Punjab-Haryana High Court
Naurata Ram vs Commissioner Of Income Tax & Ors. on 28 August, 1997
Equivalent citations: (1998)146CTR(P&H)375
JUDGMENT
G. S. SINGHVI, J. :
In the year 1976, the Improvement Trust, Ludhiana, acquired agricultural land of various persons including the petitioner for implementing the 100 acre development scheme. The compensation awarded by the Land Acquisition Collector vide his award dt. 20th September, 1974, was enhanced by the Land Acquisition Tribunal by different orders passed by it on 23rd April, 1986, 9th September, 1987 and 28th May, 1988. The petitioner and the improvement Trust have filed writ petitions challenging the orders passed by the Tribunal. The same are pending adjudication before this Court.
During the pendency of this litigation, the petitioner received compensation in three instalments or Rs. 4 lakhs (1987), Rs. 16.40 lakhs (1990) and Rs. 3.60 lakhs (1992). This amount was deposited by him under the Capital Gains Scheme, 1988.
2. For the asst. yr. 1991-92, the petitioner filed his return and claimed that the amount of Rs. 16,40,160 is not liable to be taxed in view of the judgment of the Supreme Court in CIT vs. Hindustan Housing & Land Development Trust Ltd. (1986) 161 ITR 524 (SC). However, the assessing authority did not accept the contention and assessed Rs. 9,90,165 out of the total amount of compensation as interest on income. On appeal the CIT(A), Ludhiana, deleted aforementioned addition made by the assessing authority. Soon thereafter, the respondent No. 3 issued notice under s. 148 of the IT Act, 1961 for reassessment for the years 1983-84 to 1990-91. This notice has been challenged by the petitioner in CWP No. 2513 of 1995 which is pending hearing before the High Court. For the asst. yr. 1993-94, the ITO assessed the balance amount of Rs. 6,69,204 payable to the petitioner as compensation under s. 143(3) in the status of HUF. The CIT(A) dismissed the appeal filed by the petitioner vide his order dt. 17th August, 1994. Further appeal filed by the petitioner against the order of the assessing authority and the CIT(A) is pending adjudication.
After the passing of order dt. 21st March, 1994 by the respondent No. 3, a notice under s. 271(1)(c) of the Act was issued to the petitioner for levy of penalty amounting to Rs. 5,90,000. On 29th March, 1995, the assessing authority passed order and imposed the penalty upon the petitioner. The amount of penalty was realised from the FDR purchased under the Capital Gains Scheme. The appeal filed by the petitioner against the penalty order came to be accepted by the CIT(A), Ludhiana, vide his order dt. 5th January, 1996. Further appeal filed by the Revenue before the Tribunal, Chandigarh, is still pending.
3. On 15th January, 1996, the petitioner applied for refund of the amount in view of the order dt. 5th January, 1996 passed by the CIT(A). His plea for refund has been rejected by the respondents and, therefore, the petitioner has invoked writ jurisdiction of the High Court for issuance of a writ to quash the impugned orders and also to direct the respondents to refund the amount to him. The petitioner has relied on the provisions of ss. 240 and 241 of the Act and the judgments of the Supreme Court [sic-this Court] in Leader Valves Pvt. Ltd. vs. CIT & Anr. (1987) 167 ITR 542 (P&H) and Hansa Agencies Pvt. Ltd. vs. CIT & Ors. (1988) 169 ITR 322 (P&H) : 1987 (2) PLR 47 . The respondents have opposed the plea of the petitioner by asserting that the appeal filed by the Revenue against the order dt. 5th January, 1996 is pending before the Tribunal and the decision not to accept the application for refund has been taken on the basis of the report dt. 4th March, 1996 submitted by the ITO, Ward-II(4), Ludhiana. The respondents have stated that the refund has been refused solely with the object of protecting the interest of the Revenue.
4. Secs. 240 and 241 of the Act of 1961 which have bearing on the plea raised by the petitioner are reproduced below :
"240. Refund on appeal, etc. - 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 AO shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf :
Provided that where, by the order aforesaid -
(a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment :
(b) the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee.
241. Power to withhold refund in certain cases - Where refund of any amount becomes due to the assessee as a result of an order under this Act or under the provisions of sub-s. (1) of s. 143 after a return has been made under s. 139 or in response to a notice under sub-s. (1) of s. 142 and the AO is of the opinion, having regard to the fact that -
(i) a notice has been issued, or is likely to be issued, under sub-s. (2) of s. 143 in respect of the said return; or
(ii) the order is the subject-matter of an appeal or further proceedings;
(iii) any other proceeding under this Act is pending, that the grant of the refund is likely to adversely affect the Revenue, the AO may, with the previous approval of the Chief CIT or CIT, withhold the refund till such time as the Chief CIT or CIT may determine."
5. A conjoint reading of the provisions quoted above show that in the ordinary circumstances, the AO has to refund the amount which has become due to the assessee as a result of any order passed in appeal or other proceedings under the Act. Proviso to s. 240 specifies two circumstances in which the refund cannot be granted as a matter of course. Sec. 241 empowers the competent authority to withhold refund in certain cases provided that the AO forms an opinion that the grant of refund is likely to adversely affect the Revenue. Such an order can be passed only with the previous approval of the Chief CIT or CIT. On a careful reading of the plain language used in the statute, it becomes clear that the power to withhold the refund cannot be exercised merely because some proceedings are pending before the authorities constituted under the Act or a Court of law. In other words, mere pendency of the proceedings cannot by itself be a ground to deny the refund on the assumption that such refund would adversely affect the Revenue. The competent authority has to form an opinion on the basis of relevant material for coming to the conclusion that the order of refund will necessarily cause prejudice to the revenue of the State. If the legislature had intended to prohibit the refund of the amount due to the assessee only on the ground that the Revenue has preferred an appeal/revision etc., then s. 240 would have been couched in different phraseology. Absence of specific provision in the statute providing for withholding of refund only on the ground of pendency of the proceedings is clearly indicative of the intention of the legislature that pendency of proceedings will not by itself be a ground for withholding the refund.
6. This view of ours is supported by the two judgments of this Court in Leader Valves Pvt. Ltd. vs. CIT (supra) and Hansa Agencies Pvt. Ltd. vs. CIT (supra).
7. A look at the impugned order shows that the only ground on which the refund has been withheld is the pendency of the appeal filed by the Revenue before the Tribunal and nothing else. The respondents have tried to support the action of withholding on the basis of the report Annexure-R. 1 sent by the ITO, Ward-II(4), Ludhiana, but Shri Mittal pointed out that the assertion made in para 2 of that letter is factually incorrect. He also stated that the petitioner would deposit the amount back in case the appeal filed by the Revenue is ultimately accepted. Thus, on the basis of Annexure-R. 1, the orders passed by the respondents withholding the refund cannot be sustained.
In the result, the writ petition is allowed. Orders Annexure-P. 9 and P. 10 are declared illegal and are quashed. The respondents are directed to refund the amount due to the petitioner within a period of one month of the submission of certified copy of this order.