NOTING THAT the procedure for refund of tax amount and withholding of refund is often being used as a “delaying tactic” for window dressing the collection of revenue, the Punjab and Haryana High Court has issued a show-cause notice to the Principal Commissioner of Tax, Rohtak, Krinwant Sahay and Assistant Commissioner of Income Tax, Circle 4(1) Gurugram Dipin Goel to explain why costs should not be imposed on them for withholding the refund of nearly Rs 300 crore of Huawei Telecommunications.
“It is evident that procedure for refund and withholding of refund is often being used as delaying tactics for various reasons including window dressing of collection of revenue. The method adopted is a short sighted vision. Apart from harassment to the assessee, it results in paying interest on the delayed amount of refund putting further burden on the exchequer,” read an order passed by the division bench of Justices Ajay Tewari and Avneesh Jhingan. Observing that trade and commerce are “life blood” of the system, the division bench further said if the excess amount deposited as tax is not refunded to the entrepreneur or assessee, it has an effect on the liquidity and business. “There cannot be second opinion that the revenue collection and securing the interest of the revenue is to be collected like an apiarist extracts honey from beehive without destroying it,” the order read.
The Huawei Telecommunications (India) Company Private Limited had approached the court seeking quashing of an order passed in November 2019 under Section 241A of the Income Tax Act withholding the refund for the assessment years 2017-18 and 2018-19. Section 241A empowers the tax authorities to withhold the refund of an amount subject to certain conditions like Assessing Officer’s opinion that revenue would be adversely affected in case of grant of refund.
The company had claimed a refund of Rs 48,11,52,210 and Rs 252,45,13,970 as refund under the provisions of the Act.
While holding that the order passed in Huawei’s case is unsustainable as there was no reason recorded for coming to the conclusion that the grant of refund is likely to adversely affect the revenue, the Court said the pendency of proceedings under Section 143(2) (scrutiny assessment proceedings) of the Act in itself is not enough to withhold the refund. It further ruled that selection of a case for scrutiny does not automatically amount to withholding of refund, adding there is no dispute in the company’s case from the authorities regarding the refunds. The court issued notice to Sahay and Goel for April 28.
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