Calcutta High Court
Mcnally Bharat Engineering ... vs Assistant Commissioner Of The ... on 6 August, 2021
in tHE HiGH court at calcutta
conStitutional Writ JuriSDiction
oriGinal SiDE
Present:
THE HON'BLE JUSTICE ARINDAM MUKHEREJEE
WPO 79 of 2020
MCNALLY BHARAT ENGINEERING COMPANY LIMITED AND ANR.
VERSUS
ASSISTANT COMMISSIONER OF THE INCOME TAX, CIRCLE 1(1) AND 6
OTHERS
For the petitioners :: Mr. J.P.Khaitan, Sr. Adv.,
Mr. Sanjoy Bhowmik,
Mr. A. D. Dey,
Ms. Soma Chatterjee
.....Advocates
For the respondents Mr. Asok Bhaumik,
.....Advocate
Heard on : 11.01.2021 and 18.01.2021
Judgment on : 06.08.2021
Arindam Mukherjee, J. :
1) The petitioner No.1 (hereinafter also referred as the assessee) is a public
company within the meaning of the Companies Act, 2013. The assessee
filed its return of income for the assessment year 2017-18 on 29th
November, 2017 declaring a loss of Rs.7,47,68,47,282/- and
WPO 79 of 2020
consequently claimed refund of the entire tax deducted at source
amounting to Rs.17,40,26,942/-. On 9th August, 2018, the assessee
received a notice under the provisions of Section 143(2) of the Income Tax
Act, 1961 (hereinafter referred as the said Act).
2) The assessee received another intimation from the respondent no.4 on
15th March, 2019 regarding the assessment under the provisions of
Section 143(1) wherein it was declared that the principal refund amount
to be Rs.17,40,23,735/- as assessed by the concerned Assessing Officer.
The total income tax refund for the assessee for the assessment year
2017-2018 after addition of interest of Rs. 2,08,82,844/- under the
provisions of Section 244A of the said Act was computed as
Rs.19,49,06,579/-. A refund sequence No.8547644783 was also
mentioned in the said intimation stating that the process of income tax
return was complete. The assessee on checking the refund status at the
TIN-NSDL website, however, found the following message displayed
thereat, "Your Assessing Officer has not sent the refund to the refund
banker, please contact your Assessing Officer." The assessed refund was,
thus, not refunded to the petitioner (assessee). The note appended to the
said intimation shows that the refund determined under Section 143(1) of
the said Act has been withheld as per provision of Section 241A.
3) After hearing the parties it appears that the matter can be decided only on
interpretation of the various provisions of the said Act and no factual
clarification is required. The matter was, therefor, finally heard out
without calling for affidavits to which none of the parties objected to.
WPO 79 of 2020
4) On behalf of the petitioner it is submitted that to invoke the provision of
Section 241A of the said Act, the Assessing Officer has to form an opinion
that the grant of refund is likely to adversely affect the revenue. Referring
to the note appended, it is submitted by the petitioner that the Assessing
Officer has not recorded any reason when and as to why he formed an
opinion that the refund is likely to adversely affect the revenue. It is also
submitted on behalf of the petitioner that despite making representations
dated 28th May, 2nd July and 18th November, 2019 and 13th January, 2020
seeking refund, no refund of the assessee and/or any part thereof was
made. The petitioner was, therefor, compelled to file the present writ
petitions.
5) It is further submitted on behalf of the petitioner that the petitioner
became entitled to refund on 15th March, 2019 when the assessment was
made. At that point of time there was no demand as against the petitioner
for which the refund could have been withheld under Section 241A. The
demand to which the revenue is now referring to, for invoking the
provision of Section 245 of the said Act came into existence only on
27th February, 2020 that is about almost a year after the date when the
refund was required to be made. The concerned authority in any event
according to the petitioner could have withheld the refund on or after 15th
March, 2019.
6) On behalf of the revenue it is submitted that there is a total demand of
Rs.47,76,28,500/- as against the petitioner for different periods. Scrutiny
in respect of such periods are going on. The revenue as such is not liable
WPO 79 of 2020
to make the refund in view of the provision of Section 245 of the said Act.
Apart from this submission, revenue has cited no specific reason for
withholding the refund. No details have been provided to establish that
there was a demand either for a period prior to the refund having been
declared or at the time when the assessment for the relevant period was to
be made despite affording the revenue sufficient time to provide such
particulars by adjourning the matter. The only details provided was for a
period subsequent to the assessment and declaration of refund which was
non-existent at the time when the refund was declared upon completion of
assessment.
7) Upon perusal of documents submitted, I find that the instant case is
based on interpretation of few provisions of the said Act. Section 143(1)
read with Sections 143(2) and 143(3) of the said Act provide for
assessment on scrutiny proceedings initiated against an assessee. After
the assessment is done the question of payment of further tax with
penalty and interest or refund arises depending upon the assessment.
Section 241A of the said Act provides for withholding of refunds if the
Officer concerned finds that refund will have an adverse affect on the
revenue. In the instant case, the petitioner was issued a notice for refund
on 15th March, 2019 after the assessment on scrutiny proceeding for the
assessment year 2017-18 was completed but the refund was withheld
without assigning any reason. The assessment for the assessment year
2017-18 may have taken some time and was completed by 15th March,
2019 when the refund was notified but at that point of time there was no
WPO 79 of 2020
other demand pending against the petitioner/assessee either for a
previous or subsequent period.
8) The very essence of passing of the order under Section 241A is
application of mind by the Assessing Officer to the issues which are
germane for withholding the refund on the basis of statutory prescription
contained in the said Section. The power of the Assessing Officer under
the provisions of the section 241A can be exercised not only after he forms
an opinion that the refund is likely to adversely affect the revenue and
thereafter with the prior approval of the Chief Commissioner or
Commissioner as an order for refund after assessment under Section
143(3) of the said Act pursuant to a notice under Section 143(2) is subject
to appeal or further proceeding. In the instant case, after notice for refund
was issued the refund was withheld with no reasons given.
9) From the judgment reported in Maple Logistics Pvt. Ltd. vs. Principal
Chief Commissioner of Income Tax 2020 420 ITR 258, as referred to
by the petitioner, Section 241A provides that where there is a refund
payable on the returns furnished under Section 143 (1) of the Act, and the
Assessing Officer is of the opinion that grant of refund is likely to
adversely affect the revenue, he may withhold the refund up to the date on
which the assessment is made, subject to reasons to be recorded in
writing and with the previous approval of the Principal Commissioner or
Commissioner, as the case may be. On a combined reading of Section 143
with Section 241A, it can be discerned that by virtue of the new proviso, it
is now mandatory to process the return under sub-section (1) of Section
WPO 79 of 2020
143, and proceed with grant of the refund determined therein, unless,
sufficient reasons exist under Section 241A prima facie demonstrating
that the grant of refund is likely to adversely affect the revenue.
10) The scope of the power under Section 241A is narrow, making it clear that
a speaking order is required to be passed culling out the reasons as to
how the grant of refund is likely to affect the revenue. The recording of
reasons to substantiate why such withholding is necessary and how the
refund will adversely affect recovery of subsequent revenue is essential.
"Reasons" have been described by the Hon'ble Supreme Court in AIR
1974 SC 87 Union of India vs. Mohan Lal Capoor, as "Reasons are the
links between the materials on which certain conclusions are based and
actual conclusions. They should reveal a rational nexus between the facts
considered and conclusions reached." No reasons were assigned by the
Officer concerned by referring to any materials that refund declared in
case of the petitioner/assessee on being actually made will adversely affect
the revenue. No demand as against the petitioner was pending on the
date when refund was notified. The petitioner/assess became entitled to
the refund immediately on completion of assessment and refund on being
notified. The Assessing Officer could not have kept the refund withheld to
link such refund with any demand against the petitioner for a subsequent
period when such demand was not in existence on the date when the
refund was notified.
WPO 79 of 2020
11) The powers under this revenue friendly provision cannot be used in a
mechanical manner without application of mind, wherein the Assessing
Officer being of the opinion that the grant of refund may make recovery of
pending demands. In that case refund can be withheld only after
recording reasons and obtaining approval of Principal Commissioner or
Commissioner as held in the judgment reported in Vodafone idea Ltd. vs.
DCIT reported in 421 ITR 253. The assessee must also be given an
opportunity of hearing before reasons are recorded for withholding the
refund under this Section. In absence of these proceedings being followed
the action of the Assessing Officer withholding refund is amenable to
judicial review by way of writ petition under Article 226 of the Constitution
of India.
12) Following the principle laid down in the judgment reported in Nazir
Ahmad vs. King Emperor AIR 1936 PC 253, "if a statute provides an act
to be done by a particular authority and in a particular manner, it should
only be done by that authority and in that manner or not at all.", the
Competent Officer being authorised under the statute to withhold the
refund if he has reasons to believe that the same will adversely affect the
revenue can or could have withheld the refund after the same had been
declared only after assigning reasons and not otherwise. In the instant
case, the Assessing Officer withheld the refund without assigning any
reason though the statute mandates for recording the same. Having not
done so the officer concerned has acted arbitrarily. The procedure followed
by the Assessing Officer does not also show the proper application of two
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independent provisions as in Section 241A and Section 143 wherein once
a refund is declared after scrutiny proceedings and such refund is
withheld, a reasoned order has to follow because the assessment in such a
case is done after production of materials and evidence required by the
Assessing Officer. That apart and in any event the petitioner/assessee is a
public limited company whose accounts are stringently scrutinized at the
internal level. It is, therefore, more so required to apply the provisions
more cautiously while withholding the refund after the same has been
declared on completion of assessment on scrutiny.
13) In the light of the discussion, analysis and findings made hereinabove, the
action on the part of the respondents in withholding of the refund for the
assessment year 2017-18 is not sustainable in law and is set aside and
quashed. The petitioner, is therefor, entitled to a mandatory order of
refund. The respondents are directed to refund the amount of
Rs.19,49,06,580/- within a period of four weeks from date with further
interest on the principal sum of Rs. 17,40,23,735/- from the date upto
which interest has been added to the principal sum in arriving at the
figure of Rs. 19,49,06,580/-till actual refund as per the provisions of the
Income Tax Act, 1961. The respondents shall act on the basis of a server
copy of this order without insisting for a certified copy thereof while
processing the refund.
14) The writ petition WPO 79 of 2020 is allowed accordingly without any order
as to costs.
WPO 79 of 2020
Urgent photostat certified copy of this judgment and order, if applied for,
be supplied to the parties on priority basis after compliance with all
necessary formalities.
(ARINDAM MUKHERJEE, J.)
