Income Tax Refund Cannot Be Withheld Without Assigning Any Reason!
The Calcutta High Court held that the Assessing Officer cannot withhold Income Tax Refund though the statute mandates without assigning any reason.
In Mcnally Bharat Engineering Company Limited and Anr. V Assistant Commissioner of The Income Tax, Circle 1(1) Kolkata And 6 Others [WPO 80 of 2020 decided on August 8, 2021], Mcnally Bharat Engineering Company Limited (“the Petitioner”) filed a written petition seeking refund of Rs. 20,14,56,936/- from Assistant Commissioner of The Income Tax (“the Respondent”) who withheld the refund determined under Section 143(1) of the Income Tax Act, 1961 (“the IT Act”) of the Petitioner for assessment year 2018-19 computed in accordance with provisions of Section 244A of the IT Act.
The Petitioner contended that the Respondent withheld the refund as per provision of Section 241A of the IT Act, however, in order to invoke the same, the Respondent had to form an opinion that the grant of refund is likely to adversely affect the revenue which it failed to do so.
The Hon’ble High Court of Calcutta relying on a principle laid down in the judgment of Nazir Ahmad vs. King Emperor [AIR 1936 PC 253], which provided that “if a statute provides an act to be done by a particular authority and in a particular manner, it should only be done by that authority and in that manner or not at all” noted that the Respondent acted arbitrarily by withholding the refund without assigning any reason though the statute mandates for recording the same.
Further, directed the Respondent to refund the amount of Rs. 20,14,56,936/- within a period of four weeks from a date with further interest on the principal sum of Rs. 18,31,42,676/- from the date upto which interest has been added to the principal sum in arriving at the figure of Rs. 20,14,56,936/- till actual refund as per the provisions of the Income Tax Act, 1961. “The respondents shall act on the basis of a server copy of this order without insisting on a certified copy thereof while processing the refund,” the court said.
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