HC Directs Processing of Refund Claim of Rs. 1.16 Cr Despite Reassessment Proceedings u/s 153C

The petitioner has filed the present petition, inter alia, praying that the respondents be directed to process the petitioner’s return in respect of Assessment Year [AY] 2016-17 and to refund an amount of Rs. 1,16,94,870/- on account of excess tax along with interest in accordance with law.

The petitioner had filed his original return of income under Section 139(1) of the Income Tax Act, 1961 [the Act], declaring an income of Rs. 2,39,05,340/-, on 26.08.2016. The Assessee had computed the tax on the said amount at Rs. 80,71,280/- after accounting for the advance tax of Rs. 55,00,000/- and Tax Deducted at Source [TDS] of Rs. 1,42,66,154/-. On this basis, the petitioner computed its refund at Rs. 1,16,94,870/- and claimed the same in terms of the said return.

Thereafter, on 10.08.2017, a notice of deficiency was issued to the petitioner under Section 139(9) the Act by Centralized Processing Centre, Bangalore [CPC], informing the petitioner that the original return filed by the petitioner was defective as the TDS claimed was not commensurate with the income offered to tax in terms of Section 139(9) of the Act. The petitioner was given a period of fifteen days to rectify the said defect.

The petitioner filed a rectified return on 16.08.2017, which was within the fifteen day period as provided. The petitioner also computed his claim for refund of Rs. 1,16,94,870/- on the basis of his computation of income.

The petitioner did not receive any information from the Revenue regarding his revised return or claim of refund. The time period for processing the return expired on 31.03.2018. However, the status of the petitioner’s return continues to be reflected as “under process“.

It is the Revenue’s case that since the petitioner’s return was defective and the defects were not cured, the return was not processed. Thus, the petitioner was also not granted the refund as claimed.

High Court found little merit in invalidity of Revised ITR

High Court found Little merit in the revenue argument as the affidavit on behalf of the Revenue states, in unambiguous terms, that there is no recording of any sought in the records of the Revenue, which records that the revised return filed by the petitioner is invalid.

TDS – ITR mismatch cannot be a Ground for disregarding ITR

TDS mismatch with the return of income of an assessee cannot be considered as a ground for disregarding the return filed by an assessee. The finding of discrepancy between the return filed and the TDS collected/deposited by the deductors may pose a ground for further inquiry and to test whether the amount of income which has been disclosed by an assessee is true and correct. But, it cannot be a ground for the Revenue to totally ignore the same.

Petitioner’s request for Refund rejected on due to proceedings under Section 153C

11. Mr. Saksena, the learned counsel for the Revenue further submitted that on account of a search conducted in respect of another person, notices under Section 153C of the Act were issued for assessing the petitioner‟s income for AY 2016-17. The re-assessment proceedings culminated in an assessment order dated 31.05.2023 passed by the Assessing Oficer [AO] under Section 153C of the Act, whereby the AO has made an addition of ₹76,62,180/- and the petitioner‟s income has been assessed at Rs. 3,15,67,800/-.

12. He submitted that the petitioner may apply for rectification of the said assessment order to also include the refund and the AO shall process the same. However, the learned counsel of the petitioner points out that the petitioner’s requests to the aforesaid effect were not considered on the ground that the proceedings under Section 153C of the Act cannot accrue to the benefit of the assessee and no refund could be processed as the intital return was found defective.

Order of Delhi High Court:

13. We do not consider it apposite to examine this issue in these proceedings for essentially two reasons. First, we find that the petitioner‟s return as rectified could not be ignored as stated earlier. Since no addition has been made by the AO on the scrutiny of the return at the intital stage, the petitioner‟s claim for refund was required to be processed. Second, that the learned counsel for the Revenue, on instructions, has made a statement that the petitioner‟s application for rectification of the assessment order passed under Section 153C of the Act to seek grant of refund on account of the excess tax paid after adjusting the tax liability in terms of the assessment order under Section 153C of the Act would be processed.

14. We find no grounds to reject the same.

15. In view of the above, the present petition is disposed of albeit with a direction that the Revenue would be bound down to the statement made in this court. It is also made clear that the petitioner is at liberty to file the rectification application relying on the amount of Advance Tax and TDS as reflected in Form 26AS.

16. In view of our finding that the refund due to the petitioner was required to be processed; the assessment order passed under Section 153C determining a lesser amount of refund due to the additions made, cannot be considered as providing an advantage to the petitioner in proceedings under Section 153C of the Act.