Authorities Directed to Release Rs. 70.45 Lakhs with Interest for Withholding Excess Refund Amount
In a significant ruling, the Delhi High Court has directed tax authorities to immediately release a refund of Rs. 70,45,660 to M/s Civitech Housing India (P) Ltd., amidst a minor pending tax demand. The court emphasized that authorities cannot withhold the entire refund amount for a meager outstanding demand of Rs. 1,25,389.
The bench, comprising Justices Dinesh Mehta and Rajneesh Kumar Gupta, observed that the Centralized Processing Centre (CPC) had calculated a refund of Rs. 71,71,049 due to the petitioner. However, this amount was withheld due to pending demands from the Assessment Year 2010-11, totaling just Rs. 1,25,389.
The court ruled that tax authorities could only retain an amount equivalent to the proposed adjustment under Section 245 of the Income Tax Act, 1961, and must remit the remaining refund immediately. Failure to credit the refund by September 5, 2026, would attract an interest rate of 1% per month.
The court also provided a mechanism for the petitioner to address any grievances regarding the refund's quantification and applicable interest, directing them to approach the Assessing Authority for redressal.
The decision reinforces the principle that taxpayers should not be unduly deprived of their funds due to minor disputes, ensuring that only the necessary amount is withheld while the balance is promptly refunded.
Bottom Line :
Income Tax - Refund of amount due to assessee - Authorities cannot withhold entire refund amount for a meagre pending demand - Authorities must retain an amount equal to the proposed adjustment under Section 245 of the Income Tax Act, 1961, and remit the remaining amount forthwith.
Statutory provision(s): Income Tax Act, 1961 Section 245
