Income Tax Refund: Refund Principles of natural justice and fair play should be followed- Bombay HC
Bombay HC in a write petition filed before it in case of Income Tax Refund has held that refund Principles of natural justice and fair play should be followed-
Let us have a Short Overview of the case:
Primary Issues:
The validity of the impugned communication dated 16 June 2022, which rejected the refund claim was challenged by way of writ. The legal status of the communication dated 29 November 2018, which acknowledged the refund claim.
Whether a writ of mandamus should be issued to grant the refund based on the communication dated 29 November 2018.
Petitioner’s Arguments:
The communication dated 29 November 2018 constitutes a determination of the refund under Section 237 of the Act.
The petitioner is entitled to a refund as per the India-Mauritius Tax Treaty, which mandates a 5% DDT rate instead of 20.358%.
The petitioner argued that the refund claim was made correctly and that the communication dated 16 June 2022 was unjustified.
Respondent’s Arguments:
The petitioner must file a return of income to claim a refund, as per Section 239 read with Rule 41. The communication dated 29 November 2018 was not a statutory order but a preliminary opinion.
The petitioner did not make a refund claim in their return of income and did not protest the intimation under Section 143(1) and assessment order under Section 143(3).
High Court’s decision:
The Court quashed the impugned communication dated 16 June 2022. The Court emphasized that the principles of natural justice and fair play were not followed before issuing the impugned communication dated 16 June 2022, as the petitioner was not given an opportunity to be heard.
The Court noted that the communication dated 29 November 2018 was based on preliminary verification and was not a final determination of the refund claim. A final order must be conclusive and supported by reasoning.
The Court highlighted that the refund claim must be determined through a statutory order under Section 237 of the Act, which requires a final and conclusive determination of the entitlement to a refund.
The Court directed the AO to pass a final order on the refund claim within eight weeks, after giving the petitioner an opportunity for a hearing.
The communication dated 29 November 2018 was not considered a final statutory order.
The copy of the order is as under:
