Huawei Telecommunications (India) Company Private Limited v. Union of India and others
[Citation -2020-LL-0306-69]

Citation 2020-LL-0306-69
Appellant Name Huawei Telecommunications (India) Company Private Limited
Respondent Name Union of India and others
Court HIGH COURT OF PUNJAB & HARYANA
Relevant Act Income-tax
Date of Order 06/03/2020
Assessment Year 2017-18, 2018-19
Judgment View Judgment
Keyword Tags statutory interest • prescribed time • grant of refund • withhold refund
Bot Summary: The section applies to the assessment year commencing on or after the Ist day of April, 2017; the refund due under Section 143(1) can be withheld till assessment is made if:- there is a notice under Section 143; the Assessing Officer is of the opinion that revenue would be adversely affected in case of grant of refund; the Assessing Officer has to get previous approval of the Principal Commissioner or Commissioner; and the reasons are to be recorded in writing. The relevant clauses of extracts explaining relevant provisions of Finance Bill of 2017 are reproduced below: Processing of return within the prescribed time and enable withholding of refund in certain cases The provisions of sub-section of section 143 provide that the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section 2 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 3 of the said section. To address the concern of recovery of revenue in doubtful cases, it is proposed to insert a new section 241A to provide that, for the returns furnished for assessment year commencing on or after 1st April, 2017 where refund of any amount becomes due to the assessee under section 143(1) and the Assessing Officer is of the opinion that grant of refund may adversely affect the recovery of revenue, he may, for the reasons recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, withhold the refund upto the date on which the assessment is made. From the clauses it is clear that amendment in Section 143(1D) and insertion of Section 241A was to over-come the delay of refund where the cases were routinely selected for scrutiny. In CWP No. 28402 of 2019 filed by the petitioner for direction to process the returns and seeking refund, the respondents filed written statement annexing order dated 8.11.2019 withholding the refund for both the years. The contention of the respondents to remit the matter back is not found worth acceptance as in the present case, there are no reasons even in the record to support the finding that refund would adversely affect the revenue and the note in approval file that there was demand of 5 crores pending has been found not good enough to withhold the refund of more than 300 crores. 9 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 10 Before parting, it is pertinent to note that in the present case and also from number of cases, it is evident that procedure for refund and withholding of refund is often being used as delaying tactics for various reasons including window dressing of collection of revenue.


CWP No. 2698 of 2020 [1] IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No. 2698 of 2020 Date of decision: March 6, 2020 Huawei Telecommunications (India) Company Private Limited .. Petitioner v. Union of India and others .. Respondents CORAM: HON'BLE MR. JUSTICE AJAY TEWARI HON'BLE MR. JUSTICE AVNEESH JHINGAN Present: Mr. Tarun Gulati, Senior Advocate with Mr. Rishab Singla and Mr. Kishore Kumar, Advocates for petitioner. Mr. Tajender K. Joshi, Senior Standing Counsel for revenue. ... AVNEESH JHINGAN, J. writ petition is filed seeking quashing of order dated 8.11.2019 passed under Section 241A of Income Tax Act, 1961 (for short, 'the Act') withholding refund for assessment years 2017-18 and 2018-19. Further direction is sought to respondents to refund amount due to petitioner. short issue arising is as to whether refund can be withheld under Section 241A without conditions mentioned therein being fulfilled? Section 241A is quoted below: 241A. For every assessment year commencing on or after Ist day of April, 2017, where refund of any amount becomes due to assessee under provisions of sub- section (1) of section 143 and Assessing Officer is of 1 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [2] opinion, having regard to fact that notice has been issued under sub-section (2) of section 143 in respect of such return, that grant of refund is likely to adversely affect revenue, he may, for reasons to be recorded in writing and with previous approval of Principal Commissioner or Commissioner, as case may be, withhold refund up to date on which assessment is made. section applies to assessment year commencing on or after Ist day of April, 2017; refund due under Section 143(1) can be withheld till assessment is made if:- (i) there is notice under Section 143 (2); (ii) Assessing Officer is of opinion that revenue would be adversely affected in case of grant of refund; (iii) Assessing Officer has to get previous approval of Principal Commissioner or Commissioner; and (iv) reasons are to be recorded in writing. In cases where above said conditions are fulfilled, Section 241A empowers withholding of refund. check mechanism is inbuilt in provision i.e. for reasons to be recorded in writing. This ensures that opinion of Assessing Officer is based on some material. relevant clauses of extracts explaining relevant provisions of Finance Bill of 2017 are reproduced below: Processing of return within prescribed time and enable withholding of refund in certain cases provisions of sub-section (1D) of section 143 provide that processing of return shall not be necessary, where notice has been issued to assessee under sub-section (2) 2 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [3] of said section. Amendment to said sub-section brought by Finance Act, 2016 provides that with effect from assessment year 2017-18, processing under section 143(1) is to be done before passing of assessment order. In order to address grievance of delay in issuance of refund in genuine cases which are routinely selected for scrutiny assessment, it is proposed that provisions of section 143(1D) shall cease to apply in respect of returns furnished for assessment year 2017-18 and onwards. However, to address concern of recovery of revenue in doubtful cases, it is proposed to insert new section 241A to provide that, for returns furnished for assessment year commencing on or after 1st April, 2017 where refund of any amount becomes due to assessee under section 143(1) and Assessing Officer is of opinion that grant of refund may adversely affect recovery of revenue, he may, for reasons recorded in writing and with previous approval of Principal Commissioner or Commissioner, withhold refund upto date on which assessment is made. From clauses it is clear that amendment in Section 143(1D) and insertion of Section 241A was to over-come delay of refund where cases were routinely selected for scrutiny. However interest of revenue was protected in doubtful cases by insertion of Section 241A that refund can be withheld where Assessing Officer is of opinion that same may adversely affect revenue. 3 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [4] In present case, from impugned order and record, it is evident that there is no reason recorded for coming to conclusion that grant of refund is likely to adversely affect revenue, as such order is unsustainable. facts are that petitioner is engaged in business of manufacturing and trading of telecom network equipment. returns for assessment years 2017-18 and 2018-19 were filed declaring taxable income of more than `700 crores and `200 crores, claiming refund of `48,11,52,210/- and `252,45,13,970/-, respectively. After various notices, reply and direction in CWP No. 28402 of 2019, refund as per communication under Section 143(1) for assessment year 2017-18 was `50,89,05,185/- and for assessment year 2018-19 was `275,63,65,127/-. In CWP No. 28402 of 2019 filed by petitioner for direction to process returns and seeking refund, respondents filed written statement annexing order dated 8.11.2019 withholding refund for both years. present petition is filed impugning order of withholding. It would be relevant to reproduce impugned order in toto: In this case letter dated 30.10.2019 and 8.11.2019 was received requesting expeditious processing of return and issue of refund of Rs. 252.45 Cr. for A.Y. 2018-19 and Rs. 48.35 Cr for A.Y. 2017-18. request for issue of refund of assessee has been perused. It is seen that in past few years huge addition have been made including upward adjustments on issue of transfer pricing leading to raising of huge demand on completion of scrutiny 4 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [5] assessment u/s 143(3) of IT Act, 1961. It is further seen that scrutiny assessment proceedings in this case for A.Y. 2016-17, 2017-18 and 2018-19 are presently pending as on date. For A.Y. 2016-17 order u/s 92 CA(3) has already been received from Transfer Pricing Officer proposing upward adjustment. For A.Y. 2018-19, reference has already been made to TPO. Since similar issues are involved in all three A.Ys for which scrutiny assessment are pending and there is likelihood of huge demand being raised for these years as well. In view of above facts, undersigned is of opinion that grant of refund for A.Y. 2017-18 and 2018- 19 before completion of scrutiny assessment is likely to adversely affect collection of revenue as huge demand is likely to be raised in scrutiny assessments. Therefore, in accordance with powers conferred under provisions of section 241A, refund due for A.Y. 2017-18 and 2018-19 is withheld till finalization of scrutiny assessment after obtaining approval of Hon'ble Pr. Commissioner of Income Tax, Gurgaon dated 8.11.2019. There is no dispute on fact that notices under Section 143(2) have been issued for years in question. Learned counsel for petitioner argued that impugned order is unsustainable and reasons recorded in order do not support opinion that grant of refund would adversely affect revenue. He further argued that additions made in preceding year were not sustained. 5 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [6] stand of respondents is that reasons are mentioned in impugned order. During course of hearing, it was put to learned counsel for respondents that apart from fact that there is likelihood of demand being created, there is no reason recorded in order as to how refund would adversely affect revenue. On 19.2.2020, following order was passed: Reply dated 19.2.2020 has been filed on behalf of learned Senior Standing counsel for respondents, same is taken on record. Copy has been supplied to opposite counsel. Pursuant to order dated 17.2.2020, Assistant Commissioner of Income Tax is present in Court. After arguing for some time, on instructions from Assistant Commissioner of Income Tax, learned Senior Standing counsel for respondents has requested that it would be more appropriate if concerned Principal Commissioner of Income Tax (who had accorded approval) be permitted to be present in Court tomorrow. Request is allowed. Let concerned Principal Commissioner of Income Tax be present tomorrow i.e. on 20.2.2020. copy of this order be handed over to learned Senior Standing counsel for respondents under signatures of Bench Secretary. 6 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [7] Though requirement is that reasons should be mentioned in order yet we heard Mr. Krinwant Sahay, Principal Commissioner of Income Tax, Rohtak present in court along with record including record of approval. He submits that while granting approval of withholding refund, it is thoroughly seen that if there is history of additions made in earlier year; whether there would be similar addition in this year or not and lastly demand, if created, is huge or not. It is submitted that all three aspects have been duly mentioned in impugned order. authorities while invoking Section 241A lost sight that mere pendency of proceedings under Section 143(2) in itself is not enough to withhold refund. Had that been case, language of provision of withholding would have been couched differently. selection of case for scrutiny does not automatically amounts to withholding of refund. We have perused record, no reasons apart from one mentioned in order are there. note of approval of Princial Commissioner was also perused by us, only reason mentioned was that there was amount outstanding of `5 crores odd against petitioner and for said reason, refund is withheld. Learned counsel for petitioner disputed fact and submitted that said demand was set aside. Be that as it may, pendency of demand of `5 crores cannot be ground for withholding almost refund of `300 crores, as per Section 245, due amount could be set off against refund due. In absence of any material and reason for forming opinion that refund is likely to adversely affect revenue withholding cannot be sustained. 7 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [8] Learned counsel for petitioner relied upon various citations relating to Section 143(1D) but same would have no direct application in case in hand as grievance is against order under Section 241A of Act. It would be further pertinent to note here that there is no dispute raised by respondents that as on date refunds are due to petitioner as per communication of processing of return under Section 143(1). Respondents have not disputed that in return filed by petitioner for assessment year 2019-20, total income declared is more than `550 crores and refund of more than `183 crores has been claimed. It cannot be lost sight of that revenue is not in position to deny that petitioner is running its business, returns being filed are of almost more than `200 crores, there are no arrears of tax relating to any assessment year and refund is being claimed every year. There is no allegation that tax is not being paid or there is any irregularity in filing returns. decision of Bombay High Court in Writ Petition No. 2145 of 2019 Vodafone Idea Limited v. Deputy Commissioner of income- tax, decided on 14.10.2019 is relied upon to contend that where requirements of Section 241A are not fulfilled, exercise of power is bad in law. operational paragraph of judgment is quoted below: Considering these aspects of matter, we do not find that exercise of powers by Assessing Officer fulfills requirement of Section 241A of Act. We have, no doubt, about existence of powers. We find that exercise of powers would not be justified in facts of case. In 8 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [9] result, orders impugned in both petitions are set aside. Resultantly, respondents shall release refund of petitioner arising out of return filed for assessment year 2017-18 and process thereof under Section 143(1) of Act by Assessing Officer. This shall be done along with statutory interest within period of three weeks from date of receipt of copy of this order. Both sides relied upon decision of Delhi High Court in W.P. (C) No. 7003 of 2019 Maple Logistics Private Limited and another v. Principal Chief Commissioner of Income Tax and others, decided on 14.10.2019. Reliance of petitioner is that order under Section 241A was set aside as no reasons were mentioned as to why refund is likely to adversely affect revenue. revenue contends that order was set aside and matter was remitted back to decide issue afresh. contention of respondents to remit matter back is not found worth acceptance as in present case, there are no reasons even in record to support finding that refund would adversely affect revenue and note in approval file that there was demand of `5 crores pending has been found not good enough to withhold refund of more than `300 crores. Even officials present in Court were not in position to cite any material or reason with regard to adverse affect of refund on revenue, it would be exercise in futility to give another opportunity. In view of above, writ petition is allowed. impugned order is quashed. respondents are directed to issue refund for assessment year 2017-18 and 2018-19 along with statutory interest not later than within four weeks from receipt of certified copy. 9 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [10] Before parting, it is pertinent to note that in present case and also from number of cases, it is evident that procedure for refund and withholding of refund is often being used as delaying tactics for various reasons including window dressing of collection of revenue. method adopted is short sighted vision. Apart from harassment to assessee, it results in paying interest on delayed amount of refund putting further burden on exchequer. It cannot be lost sight of that trade and commerce is life blood of system, if excess amount deposited as tax is not refunded to entrepreneur/assessee, it has effect on liquidity and business. There cannot be second opinion that revenue collection and securing interest of revenue is of great importance, at same time revenue is to be collected like apiarist extracts honey from beehive without destroying it. Considering facts that in spite of there being no justifiable reason as per provisions of statute, yet refund was withheld for which petitioner would be entitled to statutory interest, we deem it appropriate to further consider if costs should be imposed on officer(s) (in their personal capacity) and consequently issue notice to Mr. Krinwant Sahay, Principal Commissioner of Income Tax, Rohtak and Mr. Dipin Goel, Assistant Commissioner of Income Tax, Circle 4(1), Gurugram to show cause why this should not be done and for this limited purpose, adjourn matter to 28.4.2020. Let them be served through counsel. (AVNEESH JHINGAN) (AJAY TEWARI) JUDGE JUDGE March 6, 2020/mk Whether speaking/reasoned: Yes/No Whether reportable: Yes/No 10 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: CWP No. 2698 of 2020 [11] 11 of 11 ::: Downloaded on - 27-03-2020 21:02:21 ::: Huawei Telecommunications (India) Company Private Limited v. Union of India and other
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