Delhi High Court
Indglonal Investment&Finance ... vs Income Tax Officer Ward No.11(4) ... on 3 June, 2011
Author: Sanjiv Khanna
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WRIT PETITION (CIVIL) NO. 7127 OF 2008
Reserved on: 22nd March, 2011
% Date of Decision: 3rd June, 2011
INDGLONAL INVESTMENT&FINANCE LTD.&ANR. ...Petitioners
Through Mr. Salil Aggarwal, Advocate.
VERSUS
INCOME TAX OFFICER WARD NO.11(4) N.DELHI & ORS.
....Respondents
Through Mr. N.P. Sahni, Advocate
AND
+ WRIT PETITION (CIVIL) NO. 15639 OF 2006
Reserved on : 18th April, 2011.
% Date of Decision : 3rd June, 2011.
M/S TAKSAL THEATERS PRIVATE LIMITED .... Petitioner
Through, Mr. Y.K. Kapur, Advocate.
VERSUS
ASSISTANT COMMISSIONER OF INCOME TAX & ANOTHER
...Respondents
Through Ms. Rashmi Chopra, Advocate.
CORAM:
HON'BLE MR. JUSTICE DIPAK MISRA, THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA
1. Whether Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporter or not ? Yes.
3. Whether the judgment should be reported in the Digest ? Yes.
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 1 of 47
SANJIV KHANNA, J.:
These two writ petitions were heard on different dates, but as the
issue and subject matter are similar, they are being disposed of by this
common decision. Factual aspects have been discussed below and the
result would show one writ petition is being allowed and the other is
being dismissed by applying the legal principles and ratio to the factual
matrix.
2. Income-Tax Act, 1961 (1961 Act) and Wealth Tax Act, 1957
(1957 Act) are direct taxes. Under the 1961 Act, taxes are collected by
deduction of tax at source (TDS, for short), payment of self-assessment
tax or advance tax. Under the 1957 Act, self-assessment tax is paid by
the assessee. Taxes are also paid on demand raised.
3. An assessee may be entitled to refund of the tax paid on the
basis of return of income filed, refund claimed, pursuant to an
assessment order, appellate order or some other order. The two
enactments, as noticed below, incorporate statutory provisions for
refund of taxes paid in excess of the amount ascertained/determined or
due and payable. The question raised in these writ petitions is whether
and when an assessee is entitled to refund when tax or part thereof has
been paid by inadvertence or if the tax is „wrongly‟ paid, recovered or
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 2 of 47
retained. Often in such cases reliance is placed on Article 265 of the
Constitution and it is urged that taxes „wrongly‟ levied and collected
should be refunded. Doctrine/principles of unjust enrichment, equity,
justice and good conscience are concomitantly invoked.
4. Article 265 reads as under:
"265. Taxes not to be imposed save by authority
of law.--No tax shall be levied or collected except by
authority of law."
5. Expressions "levy" and "collection" are used in Article 265 in a
comprehensive sense and are intended to include the entire process of
collection, commencing from charging or taxing a person to taking
away money. What the Article enjoins is that every stage in this entire
process must be authorized by law. (See District Mining Officer
versus Tata Iron and Steel Company, (2001) 7 SCC 358). The term
"levy" is of a wider import than the term "assessment" and includes
both imposition of tax as well as assessment. (See CCE versus
National Tobacco Company of India Limited, (1972) 2 SCC 560).
6. Article 265 and a claim for refund for violation of the principles
underlying the said Article or under the general principles of equity,
justice and good conscience as well as the statutory provisions in tax
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 3 of 47
enactments was settled by the Constitutional Bench decision of 9
Judges in Mafatlal Industries versus Union of India, (1997) 5 SCC
536. The said decision interprets Article 265 of the Constitution and
lays down legal principles, which we feel are equally applicable to the
arguments raised. The Supreme Court in the said case has held that
Article 265 mandates that no tax can be levied or collected except by
authority of law, which means that tax collected contrary to law has to
be refunded; but the question is -- when a tax is considered to have
been levied and collected without authority of law. The Supreme Court
visualized several hypothetical situations and answered questions but
for the purpose of this case we are required to examine two distinct
situations/categories. The first situation is where the tax is collected or
voluntarily paid to the authority under a valid enactment but by
misconstruing or by wrong interpretation of the provisions of the
enactment or by erroneous determination of relevant facts. The second
category of cases is where the enactment by which tax is levied is an
unconstitutional enactment or its provisions transgress the
constitutional limitations. In such cases, refund becomes due because
enactment/statute imposing the tax or the provision is unconstitutional.
This second category of cases will normally be cases; (1) where
legislative competence of the legislature is challenged and questioned
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 4 of 47
on the basis of entries in the Seventh Schedule of the Constitution, (2)
where law is prohibited by any particular provision of the Constitution,
e.g., Articles 276(2), 286 etc. and (3) the wrong or relevant portion
thereof is invalid under Article 13 for repugnancy to those freedoms,
which are guaranteed by Part-III of the Constitution. (see Chhotabhai
Jethabhai Patel and Company versus Union of India, (1962) Supp. 2
SCR 1).
7. In the present Writ petitions, we are not concerned with the
second category of cases. The two enactments and their provisions
have not been challenged on the ground that they are unconstitutional.
We are concerned with the first category of cases where an assessee
claims refund on the ground that the levy is wrong or contrary to the
provisions of the enactment, i.e., under an enactment itself tax should
not have been levied or has been wrongly imposed/collected/paid. The
first category of cases will also include cases where an assessee claims
that he is entitled to refund on the ground that the tax was mistakenly
paid under misapprehension or error in understanding the statutory
provisions and in fact tax was not payable or exigible. (Mistake of law
in understanding/interpreting the statute, will not include cases where
the enactment itself or the provision of the enactment is declared to be
unconstitutional for violation of any constitutional limitation).
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 5 of 47
Regarding the said category of cases, the Supreme Court in the case of
Mafatlal Industries (supra) examined the provisions of Article 265 of
the Constitution and Central Excise and Salt Act, 1944.The wide scope
and width of the issues examined by the Supreme Court can be
understood if we read paragraph 31, of the said decision;
"31. There is as yet a third and an equally important
category. It is this: a manufacturer (let us call him "X")
pays duty either without protest or after registering his
protest. It may also be a case where he disputes the
levy and fights it out up to first appellate or second
appellate/revisional level and gives up the fight, being
unsuccessful therein. It may also be a case where he
approaches the High Court too, remains unsuccessful
and gives up the fight. He pays the duty demanded or it
is recovered from him, as the case may be. In other
words, so far as "X" is concerned, the levy of duty
becomes final and his claim that the duty is not leviable
is finally rejected. But it so happens that sometime later
-- may be one year, five years, ten years, twenty years
or even fifty years -- the Supreme Court holds, in the
case of some other manufacturer that the levy of that
kind is not exigible in law. (We must reiterate -- we
are not speaking of a case where a provision of the Act
whereunder the duty is struck down as
unconstitutional. We are speaking of a case involving
interpretation of the provisions of the Act, Rules and
Notifications.) The question is whether "X" can claim
refund of the duty paid by him on the ground that he
has discovered the mistake of law when the Supreme
Court has declared the law in the case of another
manufacturer and whether he can say that he will be
entitled to file a suit or a writ petition for refund of the
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 6 of 47
duty paid by him within three years of such discovery
of mistake? Instances of this nature can be multiplied.
It may not be a decision of the Supreme Court that
leads "X" to discover his mistake; it may be a decision
of the High Court. It may also be a case where "X"
fights up to first appellate or second appellate stage,
gives up the fight, pays the tax and then pleads that he
has discovered the mistake of law when the High Court
has declared the law. The fact is that such claims have
been entertained both in writ petitions and suits until
now, purporting to follow the law declared in
Kanhaiya Lal, and are being allowed and decreed,
sometimes even with interest. The Union of India says
that this can never be. It says, a manufacturer must
fight his own battle and only if he succeeds therein, can
he claim refund. He cannot take advantage of success
of another manufacturer and that no suit or writ is
maintainable by him for refund on the ground of
alleged discovery of mistake of law on the declaration
of law by this Court or a High Court (or a Tribunal or
any other authority under the Act) in the case of
another person. The Union of India denies that such a
person can plead payment of duty under a mistake of
law within the meaning of Section 72 of the Contract
Act. It also denies that such a writ petition or a suit can
be filed within three years of such "discovery of
mistake of law".
8. The first situation/category mentioned above was
answered as under;-
"78. There is, however, one exception to the above
proposition, i.e., where a provision of the Act
whereunder the duty has been levied is found to be
unconstitutional for violation of any of the
constitutional limitations. This is a situation not
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 7 of 47
contemplated by the Act. The Act does not
contemplate any of its provisions being declared
unconstitutional and therefore it does not provide for
its consequences. Rule 11/Section 11-B are premised
upon the supposition that the provisions of the Act are
good and valid. But where any provision under which
duty is levied is found to be unconstitutional, Article
265 steps in. In other words, the person who had paid
the tax is entitled to claim refund and such a claim
cannot be governed by the provisions in Rule
11/Section 11-B. The very collection and/or retention
of tax without the authority of law entitles the person,
from whom it is collected, to claim its refund. A
corresponding obligation upon the State to refund it
can also be said to flow from it. This can be called the
right to refund arising under and by virtue of the
constitutional provisions, viz., Article 265. But, it does
not follow from this that refund follows automatically.
Article 265 cannot be read in isolation. It must be read
in the light of the concepts of economic and social
justice envisaged in the Preamble and the guiding
principles of State Policy adumbrated in Articles 38
and 39 -- an aspect dealt with at some length at a later
stage. The very concept of economic justice means and
demands that unless the claimant (for refund)
establishes that he has not passed on the burden of the
duty/tax to others, he has no just claim for refund. It
would be a parody of economic justice to refund the
duty to a claimant who has already collected the said
amount from his buyers. The refund should really be
made to the persons who have actually borne its burden
-- that would be economic justice. Conferring an
unwarranted and unmerited monetary benefit upon an
individual is the very antithesis of the concept of
economic justice and the principles underlying Articles
38 and 39. Now, the right to refund arising as a result
of declaration of unconstitutionality of a provision of
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 8 of 47
the enactment can also be looked at as a statutory right
of restitution. It can be said in such a case that the tax
paid has been paid under a mistake of law which
mistake of law was discovered by the
manufacturer/assessee on the declaration of invalidity
of the provision by the court. Section 72 of the
Contract Act may be attracted to such a case and a
claim for refund of tax on this score can be maintained
with reference to Section 72. This too, however, does
not mean that the taxes paid under an unconstitutional
provision of law are automatically refundable under
Section 72. Section 72 contains a rule of equity and
once it is a rule of equity, it necessarily follows that
equitable considerations are relevant in applying the
said rule -- an aspect which we shall deal with a little
later. Thus, whether the right to refund of taxes paid
under an unconstitutional provision of law is treated as
a constitutional right flowing from Article 265 or as a
statutory right/equitable right affirmed by Section 72 of
the Contract Act, the result is the same -- there is no
automatic or unconditional right to refund.
79. We may now consider a situation where a
manufacturer pays a duty unquestioningly -- or he
questions the levy but fails before the original authority
and keeps quiet. It may also be a case where he files an
appeal, the appeal goes against him and he keeps quiet.
It may also be a case where he files a second
appeal/revision, fails and then keeps quiet.* The orders
in any of the situations have become final against him.
Then what happens is that after a year, five years, ten
years, twenty years or even much later, a decision is
rendered by a High Court or the Supreme Court in the
case of another person holding that duty was not
payable or was payable at a lesser rate in such a case.
(We must reiterate and emphasise that while dealing
with this situation we are keeping out the situation
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 9 of 47
where the provision under which the duty is levied is
declared unconstitutional by a court; that is a separate
category and the discussion in this paragraph does not
include that situation. In other words, we are dealing
with a case where the duty was paid on account of
misconstruction, misapplication or wrong
interpretation of a provision of law, rule, notification or
regulation, as the case may be.) Is it open to the
manufacturer to say that the decision of a High Court
or the Supreme Court, as the case may be, in the case
of another person has made him aware of the mistake
of law and, therefore, he is entitled to refund of the
duty paid by him? Can he invoke Section 72 of the
Contract Act in such a case and claim refund and
whether in such a case, it can be held that reading
Section 72 of the Contract Act along with Section
17(1)(c) of the Limitation Act, 1963, the period of
limitation for making such a claim for refund, whether
by way of a suit or by way of a writ petition, is three
years from the date of discovery of such mistake of
law? Kanhaiya Lal is understood as saying that such a
course is permissible. Later decisions commencing
from Bhailal Bhai have held that the period of
limitation in such cases is three years from the date of
discovery of the mistake of law. With the greatest
respect to the learned Judges who said so, we find
ourselves unable to agree with the said proposition.
Acceptance of the said proposition would do violence
to several well-accepted concepts of law. One of the
important principles of law, based upon public policy,
is the sanctity attaching to the finality of any
proceeding, be it a suit or any other proceeding. Where
a duty has been collected under a particular order
which has become final, the refund of that duty cannot
be claimed unless the order (whether it is an order of
assessment, adjudication or any other order under
which the duty is paid) is set aside according to law. So
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 10 of 47
long as that order stands, the duty cannot be recovered
back nor can any claim for its refund be entertained.
But what is happening now is that the duty which has
been paid under a proceeding which has become final
long ago -- may be an year back, ten years back or
even twenty or more years back -- is sought to be
recovered on the ground of alleged discovery of
mistake of law on the basis of a decision of a High
Court or the Supreme Court. It is necessary to point out
in this behalf that for filing an appeal or for adopting a
remedy provided by the Act, the limitation generally
prescribed is about three months (little more or less
does not matter). But according to the present practice,
writs and suits are being filed after lapse of a long
number of years and the rule of limitation applicable in
that behalf is said to be three years from the date of
discovery of mistake of law. The incongruity of the
situation needs no emphasis. And all this because
another manufacturer or assessee has obtained a
decision favourable to him. What has indeed been
happening all these years is that just because one or a
few of the assessees succeed in having their
interpretation or contention accepted by a High Court
or the Supreme Court, all the manufacturers/assessees
all over the country are filing refund claims within
three years of such decision, irrespective of the fact
that they may have paid the duty, say thirty years back,
under similar provisions -- and their claims are being
allowed by courts. All this is said to be flowing from
Article 265 which basis, as we have explained
hereinbefore, is totally unsustainable for the reason that
the Central Excises Act and the Rules made thereunder
including Section 11-B/Rule 11 too constitute "law"
within the meaning of Article 265 and that in the face
of the said provisions -- which are exclusive in their
nature -- no claim for refund is maintainable except
under and in accordance therewith. The second basic
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 11 of 47
concept of law which is violated by permitting the
above situation is the sanctity of the provisions of the
Central Excises and Salt Act itself. The Act provides
for levy, assessment, recovery, refund, appeals and all
incidental/ancillary matters. Rule 11 and Section 11-B,
in particular, provide for refund of taxes which have
been collected contrary to law, i.e., on account of a
misinterpretation or misconstruction of a provision of
law, rule, notification or regulation. The Act provides
for both the situations represented by Sections 11-A
and 11-B. As held by a seven-Judge Bench in Kamala
Mills, following the principles enunciated in Firm &
Illuri Subbayya Chetty, the words "any assessment
made under this Act" are wide enough to cover all
assessments made by the appropriate authorities under
the Act whether the assessments are correct or not and
that the words "an assessment made" cannot mean an
assessment properly and correctly made.
It was also pointed out in the said decision that the
provisions of the Bombay Sales Tax Act clearly
indicate that all questions pertaining to the liability of
the dealer to pay assessment in respect of their
transactions are expressly left to be decided by the
appropriate authorities under the Act as matters falling
within their jurisdiction. Whether or not a return is
correct and whether a transaction is exigible to tax or
not are all matters to be determined by the authorities
under the Act. The argument that the finding of the
authority that a particular transaction is taxable under
the Act is a finding on a collateral fact and, therefore,
resort to civil court is open, was expressly rejected and
it was affirmed that the whole activity of assessment
beginning with the filing of the return and ending with
the order of assessment falls within the jurisdiction of
the authorities under the Act and no part of it can be
said to constitute a collateral activity not specifically or
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 12 of 47
expressly included in the jurisdiction of the authorities
under the Act. It was clarified that even if the authority
under the Act holds erroneously, while exercising its
jurisdiction and powers under the Act that a transaction
is taxable, it cannot be said that the decision of the
authority is without jurisdiction. We respectfully agree
with the above propositions and hold that the said
principles apply with equal force in the case of both the
Central Excises and Salt Act and the Customs Act.
Once this is so, it is ununderstandable how an
assessment/adjudication made under the Act levying or
affirming the duty can be ignored because some years
later another view of law is taken by another court in
another person‟s case. Nor is there any provision in the
Act for reopening the concluded proceedings on the
aforesaid basis. We must reiterate that the provisions of
the Central Excise Act also constitute "law" within the
meaning of Article 265 and any collection or retention
of tax in accordance or pursuant to the said provisions
is collection or retention under "the authority of law"
within the meaning of the said article. In short, no
claim for refund is permissible except under and in
accordance with Rule 11 and Section 11-B. An order or
decree of a court does not become ineffective or
unenforceable simply because at a later point of time, a
different view of law is taken. If this theory is applied
universally, it will lead to unimaginable chaos. It is,
however, suggested that this result follows only in tax
matters because of Article 265. The explanation
offered is untenable, as demonstrated hereinbefore. As
a matter of fact, the situation today is chaotic because
of the principles supposedly emerging from Kanhaiya
Lal and other decisions following it. Every decision of
this Court and of the High Courts on a question of law
in favour of the assessee is giving rise to a wave of
refund claims all over the country in respect of matters
which have become final and are closed long number
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 13 of 47
of years ago. We are not shown that such a thing is
happening anywhere else in the world. Article 265
surely could not have been meant to provide for this.
We are, therefore, of the clear and considered opinion
that the theory of mistake of law and the consequent
period of limitation of three years from the date of
discovery of such mistake of law cannot be invoked by
an assessee taking advantage of the decision in another
assessee's case. All claims for refund ought to be, and
ought to have been, filed only under and in accordance
with Rule 11/Section 11-B and under no other
provision and in no other forum. An assessee must
succeed or fail in his own proceedings and the finality
of the proceedings in his own case cannot be ignored
and refund ordered in his favour just because in
another assessee‟s case, a similar point is decided in
favour of the manufacturer/assessee. (See the pertinent
observations of Hidayatullah, C.J. in Tilokchand
Motichand extracted in para 46.) The decisions of this
Court saying to the contrary must be held to have been
decided wrongly and are accordingly overruled
herewith."
9. Like the Central Excise and Salt Act, 1944, the two enactments,
i.e., the 1961 Act and the 1957 Act are self-contained codes exhaustive
of matters dealt with therein. They are also exhaustive to obligations
and remedies available to a tax payer under the two enactments.
Applying the ratio exposited in Mafatlal Industries (supra), it is clear
that in cases covered by the first category, claim for refund must be
made by the assessee in accordance with the provisions of the
enactment. Refund will be due and paid to the assessee as per the
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 14 of 47
provisions of the enactment itself. The two Acts provide for levy,
assessment, recovery, refund, appeals and all incidental/ancillary
matters. For an assessee to claim refund, he must satisfy the statutory
requirements and Article 265 of the Constitution is not violated if an
assessee does not claim refund as per the provisions of the Act or when
the "wrong" assessment or any other "wrong" order becomes final and
has the effect of denying refund. An assessee cannot file a writ petition
and state that Article 265 of the Constitution is violated because he is
not being refunded tax which is not refundable under the enactment. In
such cases, tax has been collected in accordance with law, i.e., under
the enactment itself and no amount is refundable unless a refund can be
claimed in terms of the statute/enactment. Of course, if the „wrong‟
order itself is challenged in a writ petition and the challenge is
accepted then refund can be a consequence. Invoking the writ
jurisdiction to question an order or assessment is a separate aspect.
Existence of an adequate legal remedy which has not been availed of is
an important and relevant consideration before resort to extraordinary
jurisdiction is accepted.
10. Any other interpretation would lead to incongruous results with
the Revenue being put and saddled with liabilities even after the
assessments become final and are not subjected to any challenge in
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 15 of 47
appeal or revision. It will result in chaotic situation and will be
contrary to public interest, making a decision or adjudication inchoate
and uncertain. It may be noticed here that there are fetters and
restrictions on the power of the tax authorities both by limitation as
well as conditions regarded as jurisdictional pre-conditions that have to
be satisfied before any case is reopened under Section 147/148 of the
1961 Act or under Section 17 of the 1957 Act. Further, Revenue
cannot defend a writ petition or a refund claim and state that the
assessee had wrongly claimed benefit or has been wrongly granted
benefit of a deduction/claim, even when the order/assessment has
attained finality.
11. Provisions of assessment are independent of provisions of
refund, but the provisions relating to refund may be dependent on the
assessment. (See Commissioner of Income Tax, West Bengal vs.
Central India Industries Ltd. (1971) 82 ITR 555). An assessment
order or an order quantifying the income/net wealth can be rectified or
modified in the proceedings as contemplated by the enactment. The
assessment order or the order quantifying the income or taxable wealth
cannot be challenged on merits while the authorities examine the
question of refund. The authorities cannot go behind the assessment
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 16 of 47
order or the order quantifying net wealth/income. Section 242 of the
1961 Act is apposite and is reproduced below:-
"242. Correctness of assessment not to be
questioned.--In a claim under this Chapter, it shall
not be open to the assessee to question the
correctness of any assessment or other matter
decided which has become final and conclusive or
ask for a review of the same, and the assessee shall
not be entitled to any relief on such claim except
refund of tax wrongly paid or paid in excess.
12. Another principle is that the refund provisions should be
interpreted in a reasonable and practical manner and when warranted
liberally in favour of the assessee. If there is substantial compliance of
the provisions for refund, it may not be denied because it is not made
strictly in the form or the prescribed manner. The forms prescribed
may be merely intended to facilitate payment of refund. The tax
authorities have to act judiciously when they exercise their power
under an enactment. The power given to the tax authorities under the
enactments are mandated with the duty to exercise them when the
statutory provisions so warrant. It is imperative upon them to exercise
their authority in an appropriate manner. In case the Assessing Officer
or tax authority comes to know that an assessee is entitled to deduction,
relief or refund on the facts of the case and the assessee has omitted to
make the claim, he should draw the attention of the assessee. The tax
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 17 of 47
authorities should act as facilitators and not occlude and obstruct. The
role of tax authorities has been aptly described in CIT versus Rajesh
Jhaveri Stock Brokers Pvt. Ltd. (2008) 14 SCC 208 as :-
"19............ The function of the assessing
officer is to administer the statute with solicitude
for the public exchequer with an inbuilt idea of
fairness to taxpayers."
13. In Commissioner of Income Tax Vs. Shelly Products and Anr.,
(2003) 261 ITR 367, the Supreme Court while upholding the right of
the tax authorities to retain taxes due and payable even when the
assessment proceeding is annulled, on the question of refund when tax
is not payable clarified the position as under:
"We cannot lose sight of the fact that the failure
or inability of the Revenue to frame a fresh
assessment should not place the assessee in a more
disadvantageous position than in what he would
have been if a fresh assessment was made. In a
case where an assessee chooses to deposit by way
of abundant caution advance tax or self-assessment
tax which is in excess of his liability on the basis of
the return furnished or there is any arithmetical
error or inaccuracy, it is open to him to claim
refund of the excess tax paid in the course of the
assessment proceeding. He can certainly make such
a claim also before the concerned authority
calculating the refund. Similarly, if he has by
mistake or inadvertence or on account of
ignorance, included in his income any amount
which is exempted from payment of income-tax, or
is not income within the contemplation of law, he
may likewise bring this to the notice of the
assessing authority, which if satisfied, may grant
W.P. (C) Nos. 7127/2008 & 15639/2006 Page 18 of 47
him relief and refund the tax paid in excess, if any.
Such matters can be brought to the notice of the
concerned authority in a case when refund is due
and payable, and the authority concerned, on being
satisfied, shall grant appropriate relief."
Facts
of the W.P.(C) No. 7127 Of 2008
14. The petitioner No. 1, Indglonal Investment & Finance Limited,
by this writ petition has prayed for quashing of the order dated 23rd
August, 2007 passed by the respondent No. 1, Income Tax Officer,
Ward No. 11(4), New Delhi and for direction that the respondent
should refund Rs.5,73,038/- along with interest. It is stated that this
amount was deducted as TDS during the period relevant to the
assessment year 1994-95 and is refundable.
15. By the impugned order dated 23rd August, 2007, the claim for
refund has been rejected on the ground that in the return of income for
the assessment year 1994-95 filed on 29th November, 1994, the
assessee/petitioner had declared total loss of Rs.4,56,994/- and no
amount was shown as deducted towards TDS and no claim for refund
was made. It is stated that the return was processed under Section
143(1)(a) of the 1961 Act on 28th February, 1995 and it was concluded
that no tax was paid and due. The respondent has relied upon Section
139(5) of the 1961 Act and stated that in case there was an omission or
error in the return itself, the petitioner should have filed revised a
return within the time stipulated. No revised return was filed.
16. Section 237, 239(1) & (2)(c) and 240 of the 1961 Act read as
under:-
"Section 237- Refunds
If any person satisfies the [Assessing] Officer
that the amount of tax paid by him or on his
behalf or treated as paid by him or on his behalf
for any assessment year exceeds the amount with
which he is properly chargeable under this Act
for that year, he shall be entitled to a refund of
the excess."
Section 239- Forms of claim for refund and
limitation.
"(1) Every claim for refund under this Chapter
shall be made in the prescribed form and verified
in the prescribed manner.
[(2) No such claim shall be allowed, unless it is
made within the period specified hereunder,
namely:-
(a) ...
(b) ...
(c) Where the claim is in respect of income which
is assessable for any other assessment year,
[one] year from the last day of such
assessment year;]"
Section 240- Refund on appeal, etc.
"Where, as a result of any order passed in appeal or
other proceeding under this Act, refund of any
amount becomes due to the assessee, the Assessing
Officer shall, except as otherwise provided in this
Act, refund the amount to the assessee without his
having to make any claim in that behalf.
Provided that where, by the order aforesaid,--
(a) an assessment is set aside or cancelled and an
order of fresh assessment is directed to be made, the
refund, if any, shall become due only on the making of
such fresh assessment ;
(b) the assessment is annulled, the refund shall
become due only of the amount, if any of the tax paid in
excess of the tax chargeable on the total income
returned by the assessee."
17. As per Section 237 of the 1961 Act, an assessee is entitled to
refund if the tax paid by him or treated to have been paid by him or on
his behalf for the assessment year, exceeds the amount chargeable
under the 1961 Act for a particular assessment year. Claim for refund
as per Section 239(1) and 239 (2)(c), has to be made in the prescribed
form and verified in the proper manner within one year from the last
date of the relevant assessment year. Rule 41 of the Income Tax Rules,
1962 (Rules, for short) is also relevant. As per the aforesaid Rule,
claim for refund is to be accompanied by a return in the prescribed
form and in case a person makes a claim for refund that consists of
dividend from any other income on which tax has been deducted at
source, the claim is required to be accompanied by certificate of TDS.
The said provisions for refund have been liberally interpreted in favour
of the assessee and hyper-technical grounds which hinder the right of
the assessee to get refund have not been encouraged. When there has
been substantial compliance of Sections 237 and 239 of the 1961 Act
but there is a procedural lapse, for non-compliance, the refund should
not be denied.
18. Section 240 of the 1961 Act provides that where, as a result of
any order passed in appeal or other proceedings under the Act, refund
of any amount becomes due to any assessee, the assessing officer shall
refund the amount to the assessee without his having made any claim
in that behalf. Interpreting the expression "other proceedings" in
Section 240 of the 1961 Act it has been held in Atmaram J. Haithsala
Vs. Smt. S. Sarup, ITO (1994) 209 ITR 456 as under;-
"The phrase "other proceedings" used under
section 240 is of wide amplitude and would cover
any order passed in proceedings other than an appeal
under the Income-tax Act. Therefore, the phrase
"orders passed in other proceedings under the
Income-tax Act" would include orders passed under
section 154 (rectification proceedings), orders passed
by the High Court or the Supreme Court under
section 260 (in reference) and orders passed by the
Commissioner of Income-tax in revision applications
under section 263 or 264 or on an application under
section 273A of the Act. In this view of the matter,
in our view, there is no reason to restrict the meaning
of the phrase "other proceedings" under the Income
tax Act used in section 240 to only some orders by
which refund of excess tax or penalty is granted and
not to cover orders passed under section 273A of the
Act. Sub-section (1A) of section 244 also, inter alia,
provides that where the whole or any part of the
refund referred to in sub-section (1) is due to the
assessee in pursuance of any order of assessment or
penalty and such amount or any part thereof having
been found in other proceedings under this Act to be
in excess of the amount which such assessee is liable
to pay as penalty, then the Government is required to
pay to such assessee simple interest as specified
therein. In this view of the matter, there is no reason
to hold that in case where penalty is waived or
reduced under section 273A of the Act, the assessee
is not entitled to have the said amount with interest
as provided under section 244(1A) of the Act.
The Allahabad High Court in the case of Raj
Kishore Prasad v. ITO [1991] 188 ITR 765,
observed that the words "other proceedings under the
Act" used under section 240, are wide enough to
include proceedings or orders passed under section
263 of the Act giving rise to the claim of an assessee
for refund. The court negatived the contention of the
Revenue for restricting the meaning and scope of the
phrase "other proceedings" only to references made
under the Act."
(See also S.R.Koshti versus Commissioner of Income Tax
(2005) 276 ITR 165 mentioned below)
19. In view of the statutory provisions the issue raised is whether the
petitioner assessee had made a claim for refund or the refund is
payable under the 1961 Act.
20. Photocopy of the acknowledgment issued by the Department at
the time of filing of return is available on our file. Acknowledgment
shows that there was a specific column i.e. column No. 5, in which the
assessee was required to show total tax deducted and collected at
source. Against the said column, the figure written is NIL. A perusal of
the acknowledgment of return also shows that no specific claim for
refund was mentioned. The column has been left blank. In the column
relating to number of documents attached regarding pre-paid taxes etc.,
no detail has been given.
21. The original file of the department was called and has been
produced before us. We have examined the original file. The Income
Tax form for the said year consisted of 10 pages. The original return
available on record consists of the first 4 pages and pages 9 and 10.
Pages 5 to 8 are not available on the record. It is obvious that these
have been removed. However, at page 3 of the return, income of
Rs.20,83,125/- has been declared as dividend from Asian Consolidated
Industries Limited. Page No. 10 of the return available on record,
shows that the assessee had filed statement of assessable income,
statutory audit report, Profit & Loss Account, Balance-sheet, annexures
to the Balance-sheet, tax audit report and depreciation. The statement
of assessable income and the audited Balance Sheet is available on
record. The statement of assessable income available on record shows
that TDS on dividend as per Form No. 16A enclosed amounting to
Rs.5,73,038/- is refundable. Original TDS certificate issued by the
Asian Consolidated Industries Limited dated 14th July, 1993 is
available on record at page no. 21. The said TDS certificate relates to
equity dividend for the year 1991-92. The gross dividend declared in
the accounts is Rs.20,83,125/-. The amount of Rs.2,81,479/- has been
paid as interest and an amount of Rs.5,73,038/- has been deducted
towards TDS and accordingly net payment of Rs.17,91,566/- has been
made. It is noticed from the audited accounts that this amount of
Rs.2,81,479/- towards interest has been shown as interest received.
22. The returned income as declared was accepted. The question
arises whether or not the assessee had asked for refund or the assessed
income entitles the petitioner to refund of TDS of Rs.5,73,034/-.
23. The contention of the Revenue is that only the return form and
the not the annexures attached are relevant to decide whether the
assessee is entitled to refund or not. Thus, if the assessee has not
claimed refund in the return form itself, then the assessee is not entitled
to refund. The aforesaid submission cannot be accepted in the present
case. We are concerned with assessment year 1994-95 and the relevant
provisions of the 1961 Act applicable in the said year. An assessee was
required and mandated by Section 139(9) of the 1961 Act to file
specified annexures and documents with the return of income. Unless
the specified documents were furnished, the return of income was
regarded as defective. Section 139(9) of the 1961 Act during the
relevant period reads as under:-
"Section 139. Return of income
(9) Where the Assessing Officer considers
that the return of income furnished by the
assessee is defective, he may intimate the
defect to the assessee and give him an
opportunity to rectify the defect within a
period of fifteen days from the date of such
intimation or within such further period
which, on an application made in this behalf,
the Assessing Officer may, in his discretion,
allow ; and if the defect is not rectified within
the said period of fifteen days or, as the case
may be, the further period so allowed, then,
notwithstanding anything contained in any
other provision of this Act, the return shall be
treated as an invalid return and the provisions
of this Act shall apply as if the assessee had
failed to furnish the return:
Provided that where the assessee rectifies
the defect after the expiry of the said period of
fifteen days or the further period allowed, but
before the assessment is made, the Assessing
Officer may condone the delay and treat the
return as a valid return.
Explanation.--For the purposes of this sub-
section, a return of income shall be regarded
as defective unless all the following
conditions are fulfilled, namely:--
(a) the annexures, statements and
columns in the return of income relating to
computation of income chargeable under each
head of income, computation of gross total
income and total income have been duly filled
in ;
(b) the return is accompanied by a
statement showing the computation of the tax
payable on the basis of the return ;
(bb) the return is accompanied by the
report of the audit obtained under section
44AB ;
(c) the return is accompanied by proof
of--
(i) the tax, if any, claimed to have been
deducted at source and the advance tax and
tax on self-assessment, if any, claimed to have
been paid ;
(ii) the amount of compulsory deposit, if
any, claimed to have been made under the
Compulsory Deposit Scheme (Income-tax
Payers) Act, 1974 (38 of 1974) ;
(d) where regular books of account are
maintained by the assessee, the return is
accompanied by copies of--
(i) manufacturing account, trading
account, profit and loss account or, as the case
may be, income and expenditure account or
any other similar account and balance-sheet ;
(ii) in the case of a proprietary business
or profession, the personal account of the
proprietor ; in the case of a firm, association
of persons or body of individuals, personal
accounts of the partners or members ; and in
the case of a partner or member of a firm,
association of persons or body of individuals,
also his personal account in the firm,
association of persons or body of individuals ;
(e) where the accounts of the assessee have
been audited, the return is accompanied by
copies of the audited profit and loss account
and balance-sheet and the auditor's report and,
where an audit of cost accounts of the
assessee has been conducted, under section
233B of the Companies Act, 1956 (1 of 1956),
also the report under that section ;
(f) where regular books of account are not
maintained by the assessee, the return is
accompanied by a statement indicating the
amounts of turnover or, as the case may be,
gross receipts, gross profits, expenses and net
profit of the business or profession and the
basis on which such amounts have been
computed, and also disclosing the amounts of
total sundry debtors, sundry creditors, stock-
in-trade and cash balance as at the end of the
previous year."
24. The explanation clause (b) specifically stipulated that the return
must be accompanied by a computation of tax payable on the basis of
return. Clause (c) further stipulated that the return must be
accompanied by proof of TDS, advanced tax and self assessment tax.
A return of income could be treated as defective unless these
documents were enclosed. The assessing officer was required to
intimate the defect and give an opportunity to the assessee to rectify
the same. The contention of the Revenue, thus, cannot be accepted that
the annexures do not form a part and parcel of the return. The
documents were a part of the return. As a matter of abundant caution,
we clarify that the statutory provision with regard to return have
undergone a change as now in some cases documents along with return
are not required to be filed. However, we are not concerned with the
present statutory provisions. Once we examine and consider the
documents attached to the return, it is apparent that the petitioner had
made a claim for refund of Rs. 5,73,034/-.
25. The income tax return as filed consists of 10 pages. Pages 5 to 8
which are the relevant pages pertaining to refund are missing. There is
no explanation by the Revenue/respondent why and how they are
missing. Although these are pages missing from the income tax return
filed by the petitioner, statement of total income, computation of tax
payable on the total income and attachment of the original TDS
certificate with the original return, have not been denied or disputed by
the respondent. This supports the stand of the petitioner. The statement
of assessable income on record clearly shows that TDS on dividend
amounting to Rs. 5,73,038/- is refundable. The return for the relevant
assessment year had been filed by the petitioner well within the time
and the contention of the respondent that the petitioner should have
filed a revised return in order to claim refund is not satisfactory or
correct, in light of the attachments that had been annexed to the return.
26. The documents placed on record show that the petitioner had
written to the Deputy Commissioner of Income Tax, New Delhi on 20 th
October, 1999 stating that it had filed its return of income on 29th
November, 1994 for the assessment year 1994-95 declaring a loss of
Rs. 4,56,994/-. In the said letter the petitioner had prayed for refund of
Rs. 5,73,038/- in respect of TDS and had filed copy of Income Tax
return, TDS certificate and a computation of income along with the
said letter. Thereafter, the petitioner wrote several letters from 2004
onwards to the respondent and also to the Commissioner of Income
Tax, Help Line requesting for the refund and interest in view of
provisions of Sections 237 and 239 of the 1961 Act. On 23rd April,
2007, the Revenue had sent a letter to the petitioner asking them to
furnish evidence in relation to its initial claim for refund. No question
of limitation or delay was raised by the respondent.
27. Plea of the respondent relying upon the doctrine of delay and
laches has to be rejected. Apart from the facts noticed above, once it is
held that the petitioner had applied for and is entitled to refund, then
the delay in making the refund is attributable to the respondent. The
respondent rejected the claim for refund only vide order dated 23 rd
August, 2007 and the petitioner filed the present writ petition in 2008.
The petition has remained pending for last 3 years.
28. In Ram Chand v. Union of India, (1994) 1 SCC 44, the
Supreme Court has observed that if the statutory authority has not
performed its duty within a reasonable time, it cannot justify the same
by taking the plea that the person who has been deprived of his right
has not approached the appropriate forum for relief. It was held:
"16. On behalf of the respondents, it was pointed
out that the petitioners have approached this Court
only after making of the awards, or when awards
were to be made, having waited for more than
fourteen years, without invoking the jurisdiction of
the High Court under Article 226 or of this Court
under Article 32. It is true that this Court has taken
note of delay on the part of the petitioners
concerned in invoking the jurisdiction of the High
Court or of this Court for quashing the land
acquisition proceedings on the ground that the
proceedings for acquisition of the lands in question
have remained pending for more than a decade, in
the cases of Aflatoon v. Lt. Governor of Delhi and
Ramjas Foundation v. Union of India. According
to us, the question of delay in invoking the writ
jurisdiction of the High Court under Article 226 or
of this Court under Article 32, has to be considered
along with the inaction on the part of the
authorities, who had to perform their statutory
duties. Can the statutory authority take a plea that
although it has not performed its duty within a
reasonable time, but it is of no consequence
because the person, who has been wronged or
deprived of his right, has also not invoked the
jurisdiction of the High Court or of this Court for a
suitable writ or direction to grant the relief
considered appropriate in the circumstances? The
authorities are enjoined by the statute concerned to
perform their duties within a reasonable time, and
as such they are answerable to the Court why such
duties have not been performed by them, which has
caused injury to claimants. By not questioning, the
validity of the acquisition proceedings for a long
time since the declarations were made under
Section 6, the relief of quashing the acquisition
proceedings has become inappropriate, because in
the meantime, the lands notified have been
developed and put to public use. The lands are
being utilised to provide shelter to thousands and to
implement the scheme of a planned city, which is a
must in the present set-up. The outweighing public
interest has to be given due weight. That is why
this Court has been resisting attempts on the part of
the landholders, seeking quashing of the
acquisition proceedings on ground of delay in
completion of such proceedings. But, can the
respondents be not directed to compensate the
petitioners, who were small cultivators holding
lands within the ceiling limit in and around Delhi,
for the injury caused to them, not by the provisions
of the Act, but because of the non-exercise of the
power by the authorities under the Act within a
reasonable time?"
29. In the present case the respondent has deprived the
petitioner of its money which was refundable as per statute. The
question of delay invoking writ jurisdiction has to be considered
with a duty cast by the statute on the authority. When a
statutory authority does not pass any order and fails to comply
with the statutory mandate within reasonable time, they cannot
take the defence of laches and delay. Delay in such cases
furnishes cause of action and right to the petitioner to approach
courts. Of course if the respondent had rejected the refund claim
but the petitioner had kept quiet and thereafter approached the
court after considerable delay, different consequence would
flow. It was the respondent‟s statutory duty to act within a
reasonable time. State is a virtuous litigant and should meet
honest claims (See Dilbagh Rai Jarry Vs. Union of India
(1974) 3 SCC 554 and Madras Port Trust Vs. Hymanshu
International (1979) 4 SCC 176). The aforesaid view finds
resonance in the State of U.P. and Ors. Vs. Manohar, (2005) 2
SCC 126, in the following words:
"5. As a matter of fact, the appellants were
unable to produce even a scrap of evidence
indicating that the land of the respondent had
been taken over or acquired in any manner
known to law or that he had ever been paid
any compensation in respect of such
acquisition. That the land was thereafter
constructed upon, is not denied.
6. Having heard the learned counsel for the
appellants, we are satisfied that the case
projected before the court by the appellants is
utterly untenable and not worthy of emanating
from any State which professes the least
regard to being a welfare State. When we
pointed out to the learned counsel that, at this
stage at least, the State should be gracious
enough to accept its mistake and promptly pay
the compensation to the respondent, the State
has taken an intractable attitude and persisted
in opposing what appears to be a just and
reasonable claim of the respondent.
7. Ours is a constitutional democracy and
the rights available to the citizens are declared
by the Constitution. Although Article 19(1)(f)
was deleted by the Forty-fourth Amendment
to the Constitution, Article 300-A has been
placed in the Constitution, which reads as
follows: "300-A. Persons not to be deprived
of property save by authority of law.--No
person shall be deprived of his property save
by authority of law."
8. This is a case where we find utter lack of
legal authority for deprivation of the
respondent‟s property by the appellants who
are State authorities. In our view, this case
was an eminently fit one for exercising the
writ jurisdiction of the High Court under
Article 226 of the Constitution. In our view,
the High Court was somewhat liberal in not
imposing exemplary costs on the appellants.
We would have perhaps followed suit, but for
the intransigence displayed before us."
30. In view of aforesaid the writ petition is to be allowed.
Facts of the W.P. (C) No. 15639 Of 2006
31. Taksal Theaters Private Limited has filed this petition for refund
of wealth tax deposited by them for the assessment year 1999-2000.
Claim for refund for the assessment year 2000-01 has been granted and
to this extent the prayer in the writ petition is infructuous. Another
prayer made in the writ petition is that it should be declared that the
properties of the petitioner at Varansi being a theater and commercial
complex during the relevant assessment year were exempt from
payment of wealth tax.
32. The admitted factual position is that the petitioner had filed the
wealth tax return and had deposited Rs.1,49,536/- on self assessment
basis, as the wealth tax for the assessment year 1999-2000. In the
wealth tax return, the petitioner had declared taxable wealth on the
basis of which the self assessment tax was paid. The petitioner in
taxable wealth, has included the asset, the cinema hall-cum-
commercial complex. In the writ petition, the petitioner has not
mentioned the date when the return for the assessment year 1999-2000
was filed. The respondents also have not stated in their counter
affidavit the date on which the wealth tax return for the assessment
year 1999-2000 was filed. The only document available on record is
the challan for deposit of self assessment wealth tax, which is dated
15th November, 1999. It appears that the return was, therefore, filed in
November, 1999.
33. It is the accepted case of the parties that the return filed by the
petitioner was accepted and the return was not subjected to scrutiny. In
these circumstances, the acknowledgment of return is to be regarded as
the assessment under Section 16(1) of the 1957 Act.
34. This is clear if we examine Section 16 of the 1957 Act, which
for the sake of convenience is reproduced below:-
"16. Assessment.--(1) *Where a return has been
made under section 14 or section 15 or in response
to a notice under clause (i) of sub-section (4),--
(i) if any tax or interest is found due on the basis
of such return, after adjustment of any amount paid
by way of tax or interest, then, without prejudice to
the provisions of sub-section (2), an intimation
shall be sent to the assessee specifying the sum so
payable, and such intimation shall be deemed to be
a notice of demand issued under section 30 and all
the provisions of this Act shall apply accordingly ;
and
(ii) if any refund is due on the basis of such
return, it shall be granted to the assessee and an
intimation to this effect shall be sent to the assessee
:
Provided that except as otherwise provided in
this sub-section, the acknowledgement of the return
shall be deemed to be intimation under this sub-
section where either no sum is payable by the
assessee or no refund is due to him :
Provided further that no intimation under this
sub-section shall be sent after the expiry of two
years from the end of the assessment year in which
the net wealth was first assessable.
(1A) and (1B) omitted by FA 1999 wef 1-6-
1999.
(2) Where a return has been made under section
14 or section 15, or in response to a notice under
clause (i) of sub-section (4) of this section, the
Assessing Officer shall, if he considers it necessary
or expedient to ensure that the assessee has not
understated the net wealth or has not under paid the
tax in any manner, serve on the assessee a notice
requiring him, on a date to be specified therein,
either to attend at the office of the Assessing
Officer or to produce, or cause to be produced
there, any evidence on which the assessee may rely
in support of the return:
Provided that no notice under this sub-section
shall be served on the assessee after the expiry of
twelve months from the end of the month in which
the return is furnished:
(3) On the day specified in the notice issued
under sub-section (2) or as soon afterwards as may
be, after hearing such evidence as the assessee may
produce and such other evidence as the Assessing
Officer may require on specified points, and after
taking into account all relevant material which he
has gathered, the Assessing Officer shall, by order
in writing, assess the net wealth of the assessee and
determine the sum payable by him on the basis of
such assessment.
(4) For the purposes of making an assessment
under this Act, the Assessing Officer may serve, on
any person who has made a return under section 14
or section 15 or in whose case the time allowed
under sub-section (1) of section 14 for furnishing
the return has expired, a notice requiring him, on a
date to be specified therein,--
(i) Where such person has not made a return
within the time allowed under sub-section (1) of
section 14 to furnish a return of his net wealth or
the net wealth of any other person in respect of
which he is assessable under this Act on the
valuation date, in the prescribed form and verified
in the prescribed manner, setting forth the
particulars of such net wealth and such other
particulars as may be prescribed, or
(ii) to produce or cause to be produced such
accounts, records or other documents as the
Assessing Officer may require.
(5) If any person,--
(a) fails to make the return required under sub-
section (1) of section 14 and has not made a return
or revised return under section 15, or
(b) fails to comply with all the terms of a notice
issued under sub-section (2) or sub-section (4),
the Assessing Officer, after taking into account,
all relevant material which he has gathered, shall,
after giving such person an opportunity of being
heard, estimate the net wealth to the best of his
judgment and determine the sum payable by the
person on the basis of such assessment:
Provided that such opportunity shall be given by
the Assessing Officer by serving a notice calling
upon the person to show cause, on a date and time
to be specified in the notice, why the assessment
should not be completed to the best of his
judgment:
Provided further that it shall not be necessary to
give such opportunity in a case where a notice
under sub-section (4) has been issued prior to the
making of the assessment under this sub-section.
(6) Where a regular assessment under sub-
section (3) or sub-section (5) is made,--
(a) any tax or interest paid by the assessee under
sub-section (1) shall be deemed to have been paid
towards such regular assessment ;
(b) if no refund is due on regular assessment or
the amount refunded under sub-section (1) exceeds
the amount refundable on regular assessment, the
whole or the excess amount so refunded shall be
deemed to be tax payable by the assessee and the
provisions of this Act shall apply accordingly."
35. Section 16(1) of the 1957 Act stipulated that where a return of
wealth was filed, the Assessing Officer would on the basis of such
return examine whether after adjustment of the amount paid by way of
tax or interest any further amount was payable or refundable and
accordingly send an intimation to the assessee. This action was
without prejudice to provisions of sub-section 2 to Section 16. The
aforesaid sub-section related to cases which were taken up for scrutiny.
The proviso to Section 16(2) stipulated that no notice for scrutiny
would be served on the assessee after expiry of 12 months from the end
of the month in which the return was furnished. With regard to
intimation under Section 16(1) also, the second proviso stipulated that
no intimation under Section 16(1) shall be sent two years after the end
of the assessment year in which the net wealth was assessable. The
first proviso stipulated that the acknowledgment of the return shall be
deemed to be intimation under this sub-section where no sum was
payable by the assessee or no refund was due to him. It, therefore,
follows that if no intimation was received after expiry of two years
from the end of the assessment year, then acknowledgment of the
return issued by the Revenue was to be treated as the intimation that no
sum was payable by the assessee and no refund was due to him.
36. The sum effect of Section 16(1) and (2) is that in case no notice
under sub-section 2 to Section 16 was issued and no intimation for
refund or payment of tax was issued within two years, the
acknowledgment issued at the time of filing of the return by the
Revenue is treated as the intimation. Consequently net wealth as
declared is the assessed taxable wealth. Above discussion elucidates
that the return of wealth tax filed by the petitioner-assessee in
November, 1999 was accepted and has become an order of intimation
under Section 16(1) of the 1957 Act. The said intimation has become
final and binding and cannot be reopened under Section 16(2) as the
period for issue of notice under the said Section has expired. The
result is that the return filed by the petitioner-assessee declaring the net
wealth has attained finality.
37. It may be noted here that the petitioner had the right to file a
revision under Section 25 of the 1957 Act. However, the period for
filing of the revision has expired and the petitioner did not take steps to
invoke the said power.
38. The provision for refund of wealth tax is found in Chapter VII A
of the Act. The said Chapter consists of only one section, Section 34A
and the relevant sub-sections are 1 and 2, which read as under:-
"34A. Refunds.--(1) Where, as a result of any
order passed in appeal or other proceeding
(including a rectification proceeding) under this
Act, refund of any amount becomes due to the
assessee, the Assessing Officer shall, except as
otherwise provided in this Act, refund the amount
to the assessee without his having to make any
claim in that behalf.
Provided that where, by the order aforesaid,--
(a) an assessment is set aside or cancelled and
an order of fresh assessment is directed to be made,
the refund, if any, shall become due only on the
making of such fresh assessment ;
(b) the assessment is annulled, the refund
shall become due only of the amount, if any, of the
tax paid in excess of the tax chargeable on the net
wealth returned by the assessee.
(2) Where refund of any amount becomes due to
the assessee as a result of and order under this Act
or under the provisions of sub-section (1) of
section 16 after a return has been made under
section 14 or section 15 or in response to a notice
under clause (i) of sub-section (4) of section 16 and
the Assessing Officer is of the opinion, having
regard to the fact that,--
(i) a notice has been issued, or is likely to be
issued, under sub-section (2) of section 16 in
respect of the said return ; or
(ii) the order is the subject-matter of an appeal
or further proceeding ; or
(iii) any other proceeding under this Act is
pending,
that the grant of the refund is likely to
adversely affect the revenue, the Assessing Officer
may, with the previous approval of the Chief
Commissioner or Commissioner, withhold the
refund till such time as the Chief Commissioner or
Commissioner may determine."
39. Under sub-section 1, the Assessing Officer was required to make
refund of tax paid by the assessee without any claim or application on
behalf of the assessee if the same becomes due as a result of an order
passed in an appeal or any other proceedings. Sub-section 2 makes it
clear that a refund may become due even when an order was passed or
intimation was made under sub-section 1 to Section 16 of the 1957
Act. As discussed above the acknowledgment of the return constitutes
intimation but as per the said intimation, no amount is refundable. The
order of intimation under Section 16(1) has attained finality and has
not been challenged or questioned in a revision. Return of wealth has
also not been revised. In terms of Section 34A of the 1957 Act, the tax
paid by the petitioner is not to be refunded and the tax deposited is
payable towards the wealth declared which has become the wealth
assessed.
40. Faced with the aforesaid situation, learned counsel for the
petitioner submitted that the intimation under Section 16(1) of the 1957
Act is a nullity as the assets declared by the petitioner and included in
the net wealth are excluded and are not assessable to wealth tax. The
aforesaid contention has no merit. The Assessing Officer has
jurisdiction to pass an order of assessment or accept a return. An
acknowledgment of the return may constitute intimation. An order or
intimation may be incorrect and contrary to the provisions of the Act.
Something which is exempt and not assessable to tax may have been
included and treated as a part of net the wealth, but this will not make
the order or the intimation void ab initio or nullity in law. The order
itself may be susceptible to challenge but the said order or intimation
cannot be ignored and regarded as a waste paper. So long as it exists, it
operates and the consequences flow. Any other interpretation will lead
to unacceptable consequences. There will be cases or writ petitions by
the assessee, or even by the Revenue if a „wrong‟ order is passed by
the tribunal, based on the premise that the order or intimation on record
being contrary to the provisions of the Act are null and void and,
therefore, either tax should be refunded or tax should be paid. This is
not acceptable. The Act itself is a complete code that deals with the
question of payment of tax and refund of tax. It is not as if the
petitioner was without remedy. The petitioner had remedy to either file
a revised return or file a revision. The petitioner did not avail of the
said remedies and the limitation period has now expired. The petitioner
cannot get over the period of limitation by this method. Whether or
not an asset was eligible to wealth tax is determined under the 1957
Act.
41. Reliance placed by the petitioner on Sandvik Asia Limited
versus Commission of Income Tax-I, Pune and Others, (2006) 280
ITR 643 (SC) is misconceived. In the said case, the assessee had
claimed interest on the amount refundable. The amounts refundable
represented interest which was paid by the assessee to the department
under the 1961 Act. It was noticed that there was delay from 12 years
to 17 years in payment of the refund, i.e., interest paid by the assessee
to the department. It was held that as per the relevant provisions and in
the facts, interest was payable on the amount refundable even when the
amount paid by the assessee was towards the interest element. In the
present case, the intimation under Section 16(1) of the 1957 Act has
attained finality. No amount is refundable as per the said intimation.
42. Decision of the Delhi High Court in Vijay Kumar Bhati versus
Commissioner of Income Tax and Another, (1994) 205 ITR 110
(Delhi) deals with Section 241 of the 1961 Act and the power of the
Assessing Officer to set off of refunds under section 241 of the 1961
Act. In the said case, refunds were due but the Assessing Officer
without intimation had passed an order under Section 241 of the 1961
Act which was held to be bad. Accordingly, directions were issued by
the High Court.
43. In another judgment of the Delhi High Court in Glaxo Smith
Kline Asia Private Limited versus Commissioner of Income Tax and
Others, 2007 (94) DRJ 681, Section 245 of the 1961 Act was invoked
and in that context observations were made with regard to power to set
off a refund against an outstanding demand. It was held that the
restrictions on power under Section 241, were equally applicable to
Section 245 and the section should not be mechanically invoked.
Observations in the said decision are of no relevance.
44. In R. Seshammal versus Income Tax Officer and Another,
(1999) 237 ITR 185 (Mad), the assessee had paid advance tax
amounting to Rs.43,808/- but had not filed any return of income or
applied for refund in time under Section 237 of the 1961 Act.
However, Notice under Section 148 of the 1961 Act was issued and the
assessee had filed return of income but the proceedings were closed.
Thus the assessee had claimed refund. The assessee had filed a petition
under Section 119(2) of the 1961 Act, which was rejected. In the said
decision, relevant provisions of the 1961, Act, have not been
considered and interpreted. It will not be appropriate to apply the said
decision to the case of the petitioner in the present writ petition as in
the present case, return was filed and the wealth declared has been
accepted. The acknowledgment/return constitutes intimation, which
has become final.
45. Decision of a Division Bench of Gujarat High Court in S.R.
Koshti vs. Commissioner of Income-tax, (2005) 276 ITR 165 (Guj.), is
distinguishable. In the said case, return was filed and was processed.
Subsequently, the assessee revised his return to claim deduction under
Section 10(10C) but the same was beyond limitation. The Assessing
Officer had passed a rectification order under Section 154 of 1961 Act,
and had allowed the said deduction. But this order was reversed by the
Commissioner exercising power under Section 263 of the 1961 Act.
The assessee filed a revision petition under Section 264 of the 1961
Act which was dismissed. The High Court in the writ proceedings
referred the two orders under Section 263 and 264 of the 1961 Act. It
was held that the Commissioner had the power to revise the assessment
order under Section 264, even if the revised return was not filed, once
the assessee was able to show that he was over assessed.
46. Decision of Calcutta High Court in Mayank Poddar (HUF) vs.
Wealth Tax Officer, (2003) 262 ITR 633 (Cal.), is on an appeal filed
under the provisions of the 1957 Act. The same is not the position
here.
Conclusion
47. Accordingly, writ of mandamus is issued directing the
respondent to process the claim on merits for refund to the petitioner-
Indglonal Investment Finance Ltd. Rs 5,73,034/- along with the
interest as per the 1961 Act within eight weeks from the date of copy
of this order is received. W.P.(C) No 15639 of 2006 filed by M/s
Taksal Theaters Private Limited is however, dismissed. In the facts of
the cases there will be no order as to costs.
(SANJIV KHANNA)
JUDGE
(DIPAK MISRA)
CHIEF JUSTICE
JUNE 3rd , 2011
KKB/VKR
