Withholding of refund for non-completion of assessment is invalid

Cooner Institute of Health Care And Research Centre Pvt. Ltd. Vs ITO (Delhi High Court)

Delhi High Court Direction To Release Refund Withheld Without Valid Reasons And Based On Flawed Assumption

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. We find that the aforesaid reason is inherently flawed and contrary to the views expressed by this Court in aforesaid two cases i.e. 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.

The exercise of withholding of refund under section 241A of the Act, pursuant to notice u/s 143(2) of the Act, without recording justifiable reasons, is not in consonance with the legislative intent and mandate of the aforesaid provision. The reasons cited do not support the finding that refund would adversely affect the Revenue. In view of the aforesaid, we hold that the reasoning given by the Income-Tax Officer is contrary to Section 241A of the Act. Accordingly, we set aside the impugned communication/ order dated 10.0 1.2020. We, therefore, grant three weeks’ time to the respondents to re-consider the aspect whether the amount found due to be refunded, or any part thereof, is liable to be withheld under Section 241A in line with the decisions of this court as noted above. 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 (1) 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. It shall be open to the petitioner to take remedial steps in respect of any orders for withholding of refund that may be passed. 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.

The writ petition is accordingly allowed in the above terms.

Please become a Premium member. If you are already a Premium member, login here to access the full content.