Wp 894 Of 2019.Doc v. Deputy Commissioner Of Income Tax, …1(3)(2) And Ors

18 wp 894 of 2019.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.894 OF 2019 Tata Communications Limited …Petitioner versus Deputy Commissioner of Income Tax, …1(3)(2) and Ors. Respondents Mr. J.D.Mistry, Senior Advocate with Mr. Hiten Chande I/by Mint and Confreres, forPetitioner. Mr. Charanjeet Chandrapal, for Respondents. CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. DATE: 8th JULY, 2019 P.C.: 1.Heard the Counsel for the parties. The Petitioner has prayed for directions to the Respondents to process income tax return of the Petitioner for the Assessment Year 2015-16 and to grant refund of a sum of Rs.154,47,50,600/- with interest as per statutory provisions. 2.Brief facts are as under : The Petitioner is a Company registered under the Companies Act, 1956 and is regularly assessed to the tax. The Petitioner had filed return of income for the said assessment year 2015-16 on 20[th] November, 2015. This return gave rise to refund. The Petitioner filed a revised return on 1st March, 2017 , which also gave rise to refund claim. The Assessment Officer in terms of Section 143(1) of the Income Tax Act SSP 1/9 18 wp 894 of 2019.doc st March, 2018. The (“the Act” for short) would process the return before 31 Assessing Officer did not do so, instead issued a notice of scrutiny assessment underSection 143(2) of the Act, on 27th March, 2017. 2.The Petitioner approached the Assessing Officer and higher authoritiesrepeatedly requesting that the Petitioner's return in question be processed underSection 143(1) of the Act and refund flowing from such return, subject to limitedadjustments envisaged under the said provision, be released, notwithstanding the factthat the Assessing Officer has issued notice under Section 143(2) of the Act. Since theRespondent did not do so, the present Petition came to be filed. 3.Appearing for the Petitioner learned Counsel Shri Mistry took us throughthe provisions contained in the said Act, in particular Sections 143(1), 143(2), 143(1D)and 241A, which was inserted by Finance Act, 2017 with effect from 1st April, 2017 andis made applicable to the assessment years commencing on or after 1st April, 2017. Onthe basis of these statutory provisions and decisions of this Court and other HighCourts, Counsel submitted that the Assessing Officer was duty bound to process thereturn of income of the Petitioner and grant refund arising from such return, eventhough subsequently he had issued notice of scrutiny assessment. 4.On the other hand, learned Counsel Shri Chandrapal relied on the Affidavitfiled by the Department opposing the Petition. 5.In the present case, it is not necessary to refer to the statutory scheme in SSP 2/9 18 wp 894 of 2019.doc 4.On the other hand, learned Counsel Shri Chandrapal relied on the Affidavitfiled by the Department opposing the Petition. 5.In the present case, it is not necessary to refer to the statutory scheme in SSP 2/9 18 wp 894 of 2019.doc detail since this Court and other High Courts have already taken note of suchprovisions and given conclusive opinion thereon. Before referring to such judgments,we may briefly note the stand of the Department taken in the undated Affidavit-in-Reply filed by one Shri Rahul Singhania, Dy. Commissioner of Income Tax, Mumbai.In such Affidavit, a reference is made to the provisions of Section 143(1D) of the Actand the fact that the Assessing Officer has issued notice under Section 143(2) of theAct. After referring to these provisions, it is stated that the Petitioner was informedthat the refund cannot be issued in view of Section 143(1D) of the Act, since noticeunder Section 143(2) of the Act is already issued. A reference is also made to a draftassessment order for the year under consideration, which if ultimately finalized wouldgive rise to a tax demand from the Petitioner instead of department paying refund.6.As we would notice, as per different decisions of this Court and other HighCourts, none of these grounds will be sufficient to enable the Respondents to withholdthe refund arising out of the said return for the assessment year 2015-16. This Courtin the case of Group M. Media India (P) Ltd. V/s. Union of India1 in the context of theprovisions contained in Section 143(1D) and 143(1) of the Act, had observed as under :“8.Before us, Mr. Mohanty does not dispute the fact that in view of theDelhi High Court decision in Tata Teleservices Ltd. (Supra) InstructionNo.1 of 2015 dated 13th January, 2015 of the CBDT would not fetter theAssessing Officer in any manner from exercising his discretion to process 1[2017] 77 taxmann.com 106 (Bombay) SSP 3/9 1[2017] 77 taxmann.com 106 (Bombay) SSP 3/9 the return of income under Section 143(1) of the Act and considering thegrant of refund under Section 143(1D) of the Act. The Petitioner beforethe Delhi High Court was not granted refund, pending scrutinyassessment in view of Instruction No.1/2015 dated 13th January, 2015.The Delhi High Court held that the instruction issued is withoutjurisdiction. This for the reason that although Section 119 of the Act doesempower the CBDT to issue instructions for the proper administration ofthe Act, this power is hedged in by limitations as provided in the proviso toSections 119(1) and also 119(2) of the Act, i.e. the CBDT cannot direct anAssessing Officer to dispose of a case in a particular manner nor can theinstructions be prejudicial to the assessee. Therefore, thecirculars/orders /instructions issued by the CBDT under Section 119 ofthe Act would be binding upon the Revenue only to the extent they arebeneficial to the assessee. Such instructions, if not beneficial to theassessee, cannot prevail over the Act. In the above view, the Delhi HighCourt held that Instruction No.1 of 2015 dated 13th January, 2015 issuedby the CBDT is unsustainable in law and therefore, set it aside. It mustalso be pointed out that the Revenue is not disputing the decision of theDelhi High Court in in Tata Teleservices Ltd. (Supra) either on facts orin law. Therefore, in view of the decision of this Court in Smt.Godavaridevi Saraf (Supra), the officers implementing the Act are boundby the decision of the Delhi High Court and Instruction No.1 of 2015dated 13th January, 2015 has ceased to exist. Therefore, no reference tothe above Instruction can be made by the Assessing Officer while disposingof the Petitioner's application in processing its return under Section 143(1)of the Act and consequent refund, if any, under Section 143(1D) of theAct. Needless to state that the Assessing Officer would independently SSP 4/9 18 wp 894 of 2019.doc apply his mind and take a decision in terms of Section 143(1D) of the Actwhether or not to grant a refund in the facts and circumstances of thePetitioner's case for A.Y. 2015-16.” 7.Subsequently, in the case of Tata Projects Limited V/s. DeputyCommissioner of Income Tax, Range-2(3)(2)2, the Division Bench of this Court madea reference to a case of Group M Media India (Supra) and observed as under : “20. In the facts of the case, the averments made in the first twopetitions (of Tata Projects Ltd.) and annexures to the petitions show thatafter the returns were transferred to the AO much before notices wereissued under sub-section (2) of Section 143, the Petitioner made repeatedrepresentations to the AO to process the returns and number of visits weremade by the officers of the Petitioners. Perhaps, the AO was under animpression that he can wait till the last date provided for processing of thereturns. If we peruse the affidavit of Mr. Madhukar AVES, AssistantCommissioner of Income Tax-2(3)(1), Mumbai, filed in Writ PetitionNo.2051 of 2017 and in particular paragraph 9, it is very clear that he isunder an impression that as the last date for completing scrutinyassessment for the year 2015-16, is 31st December, 2017, he can wait till31st December, 2017 for completing the scrutiny assessment. Thisapproach which is reflected from the said affidavit, has to be deprecated.Secondly, he has completely ignored that such return has to be processedas there was no discretion exercised after service of notice under sub-Section (2) of Section 143.” SSP 5/9 18 wp 894 of 2019.doc SSP 5/9 18 wp 894 of 2019.doc 8.Gujarat High Court in the case of Corrtech International (P) Ltd. V/s. DeputyCommissioner of Income Tax3 was also confronted with some what similar situation. Itwas noticed that Section 241A was inserted in the Act by the Finance Act, 2017 andwas made applicable to the assessment years 2017-18 and onwards. It was also a case inwhich the Assessing Officer had issued notice under Section 143(2) of the Act and theassessee was clamoring for processing of the return under Section 143(1) and refundarising out of such return. The Court noted the decision of this Court in the case ofGroup M. Media India (Supra) and the decision of the Delhi High Court in the case of Tata Teleservices Ltd. V/s. Central Board of Direct Taxes4 and observed as under : “15.A combined reading of the said provisions and in particular, sub-section (1D) of Section 143 would demonstrate that once a notice undersub-section (2) of section 143 is issued, it would be discretionary for theAssessing Officer to process the return under Section 143(1). The timelimit envisaged in the further proviso to sub-section (1) would not applybut that the same can be done only before issuance of the order ofassessment under sub-section (3).” 16. Under such provision, therefore, it would be open for the AssessingOfficer to process the return under Section 143(1) and, if the culminationof such exercise is to deny a refund to the assessee, send such anintimation, as provided, under the proviso to sub Section (1). Oncehowever, the time frame envisaged in the further proviso to sub-section (1)expires and is not extended by virtue of the operation of sub-section (1D) of 3401 ITR 355 (Gujarat)4[2016] 386 ITR 3014[2016] 386 ITR 301 SSP 6/9 Section 143, there would be no scope thereafter for the Assessing Officer towithhold the refund arising out of the return filed by the assessee. 17. This position would become clear if we compare the provisions ofSection 143(1D) as amended by the Finance Act, 2017 read with newlyinserted Section 241A. Under the new sub-section (1D) the legislatureprovides that notwithstanding anything contained in sub-section (1) theprocessing of return would not be necessary where a notice has been issuedto an assessee under sub-section (2). This would make it clear that oncenotice under Section 143(2) has been issued, the Assessing officer shall notprocess the return under Section 143(1). The original proviso to sub-section (1D) has been substituted by a new proviso under which it isclarified that the proviso under said sub-section shall not apply to anyreturn furnished for the assessment year commencing on or after01.04.2017. Section 241A which was inserted simultaneously, nowenables the Assessing Officer to withhold the refund in favour of theassessee which becomes due in terms of sub-section (1) of Section 143 if heis of the opinion that having regard to the fact that a notice has been issuedunder sub-section (2) of Section 143 that the grant of refund is likely toadversely affect the Revenue, he would, however, do so by recording reasonsin writing and with previous approval of the Principal Commissioner orCommissioner and withhold such refund till the date the assessment ismade. We may recall that Section 241 which was omitted w.e.f.01.06.2001 previously enable the Assessing Officer to withhold the refundwhich becomes due and payable in terms of sub-Section (1) of Section 143under certain circumstances including in a situation where a notice hasbeen issued or is likely to be issued under sub-section (2) of section 143 ofthe Act and the Assessing Officer is of the opinion that the grant of refund SSP 7/9 SSP 7/9 18 wp 894 of 2019.doc is likely to adversely affect the Revenue. 21.Coming back to the facts on hand, so far as the assessment of theyear 2015-16 is concerned, the return was filed on 29.09.2015 for which,the time limit under the normal provision of sub-section (1) of Section 143of the Act, for processing the return is over long back. Even though asdiscussed earlier, the Assessing officer having issued notice under sub-section (2) of Section 143 of the Act, he would get an extended time forproceeding under sub-section (1) as highlighted by the Delhi High Court incase of Tata Teleservices Ltd. (Supra) and by the Bombay High Court inthe case of Group M Media India (P) Ltd. (Supra), it would be whollyinequitable for the Assessing Officer to merely sit over the Petitioner'srequest for refund citing the availability of time upto the last date offraming the assessment under sub-section (3) of Section 143. At lease oncethe time limit envisaged in the proviso to sub-section (1) of Section 143 isover without the Assessing Officer processing the return under sub-section(1) and even though notice under sub-section (2) of Section 143 may havebeen issued, the Assessing Officer, by all reasonable interpretation of thestatutory provisions would be expected to respond to the assessee's requestfor either granting refund or indicating that in terms of the adjustmentsimpermissible under sub-section (1) of section 143, such refund or partthereof was not available to the assessee. We simply cannot accept the theinterpretation of the counsel for the Revenue that once a notice under sub-section (2) of Section 143 is issued, the suspension of the refund arising outof the return filed by the assessee would be automatic and till the passing ofthe order of assessment under sub-section (3) of Section 143. Thereasonable interpretation of the statute and the situation in such a casewould be, to expect the Assessing Officer to take up an expeditious disposal SSP 8/9 18 wp 894 of 2019.doc of the processing of return under sub-section (1) of Section 143 of the Actat least once the assessee requests for release of the refund and send as anintimation to the assessee if he wishes to withhold the same.” 9.As per the settled law, the Respondents cannot avoid processing the return under Section 143(1) of the Act and granting refund to the Petitioner if due as per suchreturn. The Respondents have not cited justifiable reasons why such refund cannot bereleased. 10.In view thereof, the Respondents are directed to process the return underSection 143(1) of the Act and release refund if due, with statutory interest as payable within one month from the date of receipt of copy of this order. 11.The Writ Petition is disposed of. ( S.J.KATHAWALLA, J. ) ( AKIL KURESHI, J. ) SSP 9/9