Whether refund can be granted even without processing return of income either under Ss 143(1) or 143(3) - NO: Delhi HC

THE issues before the Bench are - Whether refund can be granted even without processing return of income either under Ss 143(1) or 143(3); Whether xerox copies of TDS certificates submitted along with the return of income are enough to grant refund; Whether income tax authority is bound to condone the delay in filing refund application, filed by the assessee and Whether when the assessee has filed two seperate refund applications and the reasons mentioned are different in both the applications, the denial to issue refund amount can still be construed as arbitrary. And the verdict goes against the assessee.

Facts of the case

Kiwani club of New Delhi was registered as a charitable organisation u/s 12A. It was established for the benefit of providing artificial limbs and therapy and for ensuring economic empowerment of women. During the year under

consideration, the petitioner received rents from its properties. At the time of remitting the rent, the tenants had deducted and deposited the tax with the banks. In the ROI filed, the petitioner claimed the refund of tax deducted at source. The return was not processed u/s 143(1) and therefore, no refund was granted to the petitioner. Subsequentally a letter was filed with the department explaining the delay in making the refund and a request was made that the delay in filing the return may be condoned and the refund be granted with interest. Petitioner had also enclosed TDS certificates received from the banks. The respondent passed an order u/s 119(2)(b) turning down the request of the petitioner for condonation of the delay in filing the ROI and in claiming refund.

Before HC, the petitioner's counsel contended that the petitioner being a philanthropic or charitable organization, the refusal to refund the TDS had caused genuine financial hardships and had impeded the charitable activities of the petitioner. It was further urged that as the relevant tax deduction certificates and certificates from the banks for deposit of the tax were furnished to the respondent and therefore, a direction be issued to the respondent to refund the amount along with interest till date. On the other hand, the Revenue's counsel contended that the ROI was filed belatedly, on the basis of which no assessment had been done and thus refund was possible. It was also pointed out that no TDS certificates were enclosed with the ROI either in original or in photocopies, nor was any audit report attached. It was stated that the request for condonation of the delay in filing the return was not rejected arbitrarily but a report was called for by the respondent from the concerned AO who reported that there existed no cause for the delay in filing the return.

Having heard the matter, the High Court held that:

++ under general principles, a refund of taxes can be granted only where the ROI is processed u/s 143(1) or an assessment is made u/s 143(3) after inquiry. There is no provision in the Act to grant a refund without the return being processed u/s 143(1) or an assessment being made u/s 143(3). In the case of the petitioner since the ROI was filed not only beyond the time limit prescribed by Section 139(1) but also beyond time limit prescribed by Section 139(4), the return could neither be processed u/s 143(1) nor could an assessment be made u/s 143(3);

++ there is no acceptable evidence for the TDS. The petitioner was able to file only copies of the TDS certificates in Form No.16A, but the originals were not produced or filed. It would be contrary to law to grant refunds on the basis of the photocopies of the certificates without the originals being produced for verification or filed. The furnishing of the bank certificates also does not take the case of the petitioner further because a perusal of the certificate issued by the PNB shows that apart from showing the date of deposit, the amount deposited, the challan number and the date of onward submission to the government, no details as to whose credit the tax was deposited are shown. From the certificate it is not possible to establish that the tax was deposited to the credit of the petitioner. The PAN number of the person to whose credit the tax was deposited is not shown in the certificate. The respondent was, therefore, right in not acting upon the certificate issued by the bank. Thus there is no evidence for the deposit of the TDS to the credit of the petitioner;

++ the order passed by the respondent u/s 119(2)(b) does not, suffer from any infirmity. Under this provision, the CBDT may, if it considers it desirable or expedient so to do for the removal of genuine hardship in any case or class of cases, by general or special order, authorise any income tax authority other than the CIT (A), to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by the Act for making such application or claim and deal with the same on merits in accordance with law. The respondent, it is not denied, has been duly authorised by the CBDT for the purpose of processing the application filed by the petitioner. The reason advanced by the petitioner for the delay in filing the ROI was not found correct by the respondent. Therefore the reasons for the delay in filing the ROI were found to be factually incorrect by the respondent even on the basis of return and the annexures thereto. In these circumstances, the respondent has rightly stated that the explanation of the petitioner and the reasons for the delay cannot be accepted, as they were not beyond the control of the petitioner;

++ according to the CBDT’s directions, the claim for refund should have been made within a period of six years from the end of the relevant assessment year. The petitioner ought to have made the claim on or before 31.03.2005. The claim was however made on 19.04.2005 and it was followed up by another application dated 21.12.2006. The respondent has in its order found that different reasons which are contradictory have been given in the two applications for condonation of delay. He has, therefore, refused to condone the delay. Having regard to the limits of judicial review, we are unable to say that the petitioner has been treated unfairly or that the decision of the respondent suffers from any irrationality or perversity. In the circumstances of the case, we are unable to say that the decision not to condone the delay is arbitrary.