R.pannerselvam v. Assistant Commissioner Of Income Tax, Central Circle-3(3), Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE C.SARAVANAN (Through Video Conferencing) R.Pannerselvam ... Petitioner Vs 2. Assistant Commissioner of Income Tax, Central Circle-3(3), Chennai. ... Respondents Prayer: Writ Petition filed under Article 226 of theConstitution of India to issue a Writ of Certiorarified Mandamuscalling for the records of the first respondent in OrderC.No.1592/PCIT/C-1/03/2018-19 dated 07/12/2018 and quash thesame and direct the respondents to return the sum ofRs.36,94,940/- paid as TDS and TCS in the account of thepetitioner for the assessment year 2011-12. This writ petition has been filed to quash the impugnedorder dated 07.12.2018 passed by the respondent rejecting therequest of the petitioner for refund of sum of Rs. 36,94,940/-which was deducted as tax. https://hcservices.ecourts.gov.in/hcservices/ 12. The facts on record indicate that the petitioner had notfiled returns either under Section 139(1) of "Income Tax Act,1961" ( "IT Act, 1961" for the sake of brevity) on 31.10.2011or within the extended period under Section 139 (4) of the saidAct. After the expiry of the period of limitation for filing thereturns, the petitioner filed an application on 19.11.2018 underSection 119 of the IT Act, 1961 for condoning the delay infiling the return so as to claim refund of the excess amount oftax. 3. According to the petitioner, after adjustment of the taxliability for the aforesaid assessment year amounting toRs.8,61,892, the petitioner was entitled for a refund of37,20,790/- [45,82,682-8,61,892]. It is submitted that therespondent has wrongly reached the request of the petitioner. 4. Appearing on behalf of the petitioner, learned counselfor the petitioner submits that the reason given in the impugnedorder stating that the application was beyond the timeprescribed under Board's Circular No. 9/2015 issued inF.No.312/22/2015-OT dated 09.06.2015 with regard to condonationof delay refund claim under Section 119 (2) (b) is incorrectinasmuch as the return itself was filed for the first time on26.02.2015 beyond the period of limitation, and therefore, thepetitioner should have been allowed to file the returns for thepurpose of refund under Section 237 of the IT Act, 1961. It issubmitted that Section 237 of the Act is an independentprovision and is not dependent on the returns and therefore, thefate of the refund claim of the petitioner cannot be tied downto the above circular supra. It is, therefore, submitted thatthis writ petition deserves to be allowed and impugned order isliable to be quashed with consequential direction. 5. Learned counsel for petitioner has relied on thefollowing two decisions of this Hon'ble High Court and that ofthe Hon'ble Delhi High Court in the following cases :- (i) R.Seshammal Vs. Income Tax Officer and Another,1998 (9) TMI 56- MADRAS HIGH COURT. (ii)G.V.INFOSUTIONSPVT.LTD.Vs.DEPUTYCOMMISSIONER OF INCOME TAX, CIRCLE 10(2), & ANR 2019(2) TMI 177-DELHI HIGH COURT. 6. Learned counsel for the petitioner has also placedreliance on the few passages from judgement of R.SeshammalVs. Income Tax Officer and Another, 1998 (9) TMI 56-MADRAS HIGH COURT which is reproduced below:- " 4. The argument advanced by counsel for theRevenue that Section 237 of the Act does not permitsuch refund being made is not supported by the termsof that section. Section 237 of the Act providesthat if monies have been paid in excess of theamount for which the payer is "properly chargeableunder the Act for that assessment year" such personis entitled to get the refund of the excess amount.The entire amount paid by the assessee was in excessof the amount which was actually chargeable. Theassessee was, therefore, entitled to have refund ofthe excess amount. 6. Learned counsel for the petitioner has also placedreliance on the few passages from judgement of R.SeshammalVs. Income Tax Officer and Another, 1998 (9) TMI 56-MADRAS HIGH COURT which is reproduced below:- " 4. The argument advanced by counsel for theRevenue that Section 237 of the Act does not permitsuch refund being made is not supported by the termsof that section. Section 237 of the Act providesthat if monies have been paid in excess of theamount for which the payer is "properly chargeableunder the Act for that assessment year" such personis entitled to get the refund of the excess amount.The entire amount paid by the assessee was in excessof the amount which was actually chargeable. Theassessee was, therefore, entitled to have refund ofthe excess amount. 5. Section 237 of the Act does not specify that anassessment order must be made and that some amountmust be found to be payable as tax and that someamount in excess of that amount should have beenpaid. It is not a pre-condition for invoking thatsection that some liability for tax must have beencast upon the person claiming refund." 7. G.V.INFOSUTIONS PVT.LTD.Vs.DEPUTY COMMISSIONER OF INCOMETAX, CIRCLE 10(2), & ANR 2019 (2) TMI 177-DELHI HIGH COURT areference was made to the following passage:- "9. The statute or period of limitationprescribed in provisions of law meant to attachfinality, and in that sense are statutes of repose;however, wherever the legislature intends reliefagainst hardship in cases where such statutes leadto hardships, the concerned authorities - includingRevenue Authorities have to construe them in areasonable manner. That was the effect and purportof this court's decision in Indglonal Investment &Finance Ltd. (supra). This court is of the opinionthat a similar approach is to be adopted in thecircumstances of the case." 8. Opposing the prayer for the relief, learned counsel forthe respondent submits that the petitioner is a regular incomeassessee and is not a novice. It is submitted that thepetitioner is in Hotel Business of ought to filed returns eitherunder Section 139 (1) of IT Act, 1961 in time or within theextended period under Section 139 (4) of the IT Act, 1961. 9. It is submitted that in this case, admittedly therespective dates expired on 31.10.2012 and 31.03.2013 andtherefore, the attempt of the petitioner to file a return on26.02.2015 was of no consequence. It is submitted that the https://hcservices.ecourts.gov.in/hcservices/ assessment is deemed to have been completed and there is noquestion of entertaining afresh return under Section 139 beyondthe period of limitation and therefore, the consequential refundalso cannot be entertained in the light of the above Board'sCircular. 10. Learned counsel for the respondents further submitsthat the petitioner has also not given any reasons as to how therespondent can ignore Section 119 (2) (b) of the IT Act, 1961.It is further submitted that petition under Section 119 of theIT Act, 1961 was filed beyond six years period and therefore,even on this count the impugned order cannot be interfered andtherefore, the writ petition was liable to be dismissed. 11. Finally, learned counsel for the respondents alsosubmitted that petitioner could have resorted to other avenuesavailable under law to redress his grievance. It is submittedthat petitioner could have approached to Director General ofIncome Tax, Tamil Nadu and Puducherry or the Central Board ofDirect Taxes, New Delhi to redress his grievance beforeapproaching this Court. It is, therefore, submitted that sincethe petitioner has these alternatives, the writ petition filedwas liable to be dismissed as premature. 11. Finally, learned counsel for the respondents alsosubmitted that petitioner could have resorted to other avenuesavailable under law to redress his grievance. It is submittedthat petitioner could have approached to Director General ofIncome Tax, Tamil Nadu and Puducherry or the Central Board ofDirect Taxes, New Delhi to redress his grievance beforeapproaching this Court. It is, therefore, submitted that sincethe petitioner has these alternatives, the writ petition filedwas liable to be dismissed as premature. 12. Learned counsel for respondent, further submits thattwo decisions cited by learned counsel for writ petitioner arenot applicable facts by the present case. It is submitted thatin the decision of this High Court in R.Seshammal Vs. Income TaxOfficer and Another, 1998 (9) TMI 56- MADRAS HIGH COURT. Claimamount was crystallized. It is submitted that the deemedassessment can not be reopened as the time for reopening theassessment has got over and therefore the question grantingrefund to the petitioner also will not arise. 13. Heard learned counsel for the petitioner and for therespondents, I have perused the affidavit filed and counteraffidavit by the respondents. I have also perused the circularcited above dated issued under Section 119 of the Income TaxAct, 1961 and the two decisions cited by the learned counsel forthe petitioner. Section 237 of the IT Act, 1961 is asubstantiate provision for refund of the income tax paid bymistake under the Income Tax Act, 1961. 13 A. Section 237 deals with refund of excess taxpaid by an assessee of the IT Act, 1961 which reads asunder: Section 237:- If any person or assesseesatisfies the assessing officer that the amount ofthe tax paid by him or paid by any person on his behalf during any previous assessment year exceedsthe amount with which he is properly chargeableunder the act for that year, he is entitled torefund of excess amount paid. The authority will also after considering the factsand circumstances of the case issue order for therefund of excess tax paid by the assessee. It isright of the assessee to demand excess tax paid overas tax assessed. 13 B. Reading of Section 237 makes it clear that there isno limitation prescribed for filing a refund of income tax. Asfar as filing of returns beyond the period of limitationprescribed under Section 139 (1) and 139 (4) for efficientmanagement of the work of assessment and collection of revenue,The Central Board of Direct Taxes may issue general or specialorder under Section 119 of the IT Act, 1961 which reads asunder:- 119. Instructions to subordinate authorities:- "1. The Board may, from time to time, issuesuch orders, instructions and directions to otherincome- tax authorities as it may deem fit for theproper administration of this Act, and suchauthorities and all other persons employed in theexecution of this Act shall observe and follow suchorders, instructions and directions of the Board:Provided that no such orders, instructions ordirections shall be issued- (a) so as to require any income- tax authorityto make a particular assessment or to dispose of aparticular case in a particular manner; or (b) so as to interfere with the discretion oftheDeputy Commissioner (Appeals) or the Commissioner(Appeals) in the exercise of his appellate functions. 2. Without prejudice to the generality of the foregoing power,- (a) the Board may, if it considers it necessary orexpedient so to do, for the purpose of proper andefficient management of the work of assessment andcollection of revenue, issue, from time to timewhether by way of relaxation of any of theprovisions of sections139, 143, 144, 147, 148, 154, (a) so as to require any income- tax authorityto make a particular assessment or to dispose of aparticular case in a particular manner; or (b) so as to interfere with the discretion oftheDeputy Commissioner (Appeals) or the Commissioner(Appeals) in the exercise of his appellate functions. 2. Without prejudice to the generality of the foregoing power,- (a) the Board may, if it considers it necessary orexpedient so to do, for the purpose of proper andefficient management of the work of assessment andcollection of revenue, issue, from time to timewhether by way of relaxation of any of theprovisions of sections139, 143, 144, 147, 148, 154, 155,sub- section (1A) of section 201, sections 210,211,234A, 234B , 234C , 271 and 273 or otherwise,general or special orders in respect of any class ofincomes or class of cases, setting forth directionsor instructions (not being prejudicial to assessees)as to the guidelines, principles or procedures to befollowed by other income- tax authorities in thework relating to assessment or collection of revenueor the initiation of proceedings for the impositionof penalties and any such order may, if the Board isof opinion that it is necessary in the publicinterest so to do, be published and circulated inthe prescribed manner for general information; (b) the Board may, if it considers it desirableor expedient so to do for avoiding genuine hardshipin any case or class of cases, by general or specialorder, authoriseany income- tax authority, not beinga Deputy Commissioner (Appeals) or Commissioner(Appeals) to admit an application or claim for anyexemption, deduction, refund or any other reliefunder this Act after the expiry of the periodspecified by or under this Act for making suchapplication or claim and deal with the same onmerits in accordance with law. " 14. The Central Board of Direct Taxes has issued circularsUnder Section 119 of the IT Act, 1961 from time to time. For theperiod in dispute, the relevant circular was issued on09/06/2015 bearing CIRCULAR 9/2015 F.NO.312/22/2015-OT which isreproduced below:- "InsupersessionofallearlierInstructions/Circulars/Guidelines issued by theCentral Board of Direct Taxes (the Board) from timeto time to deal with the applications forcondonation of delay in filing returns claimingrefund and returns claiming carry forward of lossand set-off thereof under section 119(2)(b) of theIncome-tax Act, (the Act) the present Circular isbeing issued containing comprehensive guidelines onthe conditions for condonation and the procedure tobe followed for deciding such matters. 2. The Principal Commissioners of Income-tax/Commissioners of Income-tax (Pr.CsIT/CsIT) shallbe vested with the powers of acceptance/rejection ofsuch applications/claims if the amount of such claims is not more than Rs.10 lakhs for any oneassessment year. The Principal Chief Commissionersof Income-tax/Chief Commissioners of Income-tax(Pr.CCsIT/CCsIT) shall be vested with the powers ofacceptance/rejection of such applications/claims ifthe amount of such claims exceeds Rs.10 lakhs but isnot more than Rs. 50 lakhs for any one assessmentyear. The applications/claims for amount exceedingRs.50 lakhs shall be considered by the Board. 3. No condonation application for claim ofrefund/loss shall be entertained beyond six yearsfrom the end of the assessment year for which suchapplication/claim is made.This limit of six yearsshall be applicable to all authorities having powersto condone the delay as per the above prescribedmonetary limits, including the Board. A condonationapplication should be disposed of within six monthsfrom the end of the month in which the applicationis received by the competent authority, as far aspossible. 3. No condonation application for claim ofrefund/loss shall be entertained beyond six yearsfrom the end of the assessment year for which suchapplication/claim is made.This limit of six yearsshall be applicable to all authorities having powersto condone the delay as per the above prescribedmonetary limits, including the Board. A condonationapplication should be disposed of within six monthsfrom the end of the month in which the applicationis received by the competent authority, as far aspossible. 4. In a case where refund claim has arisenconsequent to a Court order, the period for whichany such proceedings were pending before any Courtof Law shall be ignored while calculating the saidperiod of six years, provided such condonationapplication is filed within six months from the endof the month in which the Court order was issued orthe end of financial year whichever is later. 5. The powers of acceptance/rejection of theapplication within the monetary limits delegated tothe Pr.CCsIT/CCsIT/Pr.CsIT/CsIT in case of suchclaims will be subject to Following conditions: (i) At the time of considering the case underSection 119(2)(b), it shall be ensured that theincome/loss declared and/or refund claimed iscorrect and genuine and also that the case is ofgenuine hardship on merits. (ii) The Pr.CCIT/CCIT/Pr.CIT/CIT dealing withthe case shall be empowered to direct thejurisdictional assessing officer to make necessaryinquiries or scrutinize the case in accordance withthe provisions of the Act to ascertain thecorrectness of the claim. 6. A belated application for supplementaryclaim of refund (claim of additional amount ofrefund after completion of assessment for the sameyear) can be admitted for condonation provided otherconditions as referred above are fulfilled. Thepowers of acceptance/rejection within the monetarylimits delegated to the Pr.CCsIT/CCsIT/Pr.CsJT/CsITin case of returns claiming refund and supplementaryclaim of refund would be subject to the followingfurther conditions: (i) The income of the assessee is notassessable in the hands of any other person underany of the provisions of the Act. (ii) No interest will be admissible on belatedclaim of refunds. (iii) The refund has arisen as a result ofexcess tax deducted/collected at source and/orexcess advance tax payment and/or excess payment ofself-assessment tax as per the provisions of the Act. 7. In the case of an applicant who has madeinvestment in 8% Savings (Taxable) Bonds, 2003issued by Government of India opting for scheme ofcumulative interest on maturity but has accountedinterest earned on mercantile basis and theintermediary bank at the time of maturity hasdeducted tax at source on the entire amount ofinterest paid without apportioning the accruedinterest/TDS, over various financial years involved,the time limit of six years for making such refundclaims will not be applicable. 8.Thiscircularwillcoverallsuchapplications/claims for condonation of delay undersection 119(2xb) which are pending as on the date ofissue of the Circular. 9. The Board reserves the power to examine anygrievance arising out of an order passed or notpassed by the authorities mentioned in para 2 aboveand issue suitable directions to them for properimplementation of this Circular. However, no reviewof or appeal against the orders of such authoritieswould be entertained by the Board." 8.Thiscircularwillcoverallsuchapplications/claims for condonation of delay undersection 119(2xb) which are pending as on the date ofissue of the Circular. 9. The Board reserves the power to examine anygrievance arising out of an order passed or notpassed by the authorities mentioned in para 2 aboveand issue suitable directions to them for properimplementation of this Circular. However, no reviewof or appeal against the orders of such authoritieswould be entertained by the Board." 15. A reading of the above Circular issued Section 119 (2)(b) as extracted above indicates that avoiding genuine hardshipThe Board may in any case or by general or special orderauthorize any income authority not being Commissioner Appeals toadmit an application or for exemption, deduction, refund or anyclaim under this Act after the expiry of period of limitationspecified for making such application or claim and deal with thesame on merits in accordance with law. Further, as per Para 3 ofthe Circular, "No condonation application for claim ofrefund/loss shall be entertained beyond six years from the endof the assessment year for which such application/claim ismade.This limit of six years shall be applicable to allauthorities having powers to condone the delay as per the aboveprescribed monetary limits, including the Board. A condonationapplication should be disposed of within six months from the endof the month in which the application is received by thecompetent authority, as far as possible". 16. The facts on record indicate that the petitioner, beingan income tax assessee had failed to file returns in time. Thesecond respondent or the Jurisdictional Assessing Officer oughtto have issued notice under Section 148 of the IT Act, 1961 onor before 31.03.2018 for the assessment year 2011-12 as therewould have been a prima-facie presumption that income hadescaped assessment for the aforesaid assessment year. Thepetitioner initially made an attempt to file a return belatedlybefore the second respondent on 26.02.2015. This returnnaturally could not have been accepted as it was beyond theperiod of limitation prescribed under Section 139 of the IT Act,1961. 17. If a notice under Section 148 of the IT Act, 1961 wasissued to the petitioner, a proper assessment would have beencompleted. Such assessment would have finally determined whetherthe petitioner was indeed liable to pay tax or was entitled torefund of income tax deducted at source credit by the personswho made payment to the petitioner during the relevant financialyear. 18. In this case, the petitioner has approached the firstrespondent under Section 119 of the IT Act, 1961 on 29.08.2018with a request for adjustment of the tax Directorate source andfor refund of the amount. 19. It would have been different if the application underSection 119 was made to claim exemption for the first time afterthe returns were filed in time and after the period prescribedfor revising the assessment had expired, where the assessmenthad attained finality. Where no return was filed, it wasincumbent on the part of the second respondent or the Jurisdictional Assessing Officer as was expected to have issueda notice under Section 148 of the IT Act, 1961 to the petitionerwithin the time prescribed under the Act, in which case, thequestion of the petitioner filing an application before thefirst respondent under Section 119 of the IT Act, 1961 wouldhave arisen at all. 19. It would have been different if the application underSection 119 was made to claim exemption for the first time afterthe returns were filed in time and after the period prescribedfor revising the assessment had expired, where the assessmenthad attained finality. Where no return was filed, it wasincumbent on the part of the second respondent or the Jurisdictional Assessing Officer as was expected to have issueda notice under Section 148 of the IT Act, 1961 to the petitionerwithin the time prescribed under the Act, in which case, thequestion of the petitioner filing an application before thefirst respondent under Section 119 of the IT Act, 1961 wouldhave arisen at all. 20. Since the law mandates a particular thing to be done ina particular manner, it was incumbent on the part of the secondrespondent or the Jurisdictional Assessing Officer ought to haveissued a notice under Section 148 of the IT Act, 1961, todetermine the tax liability of the petitioner. As this was notdone, case deserves to be remitted back to the second respondentto first finalize the assessment of the petitioner for theassessment year 2011-12 within a period of three months from thedate of receipt of copy of this order. Failure to issue a noticeunder Section 148 of the IT Act, 1961, cannot be to theprejudice of the petitioner, if ultimately it is found thatpetitioner was entitled to a refund. However, liberty is givento penalise the petitioner for failure to file returns in timeand for levy of interest if any. 21. Respondents are therefore, directed to examine therefund claim independently and pass appropriate orders within aperiod of three months from the date of receipt of copy of thisorder. 22. The second respondent or the Jurisdictional AssessingOfficer is, therefore, directed to first pass an assessmentorder within a period of three months from the date of receiptof copy of this order. It is found that petitioner was indeedentitled to refund of the tax paid in excess, such refund shallbe made within a period of three months thereafter, dullyappropriating the amount out such refund towards penalty if any.Under the said Act. Thus the writ petition is allowed with the abovedirections. There shall be no order as to costs. Connectedmiscellaneous petition is also closed. Sd/- Assistant Registrar(CS-VII) //True Copy// nst Sub Assistant Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1. The Principal Commissioner of Income Tax, Central-1, 108, Uthamar Gandhi Salai, Chennai-34. Central-1, 108, Uthamar Gandhi Salai, Chennai-34. 2. Assistant Commissioner of Income Tax, Central Circle-3(3), Chennai. Central Circle-3(3), Chennai. +1cc to Mr.A.P.Srinivas, Advocate, S.R.No.60414 W.P.No.7433 of 2019 andW.M.P.No.8101 of 2019 SV(CO)SU(10/01/2022)