TDS Refund Claim cannot be withheld Merely because of notice issued u/s 143(2): Delhi HC rules in favour of OYO [Read Order]

In a significant ruling in favour of OYO, the High Court (HC) of Delhi has held that the refund claim of TDS can’t be withheld merely because of notice issued under section 143(2)of the Income Tax Act, 1961.

Oyo Hotels and Homes Private Limited, the petitioner filed a petition seeking directions for disbursal of a refund amount of Rs.31,48,42,701/- along with applicable interest for the Assessment Year (AY) 2020-2021. The Petitioner’s only grievance is that despite its refund being determined and an intimation thereof being given to the Petitioner, the same has not been remitted yet. 

The Petitioner filed a return of Income Tax for AY 2020-2021 declaring a loss of Rs.16,13,83,22,476/- and claimed a refund of Rs.31,46,26,494/- on account of tax deducted at source under Section 139 of the Income Tax Act, 1961 [“the Act”]. Under a de-merger and to give effect to the Scheme of Arrangement, the Petitioner filed a revised return of Income Tax for AY 2020-2021 on 27.03.2021 declaring a loss of Rs.16,70,16,05,998/- and claimed a refund of Rs.43,91,40,294/-.

A notice under Section 142(1) of the Act was sent to the Petitioner on 14.12.2021, wherein detailed information and documents were sought by the Revenue. The Petitioner received an intimation under Section 143(1) of the Act which stated that a refund of Rs.33,05,84,840/- has been calculated as due to the Petitioner. The Refund Intimation also stated that the refund shall be credited within a period of 15 days from that date.

Despite the lapse of several months after the passing of the Refund Intimation, no refund was received by the Petitioner. The Petitioner filed online complaints on the Income Tax Portal on 14.05.2022 and 16.06.2022 seeking disbursal of the refund amount as determined under the Refund Intimation. Since there was a difference of Rs.12,42,97,589/- between the Revised Return as submitted by the Petitioner and the Refund Intimation, the Petitioner filed an appeal before the Commissioner of Income Tax (Appeals).

It was submitted by the counsel for the Petitioner, that where a refund has been withheld by the Revenue, the provisions of Section 241A of the Act require that reasons be recorded in writing by the concerned Officer to withhold the refund and also that the approval of Principal Commissioner or Commissioner is to be taken.

While withholding a refund, the AO is required to look into various factors about an Assessee, such as the amount of tax liability which a scrutiny assessment may eventually lead to (as is underway in this case) vis-a-vis the amount of tax refund due; the financial standing or credit worthiness of the Assessee, and whether there would be any doubts in the Revenue recovering amounts from the Assessee.

Merely because a notice has been issued under Section 143(2) of the Act, it is not sufficient ground to withhold the refund under the provisions of the Act. The  Court comprising Justice Rajiv Shakdher and Justice Tara Vitasta Ganju set aside the order(s) dated 07.06.2022/30.05.2022. Further held that the Respondents shall conduct a de novo exercise bearing in mind the provisions of Section 241A of the Act and principles articulated within six weeks.

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