The Delhi High Court last week quashed the CBDT Instruction dated 13.01.2015 and the letter issued by the Deputy Commissioner of Income Tax, based on the said Instruction on the ground that it is without the authority of law. Denying refund of TDS citing the reason “case was pending scrutiny” is not sustained in Law,Delhi HC quashes CBDT instruction.
The petitioner through a writ petition challenged an Instruction No. 1 of 2015 dated 13th January 2015 issued by the Central Board of Direct Taxes and the consequential letter dated 8th September 2015 issued by the Deputy Commissioner of Income Tax. The refunds were declined for the reason that the case was pending scrutiny and that in the light of Section 143(ID) of the Income Tax Act, 1961 and the Instructions of the CBDT, a refund could not be processed for the said AYs.
The Court found the impugned instruction which is being relied upon by the Department to deny refund, where notice has been issued under Section 143(2) of the Act. The power of the CBDT to issue such instructions can be traced only to Section 119 of the Act. Therefore, such ‘instruction’ also has to adhere to the discipline of Section 119 of the Act.
While declaring the impugned instruction as without the authority of law, the Court pointed out that the real effect of the instruction is to curtail the discretion of the AO by ‘preventing’ him from processing the return, where notice has been issued to the Assessee under Section 143(2) of the Act. If the legislative intent was that the return would not be processed at all once a notice is issued under Section 143 (2) of the Act, then the legislature ought to have used express language and not the expression “shall not be necessary”. By the device of issuing an instruction in purported exercise of its power under Section 119 of the Act, the CBDT cannot proceed to interpret or instruct the income tax department to “preven” the issue of refund. In the event that a notice is issued to the Assessee under Section 143 (2) of the Act, it will be a matter the discretion of the concerned AO whether he should process the return.
In the light of the above findings, the Court was of the view that the impugned Instruction No.1 of 2015 dated 13th January 2015 issued by the CBDT is unsustainable in law and is liable to be quashed. The Court further directed the Department that the said instruction shall not hereafter be relied upon to deny refunds to the Assessees in whose cases notices might have been issued under Section 143(2) of the Act.
Read the full text of the Judgment below.
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