Assessee Entitled to Refund of Rs. 6.30 Crore Due to Unjustified Adjustments

Issue: Whether the assessee is entitled to a refund of Rs. 6.30 crore when the Assessing Officer (AO) has unjustifiably adjusted refunds totaling Rs. 5.52 crore for subsequent years, in addition to the refund due for the assessment year 2017-18.

Facts:

The assessee filed a return for AY 2017-18, declaring an income of Rs. 2.92 crore and claiming a refund of Rs. 1 crore.
The assessment order increased the taxable income to Rs. 14.36 crore, raising a demand of Rs. 4.80 crore.
On appeal, the Commissioner (Appeals) reduced the taxable income to Rs. 3.52 crore, entitling the assessee to a refund of approximately Rs. 80 lakh.
The department adjusted refunds totaling Rs. 5.52 crore for subsequent years without justification.

Decision:

The court held that since the AO had already adjusted a refund of Rs. 5.52 crore for subsequent years, the assessee was entitled to a refund of at least Rs. 6.30 crore (Rs. 80 lakh + Rs. 5.52 crore).
The court directed the AO to credit the amount of Rs. 6.30 crore to the assessee’s bank account.

Key Takeaways:

Unjustified Adjustments: The department cannot arbitrarily adjust refunds for subsequent years without providing a valid justification.
Entitlement to Refund: When refunds are unjustifiably adjusted, the assessee is entitled to receive the adjusted amount in addition to the refund due for the relevant assessment year.
Judicial Direction: Courts can direct the AO to credit the due refund amount to the assessee’s bank account to ensure compliance.
Protection of Assessee’s Rights: This decision protects the assessee’s right to receive legitimate refunds and prevents the department from withholding funds without a valid reason.
The courts will step in to protect the tax payer, when the department does not act lawfully.

HIGH COURT OF GUJARAT

L. G. Chaudhary

Assistant Commissioner of Income-tax Circle 2(2)(1)

BHARGAV D. KARIA and D.N. Ray, JJ.

R/SPECIAL CIVIL APPLICATION NO. 15731 of 2024

DECEMBER 23, 2024

B S Soparkar for the Petitioner. Varun K.Patel for the Respondent.

ORDER

Bhargav D. Karia. – 1. Heard learned advocate Mr. B.S.Soparkar for the petitioner and learned Senior Standing Counsel Mr. Varun Patel for the respondents.

2. Learned advocate Mr. B.S.Soparkar submitted that the respondent-authorities are not releasing the refund after passing Order giving effect by the Assessing Officer to the order passed by the CIT (A) and the respondents had already adjusted the refund of the subsequent years.

3. Brief facts of the case are as under:

3.1 The petitioner filed return of income for A.Y. 2017-18 on 28.10.2017 declaring total income at Rs. 2,92,83,040/- and claimed refund of Rs. 1,00,01,050/-.

3.2 Thereafter, the case of the petitioner was selected for scrutiny and assessment order under section 143(3) was passed on 30.12.2019 determining total income of Rs. 14,36,15,340/- raising a demand of Rs. 4,80,03,395/-.

3.3 Being aggrieved, the petitioner filed appeal before the Commissioner (Appeals). The Commissioner(Appeals) partly allowed the appeal by order dated 13.02.2024 reducing the taxable income to Rs. 3,52,31,671/- instead of Rs. 14,36,15,340/-.

3.4 The respondent-Assessing Officer passed an Order giving effect under section 250 of the Order of the CIT(A) on 04.03.2024 for Assessment Year 2017-18 as under:

Income u/s. 143(3) of the Act order dated 30.12.2019		14,36,15,340/-
Less: Relief/Deduction allowed by CIT(A)-11 Ahmedabad (i) Ground 1-Bogus Expenses amounting to Rs. 46,43,534/-	33,55,000/-
(ii) Ground 2-Bogus purchase amounting to Rs. 98,90,725/-	90,08,354/-
(iii) Ground 3-Bogus purchase amounting to Rs. 8,76,48,036/-	8,50,75,315/-
(iv) Ground 4-unsecured loan u/s 68 of the Act amounting Rs. 1,21,50,000/-	1,09,50,000/-
Revised Total Income		3,52,31,671/-
Revised Total Income (Rounded off u/s. 288A)		3,52,31,670/-

3.5 On the basis of the above calculation, it was further ordered to recalculate the tax and interest, credit given for pre-paid taxes, reduced/enhanced demand and issue revised Demand Notice/Challan/Refund Order, as the case may be.

3.6 It also appears from the record that during the pendency of the appeal proceeding, the respondent-department adjusted the refund for the subsequent years for A.Y. 2018-19 to 2023-24 as under:

Refunds due for subsequent years are not given

AY 2018-19 Rs. 71.08 lakhs

AY 2019-20 Rs. 1.60 Crores

AY 2020-21 Rs. 1.46 Crores

AY 2021-22 Rs. 29.63 Lakhs

AY 2022-23 Rs. 66.35 Lakhs

AY 2023-24 Rs. 79.10 Lakhs Total Rs. 5,52,16,000

4. This Court passed the following order on 26.11.2024:

“1. Heard learned Senior Advocate Mr.S.N.Soparkar with learned advocate Mr.B.S.Soparkar for the petitioner and learned Senior Standing Counsel Mr.Varun K. Patel for the respondents who appears on advance copy.

2. Learned Senior Advocate Mr.S.N.Soparkar for the petitioner submitted that though the CIT (Appeals) has held in favour of the petitioner, the refund due after order giving effect of the order passed by the CIT (Appeals) is not paid in spite of several reminders and the refund is being adjusted by the respondent without any basis for the subsequent year’s demand.

3. Learned Senior Standing Counsel Mr.Varun K. Patel for the respondents prays for time to take instructions in the matter and file reply, if any, required.

4. Issue Notice, returnable on 10th December, 2024.

Direct Service through Email is permitted.”

5. The affidavit-in-reply is filed on behalf of respondent stating as under:

“2.1 It is submitted that in this case, the assessee filed a, the return of income for A.Y.2017-18 on 28.10.2017 declaring total income at Rs.2,92,83,040/-and claiming a refund of Rs.1,00,01.050/-. The assessment was finalized u/s. 143(3) of the Act on 30.12.2019, determining total income at Rs. 14,36,15,340/and raising a demand of Rs.4,80,03,395/-.

2.2 It is submitted that subsequently following the CIT(A)-11, Ahmedabad’s order dated 13.02.2024, an effect giving order was passed on 04.03.2024, determining total income at Rs. 3,52,31,670/and resulting in a refund of Rs. 6,52,12,608/-. While the CPC has closed the accounting of this matter, the said refund has not been credited to the assessee’s account.

2.3 It is submitted that this office has already raised ticket regarding the issue (Ticket numbers 2554632 on 31.07.2024 which was resolved by the CPC with the solution as under –

“As seen from CPC portal for the PAN and A.Y., refund is held due to an outstanding demand for the same taxpayer, which needs to be addressed by the Taxpayer.”

However, on verification of the recovery module in the ITBA portal, it is observed that only one demand of Rs. 4,22,71,470/for A.Y. 2017-18 u/s. 220(2) of the Act is shown. This demand no longer exists due to the tax giving effect order dated 04.03.2024.

2.4 It is further submitted that a second ticket (Ticket No.2667574) was raised on 26.11.2024 and an email was sent to CPC on 05.12.2024, CPC resolved this ticket on 06.12.2024, stating as under

“As seen from CPC for the PAN and AY, CPC is unable to issue the refund due to technical issue. Requesting AO to pass rectification order to issue refund.”

Accordingly, proceedings for reuploading the rectification order u/ s.154 of the Act are ongoing and to be completed shortly within a period of 02 weeks.”

6. Time was sought on 10.12.2024 for taking further instruction by the learned advocate for the respondent and the matter is adjourned today.

7. Today, when the matter is taken up, another affidavit-in-reply is filed on behalf of the respondents stating further actions taken by the respondents in continuation of the action taken earlier as under:

“2.5 It is submitted that, though CPC suggested to pass a rectification order, it was later enquired and found out that a rectification order is not required and the previous order giving effect can be uploaded in this case. Subsequently, while re-uploading the giving effect order dated 04.03.2024, it was observed that a refund amounting to Rs. 96,84,434/- had purportedly been issued to the assessee on 16.03.2019. It was not clear from the assessee’s petition, the exact amount claimed by the assessee. In order to confirm the same, this office raised another ticket No. 2704958 on 13.12.2024 to ascertain whether the refund was credited to the assessce’s account, but no response has been received from the CPC todate. Copy of the said ticket No. 2704958 on 13.12.2024 ia annexed hereto and markcd as Annexure-R/2.

2.6 Consequently, based on the data available from the ITBA portal, the giving effect order for the remaining refund amount was re uploaded on 18.12.2024 and duly endorsed by the Range Head, Addl CIT 2(1)), Ahmedabad on same day. Further, a subsequent ticket No. 2711877 was raised, (copy of which is annexed hereto and marked «as Annexure-R/3) and a mail was sent on 18.12.2024 (copy of which 1s annexed hereto and marked as Annexure-R/4) to CPC, Bangalore, followed by telephonic communication, requesting urgent process n of the giving effect order and issuance of the refund. CPC resolved this t= ton 19.12.2024, stating “As verified from the CPC portal for giver ‘¥ accounting completed by CPC successfully and response shared ITBA. AO still facing any issue kindly contact [TBA help desk. Hence, this ticket is resolved from CPC side.”

2.7 Further, as per direction received from CPC, Bangalore a ticket (Tiket No. 2713934) was raised on 19.12.2024 (copy of which is annexed hereto and marked as Annexure-R/S) and a mail was sent to ITA HELPDESK on 19 12 2024 (copy of which is annexed hereto and marked as Annexure-R/6) requesting to ITBA help desk for releasing the said refund at earliest. The response from help desk is awaited to date. It is therefore submitted that in view of above, the further time is needed to address the refund issue of the petitioner.”

8. It appears from the above averments made on oath by the respondent-Assessing Officer that there is passing the buck by the respondent-Assessing Officer on CPC, CPC on the ITBA HELPDESK and there is no resolution to the issue of refund which is very simple in our understanding.

9. Therefore, we have made exercise on our own as to whether the assessee-petitioner is entitled to the refund as per the grievance made in the petition or not as under:

(i)

The petitioner filed return of income showing gross total income Rs. 2,92,83,044/- (Annexure B1 page 11) as per the acknowledge for A.Y. 2017-18. As per the acknowledgement, the petitioner has paid total tax as TDS and TCS and self assessment tax of Rs. 2,01,35,322/-.

(ii)

The petitioner, as per the acknowledgement, was liable to pay tax of Rs. 1,01,34,274/- and entitled to refund Rs. 1,00,01,050/- [Rs. 2,01,35,322Rs. 1,01,34,274/-].

(iii)

As per the Order giving effect passed by the respondent-Assessing Officer, the revised total income is rounded of under section 288A at Rs. 3,52,31,670/- (Annexure A page 10). Therefore, calculating tax applying approx rate of 35% subject to verification, the amount of tax payable would come to roughly around to Rs. 1.23 Crores(rounded of).

10. Therefore, the assesee would be entitled to the refund around to Rs. 80,00,000/- [Rs.2,01,35,3221,23,00,000/-] (subject to verification and accurate computation along with eligible interest).

11. The respondent-Assessing Officer has already made adjustment of the refund for the subsequent years as stated here-in-above. Therefore, ADMITTEDLY, the petitioner is entitled to refund at least of principal amount of Rs. 6,32,16,000/- (Rs. 80,00,000/- + Rs. 5,52,16,000) with cost rounded of to Rs. 6.30 Crore.

12. This amount of Rs. 6.30 Crore is subject to enhancement of eligible interest and verification of applicable rate of tax. Accordingly to us, the respondent is liable to refund at least Rs. 6.30 Crore subject to final calculation of refund.

13. In view of the above we direct the respondent-Assessing Officer to credit the amount of Rs. 6.30 Crore in the bank account of the petitioner being A/c. No.40083693169 State Bank of India Pragatinagar Branch, Ahmedabad by coordinating the same with the respective departments including CPC or any other department responsible for such credit of the amount on or before the next date of hearing failing which, the responsible officer shall be held liable for breach of this order.

14. Learned advocate Mr. B.S.Soparakar submitted that the above bank account is already updated on the Income Tax Portal of the petitioner.

15. Let this petition be listed for further hearing on 7^th January,2025 on top of the Board.

16. This order be sent by the Registry to the respondents forthwith for compliance. Direct service through Email is permitted.