By TIOL News Service

MUMBAI, MAY 01, 2019: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether the Revenue can withhold the genuine refund of taxpayer in the garb of error in their computer system, when there is no factual dispute regarding same. NO IS THE VERDICT.

Facts of the case:

For the year under consideration, a principal demand of Rs 27,93,47,377/- was raised u/s 201(1) from AY 2007-08 to AY 2012-13. Challenging the same, the assessee approached the CIT(A) who confirmed the order of AO upholding the said demand. In pursuence of the same, the assessee had deposited Rs 21,48,21,980/- against the said demand. However, not satisfied, the assessee went before the ITAT, wherein the said said demand was deleted. Meanwhile, further demands of Rs 53,18,76,993/- u/s 201(1) were raised for AY 2013-14 to AY 2016-17. Accordingly, deposits made against the demand for AY 2007-08 to AY 2012-13 was adjusted against demand for AY 2013-14 to AY 2016-17. Subsequently, the demand for AY 2013-14 to AY 2016-17 was again deleted by CIT(A). Now, the assessee's grievance under present petition was that a refund of Rs 21,45,54,980/- payable to them was yet not released by the Income Tax Department.

High Court held:

++ from the communication issued by AO, it is found that he was unable to issue the refund on account of error of Rs 20,02,034/- in the system of the Department. Again the fact that this amount was not due and payable by the assessee to the Department but was on account of rectifiable error can be gathered from yet another communication issued by the AO. Upon perusal of the communication, it would appear that due to human error, the assessee had shown payment to HSBC under old as well as new TAN giving rise to TDS mismatch;

++ the AO himself agrees that this is an error and the demand should be deleted from the system. Despite this communication from the AO, the computer system of the Department has not taken steps to delete the demand. As a result of which, the assessee's sizable tax refund in access of Rs.21 Crores is held up. Facts being clear, the Department cannot withhold the refund of assessee. Firstly, the computer system cannot override the factual aspects. If the refund is payable, whether the computer systems accepts or not, is of no consequence. More importantly, in the present case, according to the department itself, the error had to be rectified. Had this be done timely, there would have been no delay in releasing the assessee's refund.

(See 2019-TIOL-958-HC-MUM-IT)