HC directs AO to pass appeal effect order & Issue Income Tax refund with interest

Brillon Consumer Products Pvt. Ltd—Earlier Known as Karamchand Appliances Pvt. Ltd. Vs DCIT (Delhi High Court)

Introduction: The Delhi High Court, in the case of Brillon Consumer Products Pvt. Ltd—Earlier Known as Karamchand Appliances Pvt. Ltd. vs. DCIT, issued a significant directive related to the Income Tax refund and appeal effect orders. This article dissects the court’s decision, focusing on the petitioner’s plea for a refund of Rs. 2,85,75,315/- for AY 2000-01 and Rs. 1,77,18,970/- for AY 2015-16, along with the passing of appeal effect orders and disposal of rectification applications.

Petition Details:

• The petitioner seeks a refund for AY 2000-01 and AY 2015-16 with up-to-date interest.
• The petitioner in W.P.(C) 16347/2023 emphasizes the passing of an appeal effect order related to court orders quashing reassessment proceedings for AY 2000-01.
• W.P.(C) 16356/2023 requests the disposal of rectification applications filed by the petitioner.

Legal Arguments:

• Non-issuance of refunds for AY 2000-01 and AY 2015-16 is argued as a violation of Article 265 of the Constitution of India and Section 237 of the Income Tax Act.
• Adjustment of AY 2014-15 refund against a non-existent demand for AY 2000-01 is highlighted as an unjust action.

Adjustment Issues:

• Recovery and adjustment without disposing of the stay application for demand of Rs. 9,16,71,460/- are deemed illegal.
• Recovery exceeding 20% of the outstanding demand for A.Y. 2015-16 is alleged to violate CBDT Office Memorandums.

Court Directives:

• The court issues notice to respondents and accepts notice on their behalf.
• Disposes of the petitions, directing the Assessing Officer to pass an appeal effect order within four weeks and refund the amount with interest within an additional four weeks.
• Directs the AO to decide the comprehensive rectification application for AY 2015-16 within four weeks and issue refunds accordingly.

Conclusion: The Delhi High Court’s directive in the Brillon Consumer Products Pvt. Ltd. vs. DCIT case sets a precedent for prompt action on IT refunds and appeal effect orders. The court’s emphasis on adherence to legal procedures and the timely disposal of rectification applications underscores the importance of procedural integrity in income tax matters. As the court ensures justice in this specific case, it reinforces the broader principles of fairness and compliance within the taxation system.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Present writ petitions have been filed seeking issuance of refund of Rs. 2,85,75,315/- for Assessment Year (AY) 2000-01 and Rs. 1,77,18,970/-for AY 2015-16 along with up-to-date interest.

2. The Petitioner in W.P.(C) 16347/2023 further prays for passing of an appeal effect order with respect to orders dated 16^th November, 2017, 28^th September, 2018 and 26^th July, 2019 passed by this Court whereby the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961(the “Act”) for AY 2000-01 were quashed.

3. The Petitioner in W.P.(C) 16356/2023 prays for directions to the Respondents to dispose-off the rectification applications filed by the petitioner dated 02^nd March, 2021, 31^st January, 2022, 24^th January, 2023, 16^th May, 2023, and 26^th September, 2023 by way of a speaking order in accordance with law.

4. Learned counsel for the Petitioners states that despite submission of various applications (including applications dated 26^th August, 2019 and 04^th December, 2019 for passing of an appeal effect order with respect to orders dated 16^th November, 2017, 28^th September, 2018 and 26^th July, 2019), non-issuance of refund due for AY 2000-01 and AY 2015-16 is in violation of Article 265 of the Constitution of India and Section 237 of the Act.

5. Learned counsel for the Petitioners states that despite absence of any demand outstanding against the Petitioner for AY 2000-01, refund of Rs. 8,77,63,700/- due to the Petitioner for AY 2014-15 was adjusted against non-existent demand of Rs. 1,38,04,500/- for AY 2000-01 due to inaction of the Respondents in passing the appeal effect order for AY 2000-01. She further states that no adjustment was called for on the said date of adjustment as the demand for AY 2000-01 already stood deleted and cancelled.

6. She also relies upon various judgments to submit that no demand can be adjusted against the refund without passing a speaking order under Section 245 of the Act.

7. Learned counsel for the petitioner also states that without disposing of the application filed by the petitioner for stay of demand amounting to Rs.9,16,71,460/- raised vide assessment order dated 29^th November, 2017, the respondents adjusted refunds for AY 2012-13, 2014-15 and 2017-18 that were due to the petitioner against the outstanding demand determined vide assessment order dated 29^th November, 2017 for A.Y. 2015-16.

8. She further states that recovery and adjustment despite pendency of rectification applications dated 02^nd March, 2021, 31^st January, 2022, 24^th January, 2023, 16^th May, 2023, and 26^th September, 2023, was illegal. She also states that action of the Respondents in recovering amount in excess of 20% of the outstanding demand for A.Y. 2015-16 is in violation of Office Memorandums issued by CBDT dated 29^th February, 2016 and 31^st July, 2017.

9. Issue notice. Mr. Kunal Sharma accepts notice on behalf of the respondents.

10. Keeping in view the limited relief sought in the present writ petitions, the same are disposed of with a direction to the Assessing Officer to pass an appeal effect order within four weeks and refund the amount along with interest, if any, in the petitioner’s bank account within a further period of four weeks.

11. Since learned counsel for the petitioner states that the rectification application for A.Y. 2015-16 dated 24^th January, 2023 is most comprehensive, this Court directs the Assessing Officer to decide the same in accordance with law within four weeks, and refund the amount along with interest, if any, in the petitioner’s bank account within a further period of four weeks. With the aforesaid directions, the present writ petitions stand disposed of.