Revenue could not avoid processing of return under section 143(1) and granting of refund to assessee on ground that notice under section 143(2) had been issued to assessee

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Revenue could not avoid processing of return under section 143(1) and granting of refund to assessee on ground that notice under section 143(2) had been issued to assessee.

[2020] 114 taxmann.com 728 (Bombay), Tata Communications Ltd. Vs. Deputy Commissioner of Income-tax – 1(3)(2)*
AKIL KURESHI AND S.J. KATHAWALLA, JJ.,WRIT PETITION NO. 894 OF 2019, JULY  8, 2019
 Gujarat High Court in the case of Corrtech International (P.) Ltd. v. Dy. CIT [2017] 86 taxmann.com 156/251 Taxman 48/[2018] 401 ITR 355 was also confronted with some what similar situation. It was noticed that section 241A was inserted in the Act by the Finance Act, 2017 and was made applicable to the assessment years 2017-18 and onwards. It was also a case in which the Assessing Officer had issued notice under section 143(2) of the Act and the assessee was clamoring for processing of the return under section 143(1) and refund arising out of such return. The Court noted the decision of this Court in the case of Group M. Media India (supra) and the decision of the Delhi High Court in the case of Tata Teleservices Ltd. v. Central Board of Direct Taxes [2016] 69 taxmann.com 226/240 Taxman 182/386 ITR 301 and observed as under :
“15. A combined reading of the said provisions and in particular, sub-section (1D) of Section 143 would demonstrate that once a notice under sub-section (2) of section 143 is issued, it would be discretionary for the Assessing Officer to process the return under section 143(1). The time limit envisaged in the further proviso to sub-section (1) would not apply but that the same can be done only before issuance of the order of assessment under sub-section (3).”
16. Under such provision, therefore, it would be open for the Assessing Officer to process the return under section 143(1) and, if the culmination of such exercise is to deny a refund to the assessee, send such an intimation, as provided, under the proviso to sub section (1). Once however, the time frame envisaged in the further proviso to sub-section (1) expires and is not extended by virtue of the operation of sub-section (1D) of section 143, there would be no scope thereafter for the Assessing Officer to withhold the refund arising out of the return filed by the assessee.
17. This position would become clear if we compare the provisions of section 143(1D) as amended by the Finance Act, 2017 read with newly inserted section 241A. Under the new sub-section (1D) the legislature provides that notwithstanding anything contained in sub-section (1) the processing of return would not be necessary where a notice has been issued to an assessee under sub-section (2). This would make it clear that once notice under section 143(2) has been issued, the Assessing officer shall not process the return under section 143(1). The original proviso to sub-section (1D) has been substituted by a new proviso under which it is clarified that the proviso under said sub-section shall not apply to any return furnished for the assessment year commencing on or after 01.04.2017. Section 241A which was inserted simultaneously, now enables the Assessing Officer to withhold the refund in favour of the assessee which becomes due in terms of sub-section (1) of section 143 if he is of the opinion that having regard to the fact that a notice has been issued under sub-section (2) of section 143 that the grant of refund is likely to adversely affect the Revenue, he would, however, do so by recording reasons in writing and with previous approval of the Principal Commissioner or Commissioner and withhold such refund till the date the assessment is made. We may recall that section 241 which was omitted w.e.f. 01.06.2001 previously enable the Assessing Officer to withhold the refund which becomes due and payable in terms of sub-section (1) of section 143 under certain circumstances including in a situation where a notice has been issued or is likely to be issued under sub-section (2) of section 143 of the Act and the Assessing Officer is of the opinion that the grant of refund is likely to adversely affect the Revenue.
21. Coming back to the facts on hand, so far as the assessment of the year 2015-16 is concerned, the return was filed on 29.09.2015 for which, the time limit under the normal provision of sub-section (1) of section 143 of the Act, for processing the return is over long back. Even though as discussed earlier, the Assessing officer having issued notice under sub-section (2) of section 143 of the Act, he would get an extended time for proceeding under sub-section (1) as highlighted by the Delhi High Court in case of Tata Teleservices Ltd. (supra) and by the Bombay High Court in the case of Group M Media India (P.) Ltd. (supra), it would be wholly inequitable for the Assessing Officer to merely sit over the Petitioner’s request for refund citing the availability of time upto the last date of framing the assessment under sub-section (3) of section 143. At lease once the time limit envisaged in the proviso to sub-section (1) of section 143 is over without the Assessing Officer processing the return under sub-section (1) and even though notice under sub-section (2) of section 143 may have been issued, the Assessing Officer, by all reasonable interpretation of the statutory provisions would be expected to respond to the assessee’s request for either granting refund or indicating that in terms of the adjustments impermissible under sub-section (1) of section 143, such refund or part thereof was not available to the assessee. We simply cannot accept the the interpretation of the counsel for the Revenue that once a notice under sub-section (2) of section 143 is issued, the suspension of the refund arising out of the return filed by the assessee would be automatic and till the passing of the order of assessment under sub-section (3) of section 143. The reasonable interpretation of the statute and the situation in such a case would be, to expect the Assessing Officer to take up an expeditious disposal of the processing of return under sub-section (1) of section 143 of the Act at least once the assessee requests for release of the refund and send as an intimation to the assessee if he wishes to withhold the same “
As per the settled law, the Respondents cannot avoid processing the return under section 143(1) of the Act and granting refund to the Petitioner if due as per such return. The Respondents have not cited justifiable reasons why such refund cannot be released.
In view thereof, the Respondents are directed to process the return under section 143(1) of the Act and release refund if due, with statutory interest as payable within one month from the date of receipt of copy of this order.
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