CHANDRA MOHAN VS UNION OF INDIA, 2002 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 1233 (1998)

Income-tax---

----Refund---Section 240 would apply only where refund becomes due as a result of an order passed in appeal or other proceeding under Indian Income- tax Act---Return filed and tax paid by assessee---No order of assessment within period of limitation---No claim by assessee that tax had been paid in excess---Amount paid as tax could not be refunded---Indian Income Tax Act, 1961, Ss, 140A & 240.

Under section 240 of the Income Tax Act, 1961, the liability for refund of any amount which becomes due to the assessee must be in consequence of any order passed in appeal or other proceeding under the Act. The tax payable on the basis of the returns filed by the assessee is treated as "assessed tax". It is not at all made dependent on any regular assessment being made, though in the event of regular assessment, the amount paid under subsection (1) of section 140A is deemed to have been paid towards the regular assessment. Therefore, by no stretch of imagination, can the tax paid and collected under section 140A be described as a mere ad hoc or interim payment which can be said to fail in the absence of a regular assessment.

Held, that in the instant case, the petitioner claimed refund not as a result of any order passed in appeal or other proceeding. It was not the case of the petitioner that in the return filed by the petitioner, the petitioner claimed refund of excess tax paid. The petitioner's claim was based on the fact that he had filed his return and paid the taxes but no order of assessment had been passed within the time provided under the Act. In such a situation, the taxable income shown in the return, so filed by the petitioner, shall be treated as admission of the petitioner and lie same shall be binding on him unless he files a revised return claiming some non-taxable income and on that basis refusing the liability for tax payment. The petitioner was not entitled to refund of this Court.

By the Court: Section 153(1)(a)(iii) has not provided that the return filed by the petitioner shall be deemed to have been an order of assessment of income-tax accepting the return of the assessee. In many matters under the law and otherwise an assessee is asked for an assessment order. If no assessment order exists it would create a difficulty as well as hardship to the taxpayers for non-action on the part of the Income-tax Officer. It is a matter which may invite the attention of the Government of India and the legislative body or functionary which may consider this aspect of the matter. It is not in the domain if this Court.

Saurashtra Cement and Chemical Industries Ltd. v. I.T.O. (1992)

CIT v. Shelly Products (1997) 225 ITR 882 (MP); Deep Chand Jain v. I.T.O. (1984) 145 ITR 676 (P&H); Gopal Ramnarayan (R.) v. I.T.O. (Third) (1980) 126 ITR 369 (Kar.); Gulabchand Motilal v. CIT (1994) 205 ITR 62 (MP); Saraya Sugar Mills Ltd. v. I.T.O. (1997) 226. ITR 475 (All.) and Shantibai (Sort.) v. CIT (1984) 148 ITR 49 (MP) ref.

P.R. Bhave for Petitioner.

V.K. Tankha for respondent.

JUDGMENT

The petitioner is an assessee assessed to income-tax under the Tax Act, 1961 (for brevity, hereinafter referred to as the Act .

The petitioner, by means of this petition, has approached this Court seeking relief of issuance of a writ is the nature of mandamus commanding the respondents, i.e., Union of India, the Commissioner of Income-tax, Madhya Pradesh-II, Jabalpur, and the Income-tax Officer, Headquarters (Administration), Income-tax Office, Jabalpur, for making refund of Rs.58,326.01, together with interest at the rate of 12 percent. per annum in accordance with the provisions of section 244 of the Act to the petitioner.

The case of the petitioner is that for the assessment year 1982-83, he filed his return in time on July 31,1982, showing his taxable income as Rs.1,17,468 and tax payable was shown at Rs.58,326.01. The assessment was to be completed within the statutory period of two years as provided under section 153(1)(a)(iii) of the Act and accordingly no assessment order was passed within the aforesaid period of two years, i.e. uptil March 31, 1985. Therefore, the tax already paid by the petitioner, in the absence of any order of assessment, had to be refunded to the petitioner. The petitioner accordingly put forth his claim for the refund of the tax paid by him on the basis that since no order of assessment was passed within the statutory period under the Act, the tact already paid has become due for refund. Thus, the petitioner applied for refund of the entire tax paid by the petitioner but the application for refund was rejected and the rejection was communicated vide communication, dated March 21, 1988. Accordingly, the present petition under Article 226 of the Constitution of India.

Heard learned counsel for the petitioner, She, P.R. Bhave, and learned counsel for the respondents, Shri V.K. Tankha.

Learned counsel for the: petitioner submitted that the respondents were not legally entitled for retention of the tax paid by the petitioner Without there being any assessment order and as such the action of non- refund of the tax on the part of the Income-tax Officer was illegal. Learned counsel for the petitioner in support of his contention invited the attention of the Court to the provisions of section 153 of the Act which provided a deadline for making an order of assessment under section 143 or section 144 of the Act and that deadline is two years from the end of the assessment year in which the income was first assessable.

Learned counsel submitted that the assessing authority failed to make any order within the time provided and thereafter under the law the authorities were sans any power to pass any assessment order. Since no assessment order has been passed, it would be treated as if the petitioner owes no liability for tax. He relied on the provisions of section 240 of the Act where under he applied for refund of the entire tax paid by the petitioner. Section 240 of the Act is as extracted below:

"240. Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Income-tax Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf."

Section 240 of the Act speaks that as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee. Here, the liability for refund of any amount which becomes due to the assessee must be in consequence of any order passed in appeal or other proceeding under the Act. Here, in the present case, learned counsel for the petitioner has not disputed the fact that the petitioner made a claim for refund before the Income-tax Officer, not as a result of any order passed in appeal or other proceeding. It is not the case of the petitioner that in the return filed by the petitioner, the petitioner claimed refund of excess tax paid. The petitioner's claim is on different premises, i.e. since no order of assessment has been made within the period provided under the Act and thereafter the concerned authorities were incapacitated to pass any order, therefore, the whole of the tax paid by the petitioner becomes refundable. So far as the position under section 240 of the Act is concerned it is clear that in the case of the petitioner, the provisions of section 240 would not be attracted as the petitioner's claim for refund was not as a result of any order passed in appeal or other proceeding.

The question for consideration is two-fold: (i) in such a situation whether the petitioner is entitled for refund of the entire tax paid by him accepting his liability for payment of tax, and (ii) as to what consequence flows from the provisions of section 153 of the Act for the default on the part of the Revenue for not making the assessment within the tithe limit provided by law.

For the first proposition, teamed counsel for the petitioner placed reliance on the case of R. Gopal Ramnarayan v. Third ITO (1980) 126 ITR 359 (Kar). It is a decision of a single Judge of the Karnataka High Court. This case has no foundation so far as the proposition in the present case is concerned. In the case so relied on, the position was different, i.e. for the assessment year 1973-74, pursuant to an order passed under section 143(3) of the Act, the petitioner paid a sum of Rs.94,179 as advance tax and also a further sum of Rs.4,883.89 was deducted as tax at source under the Act. The petitioner also paid for that assessment year a sum of Rs.2,367 on self -assessment when he filed his return and the total tax paid by the assessee for the relevant assessment year was Rs.1,01,429.89. Similarly, for the assessment year 1975-76, the petitioner paid a total sum of Rs.69,396,75 as advance tax, tax deduced at source and tax on self-assessment. The petitioner was aggrieved by certain legal infirmities in the assessment orders and filed appeals before the Appellate Assistant Commissioner, which were dismissed. On further appeal to the Tribunal, the petitioner contended that the Income-tax Officer had not quantified the tax in the assessment orders as required by section 143(3). The Tribunal found, that while the Income-tax Officer had signed the assessment orders, he had quantified the tax due in a separate sheet annexed to the assessment order, and, therefore, annulled the assessment orders. The Revenue did not pursue the matter further. Thereafter, the petitioner made a demand for refund of the tax paid, which 'was rejected by the Income-tax Officer. The petitioner filed a writ petition under Article 226 of the Constitution praying for an appropriate direction to the Income-tax Officer to refund the tax paid by the petitioner for the relevant assessment years on the ground that there being no assessment order validly made in accordance with law, the tax retained by the Income-tax Officer was without the authority of law curd was liable to be refunded under section 240. On a reference, it was held that nothing was done by the Revenue after the assessments were annulled by the Tribunal with the result there were no assessments at all for the relevant assessment years. The Tribunal's order having become final in terms of section 254(4) of the Act, the retention by the Income-tax Officer of the moneys paid by the petitioner without any assessment and without the Income-tax Officer being capable of making fresh assessments in accordance with law was impermissible.

Firstly, in this case-there was an order which falls in the category of any order within the meaning of section 240 of Act. Secondly, the Income- tax Officer did not accept the return as filed by the petitioner but he imposed the different tax and that tax liability was set aside by the Tribunal on the plea that the quantum was not mentioned in the order passed by the Income- tax Officer. Thus, this case has no application to the facts and circumstances of the present case, as in the present case there is no order of variation of the return filed by the petitioner. The petitioner filed his income-tax return admitting his liability to tax and on the return of income-tax no order, whatsoever, was passed by the Income-tax Officer as required under the law.

The next case relied on by learned counsel for the petitioner is of Deep Chand Jain v. ITO (1984) 145 ITR 676 (P & H). It is a case of the Punjab and Haryana High Court. In this case also the position was different as in this case there was a demand notice under section 156 of the Act in regard to the assessment year 1971-72 and thereafter the assessee filed the income-tax return for the said year' on October 1, 1971, showing an income of Rs.39,469. He thereafter filed a second return wherein he showed his income only Rs. 6,130 and no orders were passed either on the original return or on the revised return for the relevant year within the period provided by law and, therefore, the claim for refund of the advance tax was made. The petitioner deposited a sum of Rs.9,400 by way of advance tax in compliance with the order passed under section 210 of the Act. Here the position is different. There was a revised return before the Income-tax Authorities at 'the time when no order on the original return was passed and in the revised return, the income was shown at Rs.6,130 which was not taxable and as such the entire advance tax paid was sought to be refunded. Here the position is different. The revised return attained finality and in the revised return, the income shown was at Rs.6,130 which was not taxable and as such the petitioner was entitled for refund of the advance tax paid by him and accordingly a direction was issued by the Court in the case relied on.

Here, in the present case, the position is not so. The petitioner has admitted his liability to tax and it is not the case of the petitioner that he paid an excess amount or the income was not taxable. The return of income filed by the petitioner is his admission in regard to his income.

Learned counsel for the respondents placed reliance on the Full Bench decision of the Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. v. ITO (1992) 194 ITR 659. In this case the position was more or less similar to the present case and the Court held that there is no warrant for holding that the entire amount of income-tax which is properly chargeable under the Act and is collected by the Department in accordance with the provisions of the Act should be refunded on the failure of the regular assessment. When the provisions do not authorise for refund which is properly collected, what could be refunded is the tax paid wrongly or paid in excess of what is properly chargeable. This case has got applicability in the facts and circumstances of the present case.

The next case relied on by learned counsel for the respondents is the case of Saraya Sugar Mills Ltd. v. ITO (1997) 226 ITR 475 (All). It is a case of the Division Bench of the Allahabad High Court. In that case the position was that an assessment order was made on September 25, 1980, determining income-tax. This assessment order was subjected to appeal and the Income-tax Appellate Tribunal held that the assessment was barred by time and was accordingly annulled. After the annulment of the assessment, the petitioner asked the Assessing Officer to refund the whole amount of Rs.12,43,780 paid by it but the Assessing Officer did not do so. Instead, he initiated proceeding under section 147 read with section 148 for making a reassessment. The petitioner then filed a writ petition for the reliefs, but since no interim order was passed during the pendency of the writ petition, the assessment was completed overruling the petitioner's objection that there was no cause for initiating action under sections 147/148 of the Act. Against this order, the petitioner appealed and ultimately the Income-tax Appellate Tribunal by order, dated April 12, 1989, quashed the reassessment holding that the assessee having filed a return of income, proceedings under section 147(a) could not be taken against the assessee. The refund was claimed as there was no order of assessment and no liability of income-tax on the petitioner and, therefore, he was entitled to refund of paid tax.

The tax payable on the basis of the returns filed by the assessee is treated as "assessed tax" It is not at all made dependent on any regular assessment being made, though in the event of regular assessment, the amount paid under subsection (1) of section 140A is deemed to have been paid towards the regular assessment. Therefore, by no stretch of imagination, can be tax paid and collected under section 140A be described as a mere ad hoc or interim payment which can be said to fail in the absence of a regular assessment, as was sought to be contended on behalf of the petitioners.

In view of the above, the petitioner is not entitled for the refund of paid tax on the basis that no assessment was done by the Income-tax Officer within the time provided by law as it is not a case of the petitioner in the return that the paid excess tax which he is entitled to refund. In such a situation, the taxable income shown in the return, so filed by the petitioner, shall be treated as admission of the petitioner and the same shall be binding on him unless he files a revised return claiming some non-taxable income and on that basis refusing the liability of tax payment.

The second submission is as to what consequence flows from section 153(1) (a)(iii) of the Act. In this connection it is submitted by learned counsel for the petitioner as well as by learned counsel for the respondents that this section itself does not provide for any consequence for default on the part of the authorities in not completing the assessment within the time frame under the Act.

This provision has not provided that the return filed by the petitioner shall be deemed to have been an order of assessment of income-tax accepting the return to the petitioner, in many matters under the law and otherwise an assessee is asked for an assessment order and in a case like present one if the assessee prays for issuing assessment order, then the Assessing Officer would tell him that no assessment order exists as the person is not assessed by any order and such an order cannot be issued. It would create difficulty as well as hardship to the taxpayers for non-action on the part of Income-tax Officer. It is a matter which may invite the attention of the Government of India and the legislative body or functionary which may consider this aspect of the matter. It is not in the donation of this Court.

In view of the above, the writ petition is sans substance and is rejected. In the peculiar circumstances of the case, I make no order as to costs. Security amount deposited, if any, may be refunded.

M. B. A./611/FC Petition dismissed.