High Court Slams Revenue: Refund Cannot Be Withheld Due to CPC Tech Glitch

The petitioner approached the Court seeking relief against the non-grant of credit for the advance tax deposited in the PAN of its predecessor entity following a demerger. As a result, the refund due to the petitioner was not released, and the demands were incorrectly displayed in the CPC system.

On 27.08.2025, the Court recorded Revenue’s request for time to resolve the issue. On the next date, the Revenue placed on record an email from the DCIT, Central Circle-1, stating that the Systems Directorate had expressed its technical inability to allow partial credit in such cases through the portal.

Main Issue: Whether the Revenue could be directed to manually adjust the petitioner’s advance tax credit and issue a refund, despite CPC’s technical limitations.

HC’s Decision: The Court noted that the Revenue had already proposed to the Chief Commissioner of Income Tax (Central), New Delhi, to allow manual issuance of refund by giving credit of partial advance tax paid on the predecessor’s PAN. It was also proposed to mark the impugned demand as “stayed” to prevent automatic adjustment of future refunds by CPC.

Recording this stand, the Court disposed of the writ petition with a direction to the Revenue to complete the follow-up action within three weeks. It was clarified that if the issue was not resolved within the said period, the petitioner would be at liberty to revive the petition. Pending applications were dismissed as infructuous.

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