Indglonal Investment&Finance Ltd.&Anr v. Income Tax Officer Ward

* IN THE HIGH COURT OF DELHI AT NEW DELHI + WRIT PETITION (CIVIL) NO. 7127 OF 2008 % Reserved on: 22[nd] March, 2011 Date of Decision: 3[rd] June, 2011 INDGLONAL INVESTMENT&FINANCE LTD.&ANR. ...Petitioners Through Mr. Salil Aggarwal, Advocate. VERSUS INCOME TAX OFFICER WARD NO.11(4) N.DELHI & ORS. ....Respondents Through Mr. N.P. Sahni, Advocate AND + WRIT PETITION (CIVIL) NO. 15639 OF 2006 % Reserved on : 18[th] April, 2011. Date of Decision : 3[rd] June, 2011. M/S TAKSAL THEATERS PRIVATE LIMITED .... Petitioner Through, Mr. Y.K. Kapur, Advocate. VERSUS ASSISTANT COMMISSIONER OF INCOME TAX & ANOTHER ...Respondents Through Ms. Rashmi Chopra, Advocate. CORAM: HON’BLE MR. JUSTICE DIPAK MISRA, THE CHIEF JUSTICEHON'BLE MR. JUSTICE SANJIV KHANNA 1.Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not ? Yes. 3. Whether the judgment should be reported in the Digest ? Yes. SANJIV KHANNA, J.: These two writ petitions were heard on different dates, but as the issue and subject matter are similar, they are being disposed of by this common decision. Factual aspects have been discussed below and the result would show one writ petition is being allowed and the other is being dismissed by applying the legal principles and ratio to the factual matrix. 2. Income-Tax Act, 1961 (1961 Act) and Wealth Tax Act, 1957 (1957 Act) are direct taxes. Under the 1961 Act, taxes are collected by deduction of tax at source (TDS, for short), payment of self-assessment tax or advance tax. Under the 1957 Act, self-assessment tax is paid by the assessee. Taxes are also paid on demand raised. 3. An assessee may be entitled to refund of the tax paid on the basis of return of income filed, refund claimed, pursuant to an assessment order, appellate order or some other order. The two enactments, as noticed below, incorporate statutory provisions for refund of taxes paid in excess of the amount ascertained/determined or due and payable. The question raised in these writ petitions is whether and when an assessee is entitled to refund when tax or part thereof has been paid by inadvertence or if the tax is „wrongly‟ paid, recovered or W.P. (C) Nos. 7127/2008 & 15639/2006 Page 2 of 47 retained. Often in such cases reliance is placed on Article 265 of the Constitution and it is urged that taxes „wrongly‟ levied and collected should be refunded. Doctrine/principles of unjust enrichment, equity, justice and good conscience are concomitantly invoked. 4. Article 265 reads as under: “265. Taxes not to be imposed save by authority —of law.No tax shall be levied or collected except by authority of law.” 5. Expressions “levy” and “collection” are used in Article 265 in a comprehensive sense and are intended to include the entire process of collection, commencing from charging or taxing a person to taking away money. What the Article enjoins is that every stage in this entire process must be authorized by law. (See District Mining Officer versus Tata Iron and Steel Company, (2001) 7 SCC 358). The term “levy” is of a wider import than the term “assessment” and includes both imposition of tax as well as assessment. (See CCE versus National Tobacco Company of India Limited, (1972) 2 SCC 560). 6. Article 265 and a claim for refund for violation of the principles underlying the said Article or under the general principles of equity, justice and good conscience as well as the statutory provisions in tax W.P. (C) Nos. 7127/2008 & 15639/2006 Page 3 of 47 6. Article 265 and a claim for refund for violation of the principles underlying the said Article or under the general principles of equity, justice and good conscience as well as the statutory provisions in tax W.P. (C) Nos. 7127/2008 & 15639/2006 Page 3 of 47 enactments was settled by the Constitutional Bench decision of 9 Judges in Mafatlal Industries versus Union of India, (1997) 5 SCC 536. The said decision interprets Article 265 of the Constitution and lays down legal principles, which we feel are equally applicable to the arguments raised. The Supreme Court in the said case has held that Article 265 mandates that no tax can be levied or collected except by authority of law, which means that tax collected contrary to law has to be refunded; but the question is -- when a tax is considered to have been levied and collected without authority of law. The Supreme Court visualized several hypothetical situations and answered questions but for the purpose of this case we are required to examine two distinct situations/categories. The first situation is where the tax is collected or voluntarily paid to the authority under a valid enactment but by misconstruing or by wrong interpretation of the provisions of the enactment or by erroneous determination of relevant facts. The second category of cases is where the enactment by which tax is levied is an unconstitutional enactment or its provisions transgress the constitutional limitations. In such cases, refund becomes due because enactment/statute imposing the tax or the provision is unconstitutional. This second category of cases will normally be cases; (1) where legislative competence of the legislature is challenged and questioned on the basis of entries in the Seventh Schedule of the Constitution, (2) where law is prohibited by any particular provision of the Constitution, e.g., Articles 276(2), 286 etc. and (3) the wrong or relevant portion thereof is invalid under Article 13 for repugnancy to those freedoms, which are guaranteed by Part-III of the Constitution. (see Chhotabhai Jethabhai Patel and Company versus Union of India, (1962) Supp. 2 SCR 1). 7. In the present Writ petitions, we are not concerned with the second category of cases. The two enactments and their provisions have not been challenged on the ground that they are unconstitutional. We are concerned with the first category of cases where an assessee claims refund on the ground that the levy is wrong or contrary to the provisions of the enactment, i.e., under an enactment itself tax should not have been levied or has been wrongly imposed/collected/paid. The first category of cases will also include cases where an assessee claims that he is entitled to refund on the ground that the tax was mistakenly paid under misapprehension or error in understanding the statutory provisions and in fact tax was not payable or exigible. (Mistake of law in understanding/interpreting the statute, will not include cases where the enactment itself or the provision of the enactment is declared to be unconstitutional for violation of any constitutional limitation). W.P. (C) Nos. 7127/2008 & 15639/2006 Page 5 of 47 Regarding the said category of cases, the Supreme Court in the case of Mafatlal Industries (supra) examined the provisions of Article 265 of the Constitution and Central Excise and Salt Act, 1944.The wide scope and width of the issues examined by the Supreme Court can be understood if we read paragraph 31, of the said decision; W.P. (C) Nos. 7127/2008 & 15639/2006 Page 5 of 47 Regarding the said category of cases, the Supreme Court in the case of Mafatlal Industries (supra) examined the provisions of Article 265 of the Constitution and Central Excise and Salt Act, 1944.The wide scope and width of the issues examined by the Supreme Court can be understood if we read paragraph 31, of the said decision; “31. There is as yet a third and an equally important category. It is this: a manufacturer (let us call him “X”) pays duty either without protest or after registering his protest. It may also be a case where he disputes the levy and fights it out up to first appellate or second appellate/revisional level and gives up the fight, being unsuccessful therein. It may also be a case where he approaches the High Court too, remains unsuccessful and gives up the fight. He pays the duty demanded or it is recovered from him, as the case may be. In other words, so far as “X” is concerned, the levy of duty becomes final and his claim that the duty is not leviable is finally rejected. But it so happens that sometime later — may be one year, five years, ten years, twenty years —or even fifty years the Supreme Court holds, in the case of some other manufacturer that the levy of that kind is not exigible in law. (We must reiterate — we are not speaking of a case where a provision of the Act whereunder the duty is struck down as unconstitutional. We are speaking of a case involving interpretation of the provisions of the Act, Rules and Notifications.) The question is whether “X” can claim refund of the duty paid by him on the ground that he has discovered the mistake of law when the Supreme Court has declared the law in the case of another manufacturer and whether he can say that he will be entitled to file a suit or a writ petition for refund of the duty paid by him within three years of such discovery of mistake? Instances of this nature can be multiplied. It may not be a decision of the Supreme Court that leads “X” to discover his mistake; it may be a decision of the High Court. It may also be a case where “X” fights up to first appellate or second appellate stage, gives up the fight, pays the tax and then pleads that he has discovered the mistake of law when the High Court has declared the law. The fact is that such claims have been entertained both in writ petitions and suits until now, purporting to follow the law declared in Kanhaiya Lal, and are being allowed and decreed, sometimes even with interest. The Union of India says that this can never be. It says, a manufacturer must fight his own battle and only if he succeeds therein, can he claim refund. He cannot take advantage of success of another manufacturer and that no suit or writ is maintainable by him for refund on the ground of alleged discovery of mistake of law on the declaration of law by this Court or a High Court (or a Tribunal or any other authority under the Act) in the case of another person. The Union of India denies that such a person can plead payment of duty under a mistake of law within the meaning of Section 72 of the Contract Act. It also denies that such a writ petition or a suit can be filed within three years of such “discovery of mistake of law”. 8. The first situation/category mentioned above was answered as under;- “78. There is, however, one exception to the above proposition, i.e., where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation of any of the constitutional limitations. This is a situation not 8. The first situation/category mentioned above was answered as under;- “78. There is, however, one exception to the above proposition, i.e., where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation of any of the constitutional limitations. This is a situation not contemplated by the Act. The Act does not contemplate any of its provisions being declared unconstitutional and therefore it does not provide for its consequences. Rule 11/Section 11-B are premised upon the supposition that the provisions of the Act are good and valid. But where any provision under which duty is levied is found to be unconstitutional, Article 265 steps in. In other words, the person who had paid the tax is entitled to claim refund and such a claim cannot be governed by the provisions in Rule 11/Section 11-B. The very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund. A corresponding obligation upon the State to refund it can also be said to flow from it. This can be called the right to refund arising under and by virtue of the constitutional provisions, viz., Article 265. But, it does not follow from this that refund follows automatically. Article 265 cannot be read in isolation. It must be read in the light of the concepts of economic and social justice envisaged in the Preamble and the guiding principles of State Policy adumbrated in Articles 38 —and 39 an aspect dealt with at some length at a later stage. The very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passed on the burden of the duty/tax to others, he has no just claim for refund. It would be a parody of economic justice to refund the duty to a claimant who has already collected the said amount from his buyers. The refund should really be made to the persons who have actually borne its burden — that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is the very antithesis of the concept of economic justice and the principles underlying Articles 38 and 39. Now, the right to refund arising as a result of declaration of unconstitutionality of a provision of W.P. (C) Nos. 7127/2008 & 15639/2006 Page 8 of 47 the enactment can also be looked at as a statutory right of restitution. It can be said in such a case that the tax paid has been paid under a mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of invalidity of the provision by the court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. Section 72 contains a rule of equity and once it is a rule of equity, it necessarily follows that equitable considerations are relevant in applying the —said rule an aspect which we shall deal with a little later. Thus, whether the right to refund of taxes paid under an unconstitutional provision of law is treated as a constitutional right flowing from Article 265 or as a statutory right/equitable right affirmed by Section 72 of —the Contract Act, the result is the same there is no automatic or unconditional right to refund. 79. We may now consider a situation where a —manufacturer pays a duty unquestioningly or he questions the levy but fails before the original authority and keeps quiet. It may also be a case where he files an appeal, the appeal goes against him and he keeps quiet. It may also be a case where he files a second appeal/revision, fails and then keeps quiet.[*]The orders in any of the situations have become final against him. Then what happens is that after a year, five years, ten years, twenty years or even much later, a decision is rendered by a High Court or the Supreme Court in the case of another person holding that duty was not payable or was payable at a lesser rate in such a case. (We must reiterate and emphasise that while dealing with this situation we are keeping out the situation W.P. (C) Nos. 7127/2008 & 15639/2006 Page 9 of 47 where the provision under which the duty is levied is declared unconstitutional by a court; that is a separate category and the discussion in this paragraph does not include that situation. In other words, we are dealing with a case where the duty was paid on account of misconstruction, misapplication or wrong interpretation of a provision of law, rule, notification or regulation, as the case may be.) Is it open to the manufacturer to say that the decision of a High Court or the Supreme Court, as the case may be, in the case of another person has made him aware of the mistake of law and, therefore, he is entitled to refund of the duty paid by him? Can he invoke Section 72 of the Contract Act in such a case and claim refund and whether in such a case, it can be held that reading Section 72 of the Contract Act along with Section 17(1)(c) of the Limitation Act, 1963, the period of limitation for making such a claim for refund, whether by way of a suit or by way of a writ petition, is three years from the date of discovery of such mistake of law? Kanhaiya Lal is understood as saying that such a course is permissible. Later decisions commencing from Bhailal Bhai have held that the period of limitation in such cases is three years from the date of discovery of the mistake of law. With the greatest respect to the learned Judges who said so, we find ourselves unable to agree with the said proposition. Acceptance of the said proposition would do violence to several well-accepted concepts of law. One of the important principles of law, based upon public policy, is the sanctity attaching to the finality of any proceeding, be it a suit or any other proceeding. Where a duty has been collected under a particular order which has become final, the refund of that duty cannot be claimed unless the order (whether it is an order of assessment, adjudication or any other order under which the duty is paid) is set aside according to law. So W.P. (C) Nos. 7127/2008 & 15639/2006 Page 10 of 47 W.P. (C) Nos. 7127/2008 & 15639/2006 Page 10 of 47 long as that order stands, the duty cannot be recovered back nor can any claim for its refund be entertained. But what is happening now is that the duty which has been paid under a proceeding which has become final —long ago may be an year back, ten years back or —even twenty or more years back is sought to be recovered on the ground of alleged discovery of mistake of law on the basis of a decision of a High Court or the Supreme Court. It is necessary to point out in this behalf that for filing an appeal or for adopting a remedy provided by the Act, the limitation generally prescribed is about three months (little more or less does not matter). But according to the present practice, writs and suits are being filed after lapse of a long number of years and the rule of limitation applicable in that behalf is said to be three years from the date of discovery of mistake of law. The incongruity of the situation needs no emphasis. And all this because another manufacturer or assessee has obtained a decision favourable to him. What has indeed been happening all these years is that just because one or a few of the assessees succeed in having their interpretation or contention accepted by a High Court or the Supreme Court, all the manufacturers/assessees all over the country are filing refund claims within three years of such decision, irrespective of the fact that they may have paid the duty, say thirty years back, —under similar provisions and their claims are being allowed by courts. All this is said to be flowing from Article 265 which basis, as we have explained hereinbefore, is totally unsustainable for the reason that the Central Excises Act and the Rules made thereunder including Section 11-B/Rule 11 too constitute “law” within the meaning of Article 265 and that in the face —of the said provisions which are exclusive in their —nature no claim for refund is maintainable except under and in accordance therewith. The second basic W.P. (C) Nos. 7127/2008 & 15639/2006 Page 11 of 47 concept of law which is violated by permitting the above situation is the sanctity of the provisions of the Central Excises and Salt Act itself. The Act provides for levy, assessment, recovery, refund, appeals and all incidental/ancillary matters. Rule 11 and Section 11-B, in particular, provide for refund of taxes which have been collected contrary to law, i.e., on account of a misinterpretation or misconstruction of a provision of law, rule, notification or regulation. The Act provides for both the situations represented by Sections 11-A and 11-B. As held by a seven-Judge Bench in Kamala Mills, following the principles enunciated in Firm & Illuri Subbayya Chetty, the words “any assessment made under this Act” are wide enough to cover all assessments made by the appropriate authorities under the Act whether the assessments are correct or not and that the words “an assessment made” cannot mean an assessment properly and correctly made. It was also pointed out in the said decision that the provisions of the Bombay Sales Tax Act clearly indicate that all questions pertaining to the liability of the dealer to pay assessment in respect of their transactions are expressly left to be decided by the appropriate authorities under the Act as matters falling within their jurisdiction. Whether or not a return is correct and whether a transaction is exigible to tax or not are all matters to be determined by the authorities under the Act. The argument that the finding of the authority that a particular transaction is taxable under the Act is a finding on a collateral fact and, therefore, resort to civil court is open, was expressly rejected and it was affirmed that the whole activity of assessment beginning with the filing of the return and ending with the order of assessment falls within the jurisdiction of the authorities under the Act and no part of it can be said to constitute a collateral activity not specifically or expressly included in the jurisdiction of the authorities under the Act. It was clarified that even if the authority under the Act holds erroneously, while exercising its jurisdiction and powers under the Act that a transaction is taxable, it cannot be said that the decision of the authority is without jurisdiction. We respectfully agree with the above propositions and hold that the said principles apply with equal force in the case of both the Central Excises and Salt Act and the Customs Act. Once this is so, it is ununderstandable how an assessment/adjudication made under the Act levying or affirming the duty can be ignored because some years later another view of law is taken by another court in another person‟s case. Nor is there any provision in the Act for reopening the concluded proceedings on the aforesaid basis. We must reiterate that the provisions of the Central Excise Act also constitute “law” within the meaning of Article 265 and any collection or retention of tax in accordance or pursuant to the said provisions is collection or retention under “the authority of law” within the meaning of the said article. In short, no claim for refund is permissible except under and in accordance with Rule 11 and Section 11-B. An order or decree of a court does not become ineffective or unenforceable simply because at a later point of time, a different view of law is taken. If this theory is applied universally, it will lead to unimaginable chaos. It is, however, suggested that this result follows only in tax matters because of Article 265. The explanation offered is untenable, as demonstrated hereinbefore. As a matter of fact, the situation today is chaotic because of the principles supposedly emerging from Kanhaiya Lal and other decisions following it. Every decision of this Court and of the High Courts on a question of law in favour of the assessee is giving rise to a wave of refund claims all over the country in respect of matters which have become final and are closed long number W.P. (C) Nos. 7127/2008 & 15639/2006 Page 13 of 47 W.P. (C) Nos. 7127/2008 & 15639/2006 Page 13 of 47 of years ago. We are not shown that such a thing is happening anywhere else in the world. Article 265 surely could not have been meant to provide for this. We are, therefore, of the clear and considered opinion that the theory of mistake of law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee’s case. All claims for refund ought to be, and ought to have been, filed only under and in accordance with Rule 11/Section 11-B and under no other provision and in no other forum. An assessee must succeed or fail in his own proceedings and the finality of the proceedings in his own case cannot be ignored and refund ordered in his favour just because in another assessee‟s case, a similar point is decided in favour of the manufacturer/assessee. (See the pertinent observations of Hidayatullah, C.J. in Tilokchand Motichand extracted in para 46.) The decisions of this Court saying to the contrary must be held to have been decided wrongly and are accordingly overruled herewith.” 9. Like the Central Excise and Salt Act, 1944, the two enactments, i.e., the 1961 Act and the 1957 Act are self-contained codes exhaustive of matters dealt with therein. They are also exhaustive to obligations and remedies available to a tax payer under the two enactments. Applying the ratio exposited in Mafatlal Industries (supra), it is clear that in cases covered by the first category, claim for refund must be made by the assessee in accordance with the provisions of the enactment. Refund will be due and paid to the assessee as per the W.P. (C) Nos. 7127/2008 & 15639/2006 Page 14 of 47 provisions of the enactment itself. The two Acts provide for levy, assessment, recovery, refund, appeals and all incidental/ancillary matters. For an assessee to claim refund, he must satisfy the statutory requirements and Article 265 of the Constitution is not violated if an assessee does not claim refund as per the provisions of the Act or when the “wrong” assessment or any other “wrong” order becomes final and has the effect of denying refund. An assessee cannot file a writ petition and state that Article 265 of the Constitution is violated because he is not being refunded tax which is not refundable under the enactment. In such cases, tax has been collected in accordance with law, i.e., under the enactment itself and no amount is refundable unless a refund can be claimed in terms of the statute/enactment. Of course, if the „wrong‟ order itself is challenged in a writ petition and the challenge is accepted then refund can be a consequence. Invoking the writ jurisdiction to question an order or assessment is a separate aspect. Existence of an adequate legal remedy which has not been availed of is an important and relevant consideration before resort to extraordinary jurisdiction is accepted. 10. Any other interpretation would lead to incongruous results with the Revenue being put and saddled with liabilities even after the assessments become final and are not subjected to any challenge in W.P. (C) Nos. 7127/2008 & 15639/2006 Page 15 of 47 10. Any other interpretation would lead to incongruous results with the Revenue being put and saddled with liabilities even after the assessments become final and are not subjected to any challenge in W.P. (C) Nos. 7127/2008 & 15639/2006 Page 15 of 47 appeal or revision. It will result in chaotic situation and will be contrary to public interest, making a decision or adjudication inchoate and uncertain. It may be noticed here that there are fetters and restrictions on the power of the tax authorities both by limitation as well as conditions regarded as jurisdictional pre-conditions that have to be satisfied before any case is reopened under Section 147/148 of the 1961 Act or under Section 17 of the 1957 Act. Further, Revenue cannot defend a writ petition or a refund claim and state that the assessee had wrongly claimed benefit or has been wrongly granted benefit of a deduction/claim, even when the order/assessment has attained finality. 11. Provisions of assessment are independent of provisions of refund, but the provisions relating to refund may be dependent on the assessment. (See Commissioner of Income Tax, West Bengal vs. Central India Industries Ltd. (1971) 82 ITR 555). An assessment order or an order quantifying the income/net wealth can be rectified or modified in the proceedings as contemplated by the enactment. The assessment order or the order quantifying the income or taxable wealth cannot be challenged on merits while the authorities examine the question of refund. The authorities cannot go behind the assessment order or the order quantifying net wealth/income. Section 242 of the 1961 Act is apposite and is reproduced below:- “242. Correctness of assessment not to be questioned.--In a claim under this Chapter, it shall not be open to the assessee to question the correctness of any assessment or other matter decided which has become final and conclusive or ask for a review of the same, and the assessee shall not be entitled to any relief on such claim except refund of tax wrongly paid or paid in excess. 12. Another principle is that the refund provisions should be interpreted in a reasonable and practical manner and when warranted liberally in favour of the assessee. If there is substantial compliance of the provisions for refund, it may not be denied because it is not made strictly in the form or the prescribed manner. The forms prescribed may be merely intended to facilitate payment of refund. The tax authorities have to act judiciously when they exercise their power under an enactment. The power given to the tax authorities under the enactments are mandated with the duty to exercise them when the statutory provisions so warrant. It is imperative upon them to exercise their authority in an appropriate manner. In case the Assessing Officer or tax authority comes to know that an assessee is entitled to deduction, relief or refund on the facts of the case and the assessee has omitted to make the claim, he should draw the attention of the assessee. The tax W.P. (C) Nos. 7127/2008 & 15639/2006 Page 17 of 47 authorities should act as facilitators and not occlude and obstruct. The role of tax authorities has been aptly described in CIT versus Rajesh Jhaveri Stock Brokers Pvt. Ltd.(2008) 14 SCC 208 as :- “19………… The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers.” 13. In Commissioner of Income Tax Vs. Shelly Products and Anr., (2003) 261 ITR 367, the Supreme Court while upholding the right of the tax authorities to retain taxes due and payable even when the assessment proceeding is annulled, on the question of refund when tax is not payable clarified the position as under: W.P. (C) Nos. 7127/2008 & 15639/2006 Page 17 of 47 authorities should act as facilitators and not occlude and obstruct. The role of tax authorities has been aptly described in CIT versus Rajesh Jhaveri Stock Brokers Pvt. Ltd.(2008) 14 SCC 208 as :- “19………… The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers.” 13. In Commissioner of Income Tax Vs. Shelly Products and Anr., (2003) 261 ITR 367, the Supreme Court while upholding the right of the tax authorities to retain taxes due and payable even when the assessment proceeding is annulled, on the question of refund when tax is not payable clarified the position as under: “We cannot lose sight of the fact that the failure or inability of the Revenue to frame a fresh assessment should not place the assessee in a more disadvantageous position than in what he would have been if a fresh assessment was made. In a case where an assessee chooses to deposit by way of abundant caution advance tax or self-assessment tax which is in excess of his liability on the basis of the return furnished or there is any arithmetical error or inaccuracy, it is open to him to claim refund of the excess tax paid in the course of the assessment proceeding. He can certainly make such a claim also before the concerned authority calculating the refund. Similarly, if he has by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income-tax, or is not income within the contemplation of law, he may likewise bring this to the notice of the assessing authority, which if satisfied, may grant him relief and refund the tax paid in excess, if any. Such matters can be brought to the notice of the concerned authority in a case when refund is due and payable, and the authority concerned, on being satisfied, shall grant appropriate relief.” Facts of the W.P.(C) No. 7127 Of 2008 14. The petitioner No. 1, Indglonal Investment & Finance Limited, by this writ petition has prayed for quashing of the order dated 23[rd]August, 2007 passed by the respondent No. 1, Income Tax Officer, Ward No. 11(4), New Delhi and for direction that the respondent should refund Rs.5,73,038/- along with interest. It is stated that this amount was deducted as TDS during the period relevant to the assessment year 1994-95 and is refundable. 15. By the impugned order dated 23[rd] August, 2007, the claim for refund has been rejected on the ground that in the return of income for the assessment year 1994-95 filed on 29[th] November, 1994, the assessee/petitioner had declared total loss of Rs.4,56,994/- and no amount was shown as deducted towards TDS and no claim for refund was made. It is stated that the return was processed under Section 143(1)(a) of the 1961 Act on 28[th] February, 1995 and it was concluded that no tax was paid and due. The respondent has relied upon Section 139(5) of the 1961 Act and stated that in case there was an omission or error in the return itself, the petitioner should have filed revised a return within the time stipulated. No revised return was filed. 16. Section 237, 239(1) & (2)(c) and 240 of the 1961 Act read as under:- “Section 237- Refunds If any person satisfies the [Assessing] Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess.” Section 239- Forms of claim for refund and limitation. “(1) Every claim for refund under this Chapter shall be made in the prescribed form and verified in the prescribed manner. [(2) No such claim shall be allowed, unless it is made within the period specified hereunder, namely:- (a)… (b)… 16. Section 237, 239(1) & (2)(c) and 240 of the 1961 Act read as under:- “Section 237- Refunds If any person satisfies the [Assessing] Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess.” Section 239- Forms of claim for refund and limitation. “(1) Every claim for refund under this Chapter shall be made in the prescribed form and verified in the prescribed manner. [(2) No such claim shall be allowed, unless it is made within the period specified hereunder, namely:- (a)… (b)… (c)Where the claim is in respect of income which is assessable for any other assessment year, [one] year from the last day of such assessment year;]”is assessable for any other assessment year, [one] year from the last day of such assessment year;]” Section 240- Refund on appeal, etc. “Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, 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, if any, shall become due only on the making of such fresh assessment ; 17. (b) the assessment is annulled, the refund shall become due only of the amount, if any of the tax paid in excess of the tax chargeable on the total income returned by the assessee.” As per Section 237 of the 1961 Act, an assessee is entitled to refund if the tax paid by him or treated to have been paid by him or on his behalf for the assessment year, exceeds the amount chargeable under the 1961 Act for a particular assessment year. Claim for refund as per Section 239(1) and 239 (2)(c), has to be made in the prescribed form and verified in the proper manner within one year from the last date of the relevant assessment year. Rule 41 of the Income Tax Rules, 1962 (Rules, for short) is also relevant. As per the aforesaid Rule, claim for refund is to be accompanied by a return in the prescribed form and in case a person makes a claim for refund that consists of dividend from any other income on which tax has been deducted at source, the claim is required to be accompanied by certificate of TDS. W.P. (C) Nos. 7127/2008 & 15639/2006 Page 21 of 47 The said provisions for refund have been liberally interpreted in favour of the assessee and hyper-technical grounds which hinder the right of the assessee to get refund have not been encouraged. When there has been substantial compliance of Sections 237 and 239 of the 1961 Act but there is a procedural lapse, for non-compliance, the refund should not be denied. 18. Section 240 of the 1961 Act provides that where, as a result of any order passed in appeal or other proceedings under the Act, refund of any amount becomes due to any assessee, the assessing officer shall refund the amount to the assessee without his having made any claim in that behalf. Interpreting the expression “other proceedings” in Section 240 of the 1961 Act it has been held in Atmaram J. Haithsala Vs. Smt. S. Sarup, ITO (1994) 209 ITR 456 as under;- 18. Section 240 of the 1961 Act provides that where, as a result of any order passed in appeal or other proceedings under the Act, refund of any amount becomes due to any assessee, the assessing officer shall refund the amount to the assessee without his having made any claim in that behalf. Interpreting the expression “other proceedings” in Section 240 of the 1961 Act it has been held in Atmaram J. Haithsala Vs. Smt. S. Sarup, ITO (1994) 209 ITR 456 as under;- “The phrase "other proceedings" used under section 240 is of wide amplitude and would cover any order passed in proceedings other than an appeal under the Income-tax Act. Therefore, the phrase "orders passed in other proceedings under the Income-tax Act" would include orders passed under section 154 (rectification proceedings), orders passed by the High Court or the Supreme Court under section 260 (in reference) and orders passed by the Commissioner of Income-tax in revision applications under section 263 or 264 or on an application under section 273A of the Act. In this view of the matter, in our view, there is no reason to restrict the meaning of the phrase "other proceedings" under the Income tax Act used in section 240 to only some orders by which refund of excess tax or penalty is granted and not to cover orders passed under section 273A of the Act. Sub-section (1A) of section 244 also, inter alia, provides that where the whole or any part of the refund referred to in sub-section (1) is due to the assessee in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in other proceedings under this Act to be in excess of the amount which such assessee is liable to pay as penalty, then the Government is required to pay to such assessee simple interest as specified therein. In this view of the matter, there is no reason to hold that in case where penalty is waived or reduced under section 273A of the Act, the assessee is not entitled to have the said amount with interest as provided under section 244(1A) of the Act. The Allahabad High Court in the case of Raj Kishore Prasad v. ITO [1991] 188 ITR 765,observed that the words "other proceedings under the Act" used under section 240, are wide enough to include proceedings or orders passed under section 263 of the Act giving rise to the claim of an assessee for refund. The court negatived the contention of the Revenue for restricting the meaning and scope of the phrase "other proceedings" only to references made under the Act.” (See also S.R.Koshti versus Commissioner of Income Tax (2005) 276 ITR 165mentioned below) 19. In view of the statutory provisions the issue raised is whether the petitioner assessee had made a claim for refund or the refund is payable under the 1961 Act. 20. Photocopy of the acknowledgment issued by the Department at the time of filing of return is available on our file. Acknowledgment W.P. (C) Nos. 7127/2008 & 15639/2006 Page 23 of 47 shows that there was a specific column i.e. column No. 5, in which the assessee was required to show total tax deducted and collected at source. Against the said column, the figure written is NIL. A perusal of the acknowledgment of return also shows that no specific claim for refund was mentioned. The column has been left blank. In the column relating to number of documents attached regarding pre-paid taxes etc., no detail has been given. petitioner assessee had made a claim for refund or the refund is payable under the 1961 Act. 20. Photocopy of the acknowledgment issued by the Department at the time of filing of return is available on our file. Acknowledgment W.P. (C) Nos. 7127/2008 & 15639/2006 Page 23 of 47 shows that there was a specific column i.e. column No. 5, in which the assessee was required to show total tax deducted and collected at source. Against the said column, the figure written is NIL. A perusal of the acknowledgment of return also shows that no specific claim for refund was mentioned. The column has been left blank. In the column relating to number of documents attached regarding pre-paid taxes etc., no detail has been given. 21. The original file of the department was called and has been produced before us. We have examined the original file. The Income Tax form for the said year consisted of 10 pages. The original return available on record consists of the first 4 pages and pages 9 and 10. Pages 5 to 8 are not available on the record. It is obvious that these have been removed. However, at page 3 of the return, income of Rs.20,83,125/- has been declared as dividend from Asian Consolidated Industries Limited. Page No. 10 of the return available on record, shows that the assessee had filed statement of assessable income, statutory audit report, Profit & Loss Account, Balance-sheet, annexures to the Balance-sheet, tax audit report and depreciation. The statement of assessable income and the audited Balance Sheet is available on record. The statement of assessable income available on record shows that TDS on dividend as per Form No. 16A enclosed amounting to Rs.5,73,038/- is refundable. Original TDS certificate issued by the Asian Consolidated Industries Limited dated 14[th] July, 1993 is available on record at page no. 21. The said TDS certificate relates to equity dividend for the year 1991-92. The gross dividend declared in the accounts is Rs.20,83,125/-. The amount of Rs.2,81,479/- has been paid as interest and an amount of Rs.5,73,038/- has been deducted towards TDS and accordingly net payment of Rs.17,91,566/- has been made. It is noticed from the audited accounts that this amount of Rs.2,81,479/- towards interest has been shown as interest received. 22. The returned income as declared was accepted. The question arises whether or not the assessee had asked for refund or the assessed income entitles the petitioner to refund of TDS of Rs.5,73,034/-. 23. The contention of the Revenue is that only the return form and the not the annexures attached are relevant to decide whether the assessee is entitled to refund or not. Thus, if the assessee has not claimed refund in the return form itself, then the assessee is not entitled to refund. The aforesaid submission cannot be accepted in the present case. We are concerned with assessment year 1994-95 and the relevant provisions of the 1961 Act applicable in the said year. An assessee was required and mandated by Section 139(9) of the 1961 Act to file specified annexures and documents with the return of income. Unless the specified documents were furnished, the return of income was regarded as defective. Section 139(9) of the 1961 Act during the relevant period reads as under:- “Section 139. Return of income the specified documents were furnished, the return of income was regarded as defective. Section 139(9) of the 1961 Act during the relevant period reads as under:- “Section 139. Return of income (9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a