Cooner Institute of Health Care and Research Centre Pvt. Ltd. v. Income-tax Officer Ward 6(3)
[Citation -2020-LL-0727-1]

Citation 2020-LL-0727-1
Appellant Name Cooner Institute of Health Care and Research Centre Pvt. Ltd.
Respondent Name Income-tax Officer Ward 6(3)
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 27/07/2020
Assessment Year 2018-19
Judgment View Judgment
Keyword Tags excess deduction • deduction of tax • withhold refund • tax liability
Bot Summary: The present writ petition under Article 226 of the Constitution of India inter alia seeks mandamus for directing the respondent to grant refund as determined under Section 143(1) of the Income Tax Act. During the course of hearing, the reasons for withholding the refund were provided to the petitioner and consequently, the writ petition was amended to assai the order dated 10th January, 2020 whereby the refund has been withheld. From a reading of the aforesaid reasons, it is apparent that only ground for withholding refund is that since case of the petitioner has been selected for scrutiny for AY 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. Merely because a notice has been issued under section 143(2), it is not a sufficient ground to withhold refund under section 241A and the order denying refund on this ground alone would be laconic. The entire consideration, with the approval of the Principal Commissioner of Income Tax to the withholding of the refund amount, or any part thereof, should be completed within three weeks from today, failing which, we direct that without awaiting any further orders, the respondents shall transmit the amount of refund determined under section 143 of the Act alongwith interest to the petitioner. In the eventuality of the respondents recording any reasons for withholding a part thereof, or the entire amount due for refund to the petitioner under Section 143(1), the reasons thereof as approved by the Principal Commissioner of Income Tax shall be provided to the petitioner forthwith. Needless to state that the reasons recorded for withholding of refund under section 241A would only amount to a tentative view and would not come in the way of the Assessing Officer to frame the assessment under section 143(3) of the Act.


* IN HIGH COURT OF DELHI AT NEW DELHI Reserved on:20.07.2020 Pronounced on:27.07.2020 + W.P. (C) 430/2020 COONER INSTITUTE OF HEALTH CARE AND RESEARCH CENTRE PVT. LTD. Petitioner Through: Mr. Mukesh Chand, Advocate versus INCOME TAX OFFICER WARD 6(3) ..... Respondent Through: Ms.Vibhooti Malhotra, Senior Standing Counsel CORAM: HON'BLE MR. JUSTICE MANMOHAN HON'BLE MR. JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J. 1. present writ petition under Article 226 of Constitution of India inter alia seeks mandamus for directing respondent to grant refund as determined under Section 143(1) of Income Tax Act ( Act ). 2. Petitioner, company providing hospital services to general public, filed its return of income for Assessment Year ( AY ) 2018-19 on 29th October, 2018 claiming refund of Rs. 1,43,48,810/- on account of excess deduction of tax at source. Revenue selected case of petitioner for limited scrutiny under Section 143(2) of Act vide notice dated 22nd September, 2019. Subsequently, Centralised Processing Centre W.P.(C) 430/2020 Page 1 of 7 processed return of income vide order dated 12th November, 2019 under Section 143(1) of Act which resulted in refund of Rs.1,57,83,688/-. However, since said refund was not granted, petitioner submitted various representations dated 29.11.2019, 16.12.2019 and 17.12.2019 in this respect. Thereafter, in personal hearing granted to petitioner, it was informed that refund had been withheld under Section 241A of Act. Neither copy of order nor reasons for withholding refund were provided to petitioner and accordingly, present writ petition has been filed seeking directions in this regard. During course of hearing, reasons for withholding refund were provided to petitioner and consequently, writ petition was amended to assai order dated 10th January, 2020 whereby refund has been withheld. 3. Mr. Mukesh Chand, learned counsel for petitioner assailed reasons for withholding refund by arguing that action of respondent is contrary to Section 241A of Act. He argued that Income-Tax Officer, with approval of PCIT, withheld refund merely on ground that case of petitioner has been selected for limited scrutiny and cited same reason for which scrutiny has been ordered to be undertaken. He submitted that aforesaid reasoning is thus inherently flawed and cannot be considered as valid ground to withhold refund. In support of his submission, learned counsel for petitioner relied upon judgments of this Court in Maple Logistics Private Limited v Principal Commissioner of Income Tax 2019 SCC OnLine Del 10961 and Ericsson India Private Limited v Assistant Commissioner of Income Tax MANU/DE/0763/2020. W.P.(C) 430/2020 Page 2 of 7 4. Ms. Vibhooti Malhotra, learned senior standing counsel for Revenue on other hand sought to distinguish cases relied upon by petitioner on facts. She argued that in instant case, there are in fact genuine reasons for withholding refund and therefore, Assessing Officer has rightly exercised jurisdiction under Section 241A of Act. She submitted that case of petitioner has been selected for limited scrutiny and therefore till finalization of assessment, refund has been rightly withheld under Section 241A of Act. 5. reasons for withholding Revenue as contained in letter dated 10th January, 2020 read as under: assessee filed return of income for A.Y. 2018-19 vide ack. No. 3.54565941291018, dated 29.10.2018 declaring loss of Rs. 1,58,92,872/- and has claimed refund of Rs.1,43,48,810/-. Subsequently, case has been selected for scrutiny under CASS for A.Y. 2018-19 and notice u/s 143(2) dated - .2.09.2019, has already been issued and duly served. case has been selected m Limited Scrutiny with following reasons:- i. Claim of Large Value Refund. ii Lower amount disallowed u/s 40(a)(i) in ITR (Part A- OI) in comparison to audit report Amount disallowable under section 40(a)(i) on account of non-compliance with provisions of Chapter XVII-B as per 3CD 2. Amount disallowable under section 40(a)(i) on account of non- compliance with provisions of Chapter XVII-B as per Part A-OI of ITR. genuineness of refund claimed by assessee remains to be verified as assessment is yet to be complete. In view of above I am satisfies that issued of refund may adversely affect revenue. W.P.(C) 430/2020 Page 3 of 7 6. From reading of aforesaid reasons, it is apparent that only ground for withholding refund is that since case of petitioner has been selected for scrutiny for AY 2018-19, under Section 143(2) of Act, assessment is yet not complete and therefore genuineness of refund claimed by assessee is yet to be verified. We find that aforesaid reason is inherently flawed and contrary to views expressed by this Court in aforesaid two cases i.e. Maple Logistics (Supra) and Ericsson India Private Limited (Supra). In case of Maple Logistics, Court had specifically stated as under: 31. In present case, AO has completely lost sight of words in provision to effect that, grant of refund is likely to adversely affect revenue . reasons that are relied upon by Revenue to justify witholding of refund in present case, are abysmally lacking in reasoning. Except for reproducing wordings of Section 241A of Act, they do not state anything more. entire purpose of Section 241A would be negated, in case AO was to construe said provision in manner he has sought to do. It would be wholly unjust and inequitable for AO to withhold refund, by citing reason that scrutiny notice has been issued. Such interpretation of provision would be completely contrary to intent of legislature. AO has been completely swayed by fact that since case of assessee has been selected for scrutiny assessment, he is justified to withhold refund of tax. 32.The power of AO has been outlined and defined in terms of Section 241A and he must proceed giving due regard to fact that refund has been determined. fact that notice under section 143(2) has been issued, would obviously be relevant factor, but that cannot be used to ritualistically deny refunds. AO is required to apply its mind and evaluate all relevant factors before deciding request for refund of tax. Such exercise cannot be W.P.(C) 430/2020 Page 4 of 7 treated to be empty formality and requires AO to take into consideration all relevant factors. relevant factors, to state few would be prima facie view on grounds for issuance of notice under section 143(2); amount of tax liability that scrutiny assessment may eventually result in vis-a-vis amount of tax refund due to assessee; creditworthiness or financial standing of assessee, and all factors which address concern of recovery of revenue in doubtful cases. 33. Therefore, merely because notice has been issued under section 143(2), it is not sufficient ground to withhold refund under section 241A and order denying refund on this ground alone would be laconic. Additionally, reasons which are to be recorded in writing have to also be approved by Principal Commissioner, or Commissioner, as case may be and this should be done objectively. (Emphasis supplied) 7. Further in case of Ericsson (Supra), views were reiterated in following words: 18. refund of amounts claimed where they appear justified, by itself cannot be said to be adverse to interest of revenue. interest of revenue lies in collecting revenue in legal and justified manner. It does not lie in retaining collected taxes in excess of what is justified, since excess collection cannot even be properly termed as revenue . excess collection of tax is liability of State and it lies in interest of revenue of State to discharge its interest bearing liability without any delay. sovereign cannot, but, be seen as fair, honest and credible in its dealings with its subjects. Any lapse in this regard tarnishes image and credibility of sovereign. It certainly cannot act like any unscrupulous businessman, who is seen to dodge his liabilities by resort to frivolous excuses and devious ways. W.P.(C) 430/2020 Page 5 of 7 8. exercise of withholding of refund under section 241A of Act, pursuant to notice u/s 143(2) of Act, without recording justifiable reasons, is not in consonance with legislative intent and mandate of aforesaid provision. reasons cited do not support finding that refund would adversely affect Revenue. In view of aforesaid, we hold that reasoning given by Income-Tax Officer is contrary to Section 241A of Act. Accordingly, we set aside impugned communication/ order dated 10.01.2020. We, therefore, grant three weeks' time to respondents to re-consider aspect whether amount found due to be refunded, or any part thereof, is liable to be withheld under Section 241A in line with decisions of this court as noted above. entire consideration, with approval of Principal Commissioner of Income Tax to withholding of refund amount, or any part thereof, should be completed within three weeks from today, failing which, we direct that without awaiting any further orders, respondents shall transmit amount of refund determined under section 143 (1) of Act alongwith interest to petitioner. In eventuality of respondents recording any reasons for withholding part thereof, or entire amount due for refund to petitioner under Section 143(1), reasons thereof as approved by Principal Commissioner of Income Tax shall be provided to petitioner forthwith. It shall be open to petitioner to take remedial steps in respect of any orders for withholding of refund that may be passed. Needless to state that reasons recorded for withholding of refund under section 241A would only amount to tentative view and would not come in way of Assessing Officer to frame assessment under section 143(3) of Act. W.P.(C) 430/2020 Page 6 of 7 9. writ petition is accordingly allowed in above terms. Copy of this judgment be forwarded to learned counsel for parties through email. SANJEEV NARULA, J MANMOHAN, J JULY 27, 2020 v W.P.(C) 430/2020 Page 7 of 7 Cooner Institute of Health Care and Research Centre Pvt. Ltd. v. Income-tax Officer Ward 6(3)
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