Wrongful Denial of Huge Refund to Educational Society: Hon’ble Supreme Court Directs Disposal of Income-tax Appeal within 2 Months
Summary: The Supreme Court of India intervened in the case of Dalhousie Public School Educational Society v. Union of India & Ors. to expedite a tax appeal concerning a large refund due to an educational society. The society, entitled to income tax exemption, inadvertently deposited an excessive self-assessment tax, which the NFAC Assessment Unit later accepted as Nil income under Section 143(3). However, a mistake apparent from the record in the computation sheet failed to credit the prepaid tax, forcing the society to seek rectification under Section 154. When the jurisdictional Assessing Officer arbitrarily rejected the rectification, the society filed a writ petition. The Punjab and Haryana High Court initially directed the society to file a statutory appeal under Section 246A, setting an expedited one-year deadline. The Supreme Court subsequently reduced this timeline drastically, ordering the Appellate Authority (NFAC) to hear and dispose of the appeal within a strict period of two months. This ruling establishes a precedent emphasizing the need for exceptional urgency in disposing of appeals where the withholding of a lawful refund significantly hinders the operation of an educational institution.
The Background: An Apparent Mistake, An Arbitrary Denial
The matter originated when an Educational Society, which is entitled to exemption under the Income Tax Act, 1961, inadvertently deposited an excessive self-assessment tax while filing its original return for a relevant Assessment Year. Recognizing this, the Society promptly filed a revised return declaring Nil income, which was subjected to through scrutiny and subsequently accepted by the Assessment Unit of the National Faceless Assessment Centre (NFAC) under Section 143(3).
However, a clear ‘mistake apparent from the record’ in the accompanying Computation Sheet failed to credit the inadvertently deposited self-assessment tax under the ‘Prepaid Taxes’ head. The Society filed an application for rectification under Section 154 to correct this oversight and secure the pending refund.
In an illegal move, depicting colourable exercise of executive power merely to deny the legitimately owed refund, the jurisdictional Assessing Officer rejected the rectification application filed by the society through a non-speaking order, citing unspecified mismatch, in effect refuting the conclusive findings of the Assessment Unit, NFAC. This forced the educational institution to approach the jurisdictional Hon’ble Punjab and Haryana High Court.
The Judicial Intervention: SC Shortens HC’s Timeline.
The Hon’ble High Court initially disposed of the Society’s Writ Petition, directing the petitioner to pursue the statutory remedy of appeal under Section 246A. While acknowledging the institution’s nature and the fact that a huge amount of refund was involved, the High Court directed the Appellate Authority to decide the appeal expeditiously, setting a timeline of up to one year.
The Educational Society then took the matter to the Supreme Court. The Hon’ble Apex Court, noting that the statutory appeal had already been filed with the National Faceless Appeals Centre, modified the High Court’s directive.
The Supreme Court ordered the Appellate Authority to ensure that the appeal preferred by the society is heard and disposed of within a strict period of two months from the date of its order, significantly shortening the timeline originally set by the High Court.
This ruling serves as a strong precedent, affirming the principle that where an Educational Institution’s functioning is hampered by the withholding of a lawful refund, the appeal mechanism must be executed with exceptional urgency.
Author Bio
