Withholding of Refund on ground of Non-Completion of Assessment is Invalid: Delhi High Court [Read Order]

The Delhi High Court directed the Income Tax Authority to release the refund withheld without valid reasons and based on flawed assumptions.

The petitioner, Cooner Institute of Health Care And Research Centre Pvt. Ltd. is a company providing hospital services to the general public, filed its return of income for the Assessment Year 2018-19 on 29th October 2018 claiming refund of Rs. 1,43,48,810/- on account of excess deduction of tax at source.

The Revenue selected the case of the petitioner for limited scrutiny under Section 143(2) of the Act vide notice dated 22nd September 2019. Subsequently, the ‘Centralised Processing Centre’ processed the return of income vide order dated 12th November 2019 under Section 143(1) of the Act which resulted in a refund of Rs.1,57,83,688/-.
The petitioner informed that the refund had been withheld under Section 241A of the Act. Neither the copy of the order nor the reasons for withholding the refund were provided to the petitioner and accordingly, the present writ petition has been filed seeking directions in this regard.

The division bench of Justice Sanjeev Narula and Justice Manmohan directed to release refund withheld without valid reasons and based on flawed assumption only ground for withholding refund is that since the case of the petitioner has been selected for scrutiny for Assessment Year 2018-19, under Section 143(2) of the Act, the assessment is yet not complete and therefore genuineness of the refund claimed by the assessee is yet to be verified.
“The exercise of withholding of refund under section 241A of the Act, pursuant to notice u/s 143(2) of the Act, without recording justifiable reasons, is not in consonance with the legislative intent and mandate of the aforesaid provision. The reasons cited do not support the finding that refund would adversely affect the Revenue,” the bench noted.

Therefore, the bench grant three weeks time to the respondents to re-consider the aspect whether the amount found due to be refunded or any part thereof, is liable to be withheld under Section 241A in line with the decisions of this court in the two cases i.e. Maple Logistics Private Limited vs. Principal Commissioner of Income Tax 2019 and Ericsson India Private Limited vs. Assistant Commissioner of Income Tax.