petitioner to whom the refund is due. As regards the proceedings under sections 154 and 271(1)(c) of the Act, the same have been initiated after the petitioner addressed letters to the respondent to grant the refunds. The learned counsel for the petitioner, therefore, appears to be justified in contending that the proceedings under sections 154 and 271(1)(c) of the Act have been initiated only with a view to defeat the petitioner’s claim for refund. However, pendency of even those proceedings would be of no avail to the respondent, inasmuch as section 241 of the Act which permitted the Assessing Officer to withhold the refund when any other proceeding under the Act is pending if he was of the opinion that grant of refund is likely to adversely affect the revenue, stands omitted with effect from 1.6.2001. 9. As noticed earlier, while the respondent clearly admits that refund to the extent claimed by the petitioner is due and payable by it, such amount is sought to be retained on the ground of likelihood of a demand being raised. The act of the respondent of retaining the amount of refund is not backed by any provision of law. Under the circumstances, the action of the respondent authority, in seeking to retain the amount of refund due to the assessee against likely future demands that may be raised, is without any authority of law.

Under the circumstances, petitioner is entitled to a direction to the respondent to forthwith refund to it the entire amount of refund without any adjustment being made against such amount, inasmuch as, the respondent cannot be permitted to take advantage of his own wrong in not refunding the amount due and payable to the petitioner at the appropriate time in terms of the provisions of the Act, and then seek to set off the refund against a demand subsequently raised, otherwise it would amount to putting a premium over the wrong act of the respondent of not refunding the amount when due and adjusting the same against the demands which have accrued much later in point of time.

For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The respondent is directed to forthwith, within a period of fifteen days from the date of receipt of this order, refund the entire amount of Rs.17,08,78,351/- to the petitioner together with interest under section 244A of the Act in accordance with law, without making any adjustment in relation to any demand which arises after the date of this order. Rule is made absolute accordingly, with no order as to costs. (HARSHA DEVANI, J.) (A.G.URAIZEE, J.) zgs