AO Can’t Refuse to Refund Amount Merely Because Proceedings Were Pending Before DRP | HC

Case Details: IBM India (P.) Ltd. v. Deputy Commissioner of Income-tax. - [2024] 158 taxmann.com 70 (Karnataka)

Judiciary and Counsel Details

• • B.M. Shyam Prasad, J.
  • T. Suryanarayana, Sr. Adv. & Ms Tanmayee Rajkumar, Adv. for the Petitioner.
  • E.I. Sanmathi, Adv. for the Respondent.

Facts of the Case

The JCIT, in terms of the order of the Tribunal, had determined that a certain amount was refundable to the assessee for the relevant assessment year 2013-14. However, the Assessing Officer (AO) refused to give a refund of the amount, stating that the Tribunal, by an order, quashed the assessment order for the assessment year 2010-11 and restored the proceedings for reconsideration of certain issues.

The proceedings as regards the subject assessment year were pending before the DRP. In the interregnum (in the year 2023), the refund payable had been adjusted towards what could be a possible demand for the assessment year 2010-11.

Aggrieved-assessee filed a writ petition before the Karnataka High Court.

High Court Held

The High Court held that there was no recoverable demand from the assessee as of today, and the adjustment was in anticipation of the conclusion of a particular proceeding in a possible manner without due process. AO submitted that it could give due credit to the amount refundable in terms of the order of the JCIT when the AO will have to pass an order to give effect to the directions by the DRP.

AO could not point out any provision in the statute or otherwise to justify the retention in the peculiarities of the instant case. In the absence of the statutory provision or the enablement otherwise in law, the retention of the amount in anticipation of the conclusion of the DRP proceedings and giving credit to the amount while giving effect to the orders thereafter cannot be accepted.

There would be no justification for denying the assessee the advantage of the refund. It was too salient that a levy could not be unless it were with the authority of law. Therefore, there has to be a direction to the AO to ensure that steps were taken to affect the refund in terms of the order of the JCIT to the assessee.

Accordingly, the AO was directed to identify and take all steps to refund the assessee the amount consequent to the order of the JCIT.

List of Cases Referred to

• • IBM India (P.) Ltd. v. Asstt. CIT [2020] 120 taxmann.com 424 (Bang. – Trib.) (para 2).