Dipankar Mohan Ghosh vs ITO, TDS Ward-1(3)(2) Int. Taxation, New Delhi – Refund Claim and Rectification under Section 154 for AY 2012-13

Case Overview: Dipankar Mohan Ghosh vs ITO, TDS Ward-1(3)(2) Int. Taxation, New Delhi – AY 2012-13

This article discusses the case of Dipankar Mohan Ghosh (the appellant) versus the Income Tax Officer, TDS Ward-1(3)(2) Int. Taxation, New Delhi (the respondent), under case number ITA 6674/DEL/2019. The appeal, related to the assessment year (AY) 2012-13, was filed on August 9, 2019, with the final tribunal order pronounced on July 26, 2022. The primary issues in this case revolved around a refund claim and subsequent rectification proceedings under Section 154 of the Income Tax Act, 1961.

Background of the Case

The appellant, Dipankar Mohan Ghosh, had filed an application on July 23, 2012, before the Hon’ble Authority for Advance Rulings (AAR) seeking clarification on the eligibility for a deduction under Section 54F of the Income Tax Act. The appellant had invested Rs. 24,72,86,100 in the purchase of a residential house abroad from the sale proceeds of a residential property in India. Although the appellant did not file a return of income under Section 139 of the Act, a return was later filed on January 2, 2015, in response to a notice issued under Section 148 by the Assessing Officer (AO). The return declared an income of Rs. 55,48,95,950 and claimed a refund of Rs. 5,15,63,080.

Proceedings Before the AAR and AO

The Hon’ble AAR, in its order dated December 22, 2017, allowed the appellant’s claim for a deduction under Section 54F, recognizing the investment of Rs. 24,72,86,100 in the purchase of the residential house abroad. Subsequently, the AO accepted the appellant’s return of income and passed an assessment order on February 26, 2018, under Sections 147/143(3) of the Act. However, the AO restricted the credit of tax deducted at source (TDS) only to the amount chargeable as per the income tax return, and no refund was issued.

Rectification Proceedings under Section 154

Aggrieved by the non-issuance of the refund, the appellant filed a rectification application under Section 154 of the Act on March 23, 2018, seeking the issuance of the refund of Rs. 5,15,63,080. The AO, in response, passed an order on March 28, 2018, determining the amount of Rs. 5,15,63,077 as refundable.

However, the same AO later passed another order on September 27, 2018, under Section 154, rejecting the rectification application. The AO cited that since the return of income was not filed within the prescribed time under Section 139, the appellant was not entitled to the refund.

Appeal Before the CIT(A) and Further Rectification

The appellant challenged the AO’s order dated September 27, 2018, before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) quashed the AO’s order and directed the AO to allow the appellant an opportunity to decide on the issue of the rectification application. The CIT(A) pointed out that the AO had failed to comply with Section 154(3) of the Act, which mandates giving notice to the assessee and providing a reasonable opportunity of being heard before passing an order that enhances an assessment or reduces a refund.

Contentions Raised by the Appellant

The appellant, dissatisfied with the CIT(A)’s order, filed an appeal before the Income Tax Appellate Tribunal (ITAT). The appellant contended that the CIT(A) erred in law by issuing directions to the AO to reconsider the rectification application when no such application was pending. The appellant argued that the CIT(A)’s directions amounted to a remand, which is beyond the CIT(A)’s powers under Section 251 of the Act. The appellant also emphasized that the AO had already passed an order on the rectification application on March 28, 2018, and that the subsequent order on the same application was invalid.

Tribunal’s Analysis and Findings

After considering the submissions and reviewing the case records, the ITAT agreed with the appellant’s contentions. The Tribunal noted that the AO had already disposed of the rectification application on March 28, 2018, by determining the refund amount. The subsequent order passed by the AO on September 27, 2018, was on the same rectification application, which had already been decided. The ITAT observed that issuing two orders on the same application is against the principles of law, particularly the legal maxim “interest reipublicae ut sit finis litium” (it concerns the State that there should be an end to litigation) and “nemo debet bis vexari pro una et eadem causa” (no one should be vexed twice over for the same cause).

Moreover, the ITAT pointed out that Section 154 of the Act mandates that before passing any order that would enhance an assessment or reduce a refund, the AO must provide notice to the assessee and offer a reasonable opportunity of being heard. The AO failed to adhere to this requirement while passing the order on September 27, 2018, which further invalidated the order.

Conclusion

The ITAT concluded that the AO’s order dated September 27, 2018, was unsustainable, invalid, and void ab initio. Consequently, the Tribunal set aside the CIT(A)’s order as well. The appeal filed by Dipankar Mohan Ghosh was allowed, and the Tribunal directed the AO to adhere to the principles of law in any future proceedings related to this matter.

Significance of the Ruling

This ruling highlights the importance of adhering to procedural fairness and the statutory requirements under the Income Tax Act. It reinforces the principle that taxpayers should not be subjected to arbitrary or repetitive orders on the same issues, and emphasizes the necessity for tax authorities to follow due process, particularly in rectification proceedings under Section 154. The decision also underscores the limitations of the CIT(A)’s powers, ensuring that directions issued during appeals align with the statutory framework.

Overall, the case of Dipankar Mohan Ghosh vs ITO, TDS Ward-1(3)(2) Int. Taxation, New Delhi, serves as a crucial reference for both taxpayers and tax authorities in understanding the legal intricacies involved in refund claims and rectification under the Income Tax Act.

Dipankar Mohan Ghosh vs ITO, TDS Ward-1(3)(2) Int. Taxation, New Delhi – Refund Claim and Rectification under Section 154 for AY 2012-13