Grant-delay of Income Tax Refund-Conduct of AO was disturbing in not grating-delaying refund based on CBDT Instruction No. 1 of 2015 which was set aside-Bombay High Court
ABCAUS Case Law Citation:
1045 (2016) (10) HC
Assessment Year 201516
The petition under Article 226 of the Constitution of India challenged the inaction/failure on the part of the Assessing Officer (AO) in processing the return of income under Section 143(1) of the Income Tax Act, 1961 and granting refund in accordance with Section 143(1D).
Important Case Law Cited:
Tata Teleservices Ltd vs. CBDT & Anrs (Delhi HC)
Commissioner of Income Tax Vs. Smt. Godavaridevi Saraf 113 ITR 589 (Bombay HC)
Commissioner of Income Tax vs. Valson Dyeing Bleaching and Printing Works, 259 ELT 33 (Bombay HC)
Brief Facts of the Case:
The petitioner was a private limited company which filed its return of income u/s 139 on 29th November, 2015, declaring an income of Rs. 144.48 crores and claimed a refund of Rs.27.24 crores.
On 12th April, 2016, the AO issued a notice u/s 143(2) relating to the relevant assessment year. The petitioner requested the AO to process its return of income in terms of Section 143(1) and grant the consequent refund due. However, the AO informed petitioner of CBDT Instruction No.1 of 2015, restraining the exercise of his discretion u/s 143(1D). The petitioner pointed out to the AO that the Delhi High Court, had quashed Instruction No.1 of 2015 and made a further representation to the Assessing Officer as well as to the Principal Commissioner of Income Tax, inter alia seeking the processing of its return in terms of Section 143(1) and consequent refund.
Due to no response by the AO, the petitioner filed this present petition seeking a mandamus to the Assessing Officer to process the return of income u/s 143(1) and grant the consequent refund.
Contentions of the Revenue:
The Revenue relied on the said CBDT Instruction No. 1 of 2015 which inter alia provided as under:
“4. Considering the unambiguous language of the relevant provision and the intention of law as discussed above, the Central Board of Direct Taxes, in exercise of the powers conferred on it under Section 119 of the Act hereby clarifies that the processing of a return cannot be undertaken after notice has been issued under subsection (2) of section 143 of the Act. It shall, however, be desirable that scrutiny assessments in such cases are completed expeditiously. 5. This may be brought to the notice of all concerned for strict compliances.”
Also, the Revenue opposed the petition on the ground that the Assessing Officer had time available to process the refund till 31st March, 2017, and therefore no mandamus can be issued till that time.
Contentions of the Petitioner:
The petitioner pointed out that CBDT Instruction No. 1 of 2015 dated 13th January, 2015 had been quashed by the Hon’ble Delhi High Court in Tata Teleservices Ltd. It was submitted that where a provision of law was declared ultra virus by the competent Court then the same will be binding on all Authorities administering the Act all over the Country. Since, there has not been any contrary decision on that point. the AO was, therefore, obliged to ignore Instruction No. 1 of 2015 and decide the petitioner’s application to process the refund under Section 143(1) of the Act and consider the applicability of sub section 1(D) of Section 143 of the Act to the facts of the present case for the purpose of grant of refund.
Observations made by the Bombay High Court:
The Court observed that although Section 119 of the Income Tax Act, 1961 empowers the CBDT to issue instructions for the proper administration of the Act, this power is hedged in by limitations as provided in the proviso to Sections 119(1) and also 119(2) of the Act, i.e. the CBDT cannot direct an Assessing Officer to dispose of a case in a particular manner nor can the instructions be prejudicial to the assessee. Therefore, the circulars / orders / instructions issued by the CBDT under Section 119 of the Act would be binding upon the Revenue only to the extent they are beneficial to the assessee. Such Instructions, if not beneficial to the assessee,cannot prevail over the Act. For this reason the Delhi High Court held that Instruction No.1 of 2015 issued by CBDT was without jurisdiction and unsustainable in law and, therefore, was set aside.
Regarding the contention of the Revenue that no directions can be be issued till the expiry of time available for processing of refund by AO, the High Court observed that the Revenue could not give any reason as to why the AO would not able to dispose of the application for refund or process the return under Section 143(1) before the expiry of the time available.
The Court commented that this conduct / stand of the AO was most disturbing in the context of the fact that the petitioners had been seeking refund since one year. The Court termed the attitude on the part of the Assessing Officer as “preposterous”.
The Court further observed that the action of the AO on the ground urged was in complete variance with the assessee friendly tax administration regime. In fact, according to the Court, the attitude on the part of the Assessing Officer gave a feeling that the Officers of the Revenue seemed to believe that it is not enough for the assessee to please the deity (Income Tax Act) but the assessee must also please the priest (Income Tax Officer) before getting what is due to him under the Act. The Court warned that officers of the State must ensure that their conduct does not give rise to the above feeling even remotely.
The Bombay High Court also clarified that its powers under Article 226 of the Constitution are very wide for the purpose of doing justice. The powers of a Court under Article 226 of the Constitution of India are not limited only to prerogative writs but also to issue any direction or order for doing justice. Therefore, Article 226(1) of the Constitution empowers the Court to issue directions, orders or writs, including writs in the nature of habeas corpus, mandamus, certiorari or any of them
It was held that no reference to the CBDT Instruction no. 1/2015 can be made by the Assessing Officer while disposing of the petitioner’s application in processing its return under Section 143(1) and consequent refund, if any, under Section 143(1D) of the Act. The Assessing Officer would independently apply his mind and take a decision in terms of section 143 (1D) whether or not to grant a refund in the facts and circumstances of the case.