Refund Application Rejected; Delay Condonation Denied Under Section 119(2)(b)

JUDGMENT

V. Kameswar Rao, J. – The challenge in this appeal is to an order dated 26.08.2022 passed by the learned Single Judge in WP No.28461/2019, whereby the learned Single Judge has allowed the writ petition by stating in paragraph No.6 as under:

“6. In the result, I pass the following:-

2. Some of the facts which need to be noted are, that the respondent is an individual Assessee and claims that TDS was deducted for a sum of Rs.63,28,432/- from his salary (of Rs.1,88,88,510/-) by his employer for the assessment year 2008-09. On 31.07.2008, he filed return of income tax claiming credit of the salary TDS for the aforesaid amount. The said return was processed under Section 143(1) of the Income Tax Act, 1961 (‘the Act’ for short) on 31.10.2010. On 22.04.2010, Ministry of Corporate Affairs issued an order, whereby it did not approve the salary of the respondent and revised the same to Rs.1,26,19,034/-. The differential salary of Rs.62,69,480/- was paid by the respondent to his employer, who issued revised TDS certificate on 20.12.2010. It appears, on 10.02.2011, a letter was sent by the respondent wherein he has stated he is not able to file revised return due to limitation for filing revised return. The Assessee was also in receipt of refund of Rs.22,76,138/-. On 19.02.2015, the respondent sought modification of intimation issued under Section 143(1) of the Act. In response to the said request, order under Section 154 came to be passed on 05.03.2015 rejecting the request of the respondent. The respondent filed revised return of income to claim refund of excess tax on 25.07.2016 and also filed an application for condonation of delay under Section 119(2)(b) of the Act. The said application was rejected by the competent authority on 05.07.2018 as the application was filed beyond 6 years.

3. The case of the respondent before the learned Single Judge was, that he is entitled to the condonation of delay in filing the revised return dated 25.07.2016 and with a further prayer to grant refund of excess tax of Rs.24,83,851/- with interest.

4. The case of the appellant-Revenue before the learned Single Judge was, by relying upon a circular dated 22.12.2006 wherein clause-4 states that, no fresh application for claim of refund will be entertained beyond six years from the end of the assessment year for which the application/claim is made.

5. The learned Single Judge has, in paragraph No.5, stated as under:

“5. As rightly contended by the learned counsel for the petitioner, in the light of the aforesaid judgments in A.Balakrishnan’s case and Gopalan Thyagarajan’s case supra, coupled with the material on record, which clearly indicates that the Instruction No.13/2006 dated 22.12.2006 was not applicable to the facts of the instant case since the intimation dated 31.10.2010 was issued by the respondents to the petitioner, which was followed by subsequent proceedings between the petitioner and respondents culminating in a rectification order passed on 05.03.2015, the respondents clearly fell in error in coming to the conclusion that the application for condonation of delay filed by the petitioner was beyond the period of limitation and the impugned order being not only contrary to the facts of the instant case but also the aforesaid decisions, the same deserves to be set aside and the matter remitted back to the respondents to consider his claim for refund in accordance with law by condoning the delay in filing the revised returns.”

6. Sri. Dilip.M, learned counsel appearing for the appellant-Revenue would state that, the appellant is more aggrieved by the direction given by the learned Single Judge by setting aside the order dated 05.07.2018 by which the application for condonation of delay filed by the respondent in filing revised return was dismissed with a further direction condoning the delay and to consider the claim of the respondent for refund with applicable interest, which according to Sri. Dilip, shall be more than the principal amount as due and payable to the respondent. He lay stress on the fact that when the respondent himself had delayed the claim of refund, he would not be entitled to the interest as directed to be given by the learned Single Judge. He also stated that, the first letter written by the respondent was only on 10.02.2011 followed by the letter dated 06.08.2013 though the assessment was carried out in the year 2010. He has stated that, the respondent-Assessee had filed a rectification application before the Central Processing Centre (CPC) on 10.02.2011, wherein he had stated that, the reason for not being able to file a revised return was due to limitation in filing a revised return. In support of his submissions, he has referred to the provisions of Section 139(5) of the Act. He stated, as per Section 139(5) of the Act, it is clear that if any person having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before three months prior to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. He also referred to instruction dated 22.12.2006, which contemplates filing of applications/claims for refund upto six years from the end of the assessment year. In that sense, the filing of application for condonation of delay filed on 25.07.2016, was beyond limitation of 6 years which expired on 31.03.2015. In other words, the relevant assessment year being 2008-09, the six years had started running from 01.04.2009 and expired on 31.03.2015. Concedingly, the first letter to revise the return was filed only on February 10, 2011 i.e., after the limitation period as prescribed under Section 139(5) of the Act (though return was processed on 30.10.2010) had expired. He stated, even the application seeking condonation of delay for filing revised return beyond the end of the assessment year was filed only on 25.07.2016, hence the condonation of delay application was rightly rejected. He also states that, Section 119(2)(b) which reads as under only contemplates a situation for an Assessee making an application for refund:

“119. Instructions to subordinate authorities.—

xx xx xx xx xx

(2) Without prejudice to the generality of the foregoing power,—

xx xx xx xx xx

(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any income-tax authority, not being a Commissioner (Appeals) 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 or under this Act for making such application or claim and deal with the same on merits in accordance with law;”

Even this provision was not acted upon by the respondent before 31.03.2015. He did state that, while rejecting the application under Section 119(2)(b), the Commissioner of Income Tax did say that, the case is genuine and the refund claim has arisen due to Ministry of Corporate Affairs not approving the managerial remuneration resulting in reduction of salary of the Assessee, but still the grant of applicable interest as directed by the learned Single Judge in the facts of this case is not justified.

7. On the other hand, Sri. Manoj Kumar, learned counsel appearing for the respondent-Assessee would justify the order passed by the learned Single Judge in the facts of this case. He stated, the earlier assessment was processed on 31.10.2010. The higher salary was not approved by the Ministry of Corporate Affairs. The differential salary was paid by the respondent to his employer. The respondent-Assessee filed a rectification application before the CPC on 10.02.2011 and stated, the reason for not able to file the revised return, was due to limitation in filing the revised return; the respondent had rightly sought the refund of the excess tax paid by him to the authorities. He stated, unfortunately, the appellant-Revenue did not respond to the communication sent by the respondent both in the years 2011 and 2013. By the time, the date seeking condonation of delay had expired. Hence, the delay occurred in filing the application for condonation of delay is clearly attributable to the appellants and hence, the respondent cannot suffer for the same. He seeks dismissal of the appeal.

8. Having heard the learned counsel for the parties, the issue which arises for consideration is, whether the learned Single Judge could have directed the appellants to consider the claim of the respondent for refund with applicable interest, if any?

9. The plea of Sri. Dilip is primarily with regard to direction given by the learned Single Judge for considering the claim with applicable interest. According to Sri. Dilip, the direction in respect of interest would be inequitable in the facts when the respondent was clearly at fault in not filing the revised return in time. Though he do concede that the respondent had sent communications dated 10.02.2011 and 07.08.2013 for revision and refund of excess tax, but the respondent had not filed his revised return which is a pre-requisite for seeking the refund. This plea of Sri. Dilip was tried to be justified by Sri. Kumar by stating that, the same are sufficient communications to the appellants in the facts of this case to refund the excess tax as, by December 2010, when revised TDS was issued, the limitation to file revised return has expired. In fact he stated that, in the communication dated 07.08.2013, the respondent had stated that the said communication be treated as revised return as the time to file revised return under Section 139(5) of the Act had expired. Though the submission is appealing on a first blush, but on deeper consideration, it is seen the Section 139(5), contemplates the revised return to be filed before three months prior to the end of relevant assessment year or before the completion of assessment, whichever is earlier. If this section is read in perspective, then, though the assessment had been completed on 31.10.2010, but the words ‘whichever is earlier’ shall mean the completion of the assessment year i.e., 31.03.2008. But what is relevant is, the instruction No.13/2006 which specify condonation of delay in filing the return involving refund claims above Rs.10,00,000/- upto Rs.50,00,000/-. In the case in hand, the refund being Rs.24,83,851/- which is less than Rs.50,00,000/-, surely an application for refund was required to be filed within six years from the end of the assessment year for which the application/claim is made. The assessment year in the present case being 2008-09, the six years started running with effect from 01.04.2009, and expired on 31.03.2015 and in that sense, the respondent could not have filed application seeking condonation of delay after 31.03.2015. The application having been filed only on 25.07.2016, which is beyond the time of limitation as prescribed by the above instruction No.13/2006, the communication dated 05.07.2018, which was the subject matter of challenge in the writ petition is justified. Surely in the facts, the respondent cannot be given the benefit of his own wrong though the claim for refund even if genuine and bonafide, but surely the direction for grant of applicable interest, if any, could not have been directed. This is for the reason, the interest is payable for the delay attributed to the opposite party. In this case, despite the instruction dated 22.12.2006 stipulates filing of application seeking condonation of delay, the same having not been filed till 31.03.2015, but only on 25.07.2016, was rightly rejected by the appellants. This is for the reason stated in paragraphs No.4 and 5 of the said instruction which reads as under:

So, the instruction contemplates, any claim for refund, within six years from the end of the assessment year for which the application/claim is made, necessarily has to be with an application for condonation of delay, which claim/refund has arisen as a result of excess tax deducted/collected at source. Hence, the order of learned Single Judge to the extent claim of the respondent was to be considered with interest, is set aside.

10. Hence, the direction (iv) of the learned Single Judge is modified, which henceforth shall read as under:

“(iv) Respondents are directed to consider the claim for refund as sought by the petitioner in Annexures – J and K dated 25.07.2016 and in accordance with law within a period of four weeks from the date of receipt of a copy of this order.”

11. It is made clear that the appellant shall consider the claim for refund of the respondent as directed by the learned Single Judge within four weeks from today, if not already implemented.

12. The appeal is disposed of.