Assessing Officer can’t withhold Income Tax Refund though Statute mandates without assigning any reason: Calcutta High Court [Read Judgment]

The Calcutta High Court held that the Assessing Officer cannot withhold Income Tax Refund though the statute mandates without assigning any reason.

The assessee, Mcnally Bharat Engineering Company Ltd. received another intimation from respondent no.4 on 13th November 2019 regarding the assessment under the provisions of Section 143(1) wherein it was declared that the principal refund amount to be Rs.18,31,42,676/- as assessed by the concerned Assessing Officer. The total income tax refund for the assessee for the assessment year 2018-2019 after the addition of interest of Rs. 1,83,14,260/- under the provisions of Section 244A of the said Act was computed as Rs. 20,14,56,936.

The assessee on checking the refund status at the TIN-NSDL website, however, found the following message displayed thereat, “Your Assessing Officer has not sent the refund to the refund banker, please contact your Assessing Officer.” The assessed refund was, thus, not refunded to the petitioner (assessee). The note appended to the said intimation shows that the refund determined under Section 143(1) of the said Act has been withheld as per provision of Section 241A.

On behalf of the petitioner, it is submitted that to invoke the provision of Section 241A of the said Act, the Assessing Officer has to form an opinion that the grant of refund is likely to adversely affect the revenue. Referring to the note appended, it is submitted by the petitioner that the Assessing Officer has not recorded any reason when and as to why he formed an opinion that the refund is likely to adversely affect the revenue. It is also submitted on behalf of the petitioner that despite making representations dated 16th December 2019, 6th and 8th January 2020 seeking a refund, no refund of the assessee and/or any part thereof was made.

On behalf of the respondents, it is submitted that there is a total demand of Rs.47,76,28,500/- as against the petitioner for different periods. Scrutiny in respect of such periods are going on. The revenue as such is not liable to make the refund in view of the provision of Section 245 of the said Act.

The single-judge bench of Justice Arindam Mukherjee noted that the Assessing Officer withheld the refund without assigning any reason though the statute mandates for recording the same. Having not done so the officer concerned has acted arbitrarily. The procedure followed by the Assessing Officer does not also show the proper application of two independent provisions as in Section 241A and Section 143 wherein once a refund is declared after scrutiny proceedings and such refund is withheld, a reasoned order has to follow because the assessment in such a case is done after production of materials and evidence required by the Assessing Officer. That apart and in any event the petitioner/assessee is a public limited company whose accounts are stringently scrutinized at the internal level. It is, therefore, more so required to apply the provisions more cautiously while withholding the refund after the same has been declared on completion of assessment on scrutiny.

“The action on the part of the respondents in withholding the refund for the assessment year 2018-19 is not sustainable in law and is set aside and quashed. The petitioner is therefore entitled to a mandatory order of refund. The respondents are directed to refund the amount of Rs.20,14,56,936/- within a period of four weeks from a date with further interest on the principal sum of Rs.18,31,42,676/- from the date upto which interest has been added to the principal sum in arriving at the figure of Rs.20,14,56,936/- till actual refund as per the provisions of the Income Tax Act, 1961. The respondents shall act on the basis of a server copy of this order without insisting on a certified copy thereof while processing the refund,” the court said.

To Read the full text of the Judgment CLICK HERE

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