By TIOL News Service

NEW DELHI, FEB 06, 2019: THE issue before the Division Bench is - Whether an application for refund can be rejected, if filed belatedly due to inadvertent errors made by the claimant's auditor. NO IS THE VERDICT.

Facts of the case:

The assessee company filed its return for the relevant A.Y which reflected TDS of Rs.15,62,500/-. However, a larger amount of Rs.31,25,000/- escaped the attention of assessee, and so it could not be claimed. As an adjustment or for the purpose of consequent refund, the assessee paid the amounts due in terms of its calculation and assessment was framed thereunder u/s 143(1). The period for revising the demands ended on Mar 31, 2015, however the error that had crept in while furnishing the returns was not rectified through an application or a refund undertaken. The assessee therefore claimed that when it did discern the error or claim, it had applied to the Chief Commissioner, for condoning the delay for filing the application for refund. In its application, the assessee had claimed that its Chartered Accountant had inadvertently overlooked the TDS amounts, as a consequence it could not have sought appropriate refund at the first instance or even claimed it before the period of seeking refund had expired. The application was however rejected by the Commissioner, by observing that the claim of assessee company that even after having gone through the process of audit, credit of TDS of Rs.31,25,000/- could not be made at the time of filing of return for bonafide reason, could not be accepted in absence of any verifiable credible material evidence in support of such claim.

High Court held that:

++ the facts disclose; firstly, that according to the assessee a sum of Rs.31,25,000/- was inadvertently left out by its auditor/chartered accountant in the calculation while filing the return; secondly, the court notices that the amount in fact reflected on the web portal maintained by the Income Tax Department itself at the relevant time. It is also a fact that the assessee does not seem to have noticed its omission, at least before September 2016. In the meanwhile, the period of limitation to claim refund ended on Mar 31, 2015. It is seen that in case of Indglonal Investment & Finance Ltd., a Division Bench of this court while dealing with the claim for refund, which was made belatedly but rejected by the Revenue, held that: "....the refund provisions should be interpreted in a reasonable and practical manner and when warranted liberally in favour of the assessee. If there is substantial compliance of the provisions for refund, it may not be denied because it is not made strictly in the form or the prescribed manner. The forms prescribed may be merely intended to facilitate payment of refund. The tax authorities have to act judiciously when they exercise their power under an enactment. In case the AO comes to know that an assessee is entitled to deduction, relief or refund on the facts of the case and the assessee has omitted to make the claim, he should draw the attention of the assessee. The tax authorities should act as facilitators and not occlude and obstruct....";

++ the rejection of the assessee's application u/s 119(2)(b) is only on the ground that according to the Chief Commissioner’s opinion the plea of omission by the auditor was not substantiated. This court has difficulty to understand what more plea or proof any assessee could have brought on record, to substantiate the inadvertence of its advisor. The net result of the order is in effect that the assessee's claim of inadvertent mistake is sought to be characterised as not bonafide. The court is of the opinion that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case. "Bonafide" is to be understood in the context of the circumstance of any case. Beyond a plea of the sort the assessee raises, there cannot necessarily be independent proof or material to establish that the auditor in fact acted without diligence. In the circumstances of the case, the assessee was able to show bonafide reasons why the refund claim could not be made in time. The statute or period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities including Revenue Authorities have to construe them in a reasonable manner. For these reasons, the order rejecting the assessee's application u/s 119(2)(b) is hereby set aside and quashed.

(See 2019-TIOL-300-HC-DEL-IT)