Withholding of Income Tax Refund by Dept amount to 'Unjust Enrichment': Delhi HC rules Assessee need not file Separate Claim for Refund [Read Order]

In a recent ruling, the Delhi High Court held that the withholding of income tax refund is legally impermissible and there is no further obligation on the assessee to file a separate claim for filing of income tax refund.

The assessee, M/S. M. J. Engineering Consultants P Ltd approached the High Courts seeking directions to the income tax department to issue the refund as claimed in return of income dated 11^thSeptember, 2015 along with applicable interest under Section 244A of the Income Tax Act, 1961 for the Assessment Year 2015-16.

The department, on the other side, contended that as the petitioner’s return was not processed due to technical reason not attributable to assessee, no refund was issued. The departmentemphasized that in the present case, the petitioner had not applied for refund within the extended period of time for processing of the return.

Justice Manmohan and Justice Manmeet Pritam Singh Arora held that the assessee need not file any separate claim for refund as the same is deemed to have been incorporated in the return filed by the assessee itself.

“If the submission of learned counsel for Income Tax Department, as articulated in the instructions received by him from the Assessing Officer is accepted, then it would amount to unjust enrichment on the part of the State, which is legally impermissible. It is pertinent to mention that the principle of unjust enrichment proceeds on the basis that it would be unjust to allow a person to retain a benefit at the expense of another person. Supreme Court in a nine Judges Bench judgment in Mafatlal Industries Ltd. vs. Union of India, (1997) 5 SCC 536 has held that once unjust enrichment is proved, restitution is the answer i.e. the person must be given back that benefit,” the Court said.

Allowing the petition, the Court directed the income tax department to refund the excess amount paid as tax by the petitioner along with the interest within four weeks of receipt of this order.

To Read the full text of the Order CLICK HERE

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