The Assessing Officer has determined the income at nil after the Tribunal cancelled the assessment, but has noted that the tax already deposited will not be refunded. Is that refusal appealable, or must I file a writ?
It is appealable. An order of the officer refusing to refund an amount the assessee claims to be in excess of the tax properly chargeable is, in substance, an order under section 237, and an appeal lies against it — under section 246(n) as it then stood, and under section 246A(1)(i) today. That the same obligation could also be enforced by a mandamus or a civil suit does not take away the statutory right of appeal.
Decided by the High Court (J.S. Verma J (the retrieved report names only this judge)) on 1984-01-18, reported as [1984] 148 ITR 49 (MP); High Court of Madhya Pradesh; assessment years 1962-63 and 1963-64. It bears on section 237, section 239, section 240, section 246, section 141 of the Income Tax Act 1961, in Refunds, Interest & Condonation and Appeals matters.
The practical value is the forum point. Where a consequential order determines the income at nil or at a reduced figure but the officer declines to release the money, the instinct is to go straight to a writ petition; this decision says the appellate remedy is available and the refusal is an order under section 237 whatever it is called — here it was only a note appended to the consequential order. It also sets out the relationship between the three sections cleanly: section 237 creates the entitlement, section 239 prescribes the procedure and limitation for claiming, and section 240 is in the nature of a proviso to section 239 carving out an exception, so that where the entitlement arises from an order in appeal or other proceeding no claim under section 239 need be made at all and the officer must refund automatically. But the quantum premise of the case has since been reversed by statute, and that is set out in the validity note: on the same facts today the assessee would not get the money back, because the tax deposited had been computed on precisely the income he had returned. Use this decision for the forum and for the scheme of the sections, not for the proposition that cancellation of an assessment produces a full refund.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee in both references was Badri Prasad Gour. For assessment year 1962-63 he filed a return on 4 March 1964 showing taxable income of Rs 68,272; a provisional assessment under section 141 was made the same day, the tax was determined at Rs 28,247 and he deposited it. For 1963-64 the returned income was Rs 55,617, the tax determined under section 141 was Rs 23,566, and that too was deposited. He died on 7 November 1964. Regular assessment was then made by the Income-tax Officer under section 143(1). His legal representatives appealed; the Appellate Assistant Commissioner reduced the taxable income but did not set aside the regular assessment. On further appeal the Tribunal cancelled the regular assessment for both years on the ground that the legal representatives had not been noticed by the officer before the regular assessment was made after the assessee's death. The Income-tax Officer then passed a consequential order for both years showing the revised income as nil, but appended a note stating that the amounts deposited as a result of the provisional assessment during the assessee's lifetime were not to be refunded. The legal representatives appealed to the Appellate Assistant Commissioner under section 246 against that refusal. The Appellate Assistant Commissioner held the appeal not maintainable and dismissed it; the Tribunal affirmed; a reference was refused and was then directed under section 256(2), the question being whether the appeal to the Appellate Assistant Commissioner was maintainable under section 246.
The references were answered in the affirmative, in favour of the assessee and against the Revenue: in the facts and circumstances of the case the appeal filed before the Appellate Assistant Commissioner was maintainable under section 246 (para 15). Parties were to bear their own costs (para 16). The Income-tax Officer's order refusing to refund the tax deposited, which had become refundable once the income was assessed at nil after the Tribunal cancelled the regular assessment, was in substance an order made under section 237 and fell within clause (n) of section 246; the officer was bound by section 240 to make the refund and the assessee was not required to prefer any claim in the manner prescribed by section 239 (para 11).
The Court set out Chapter XIX and read sections 237, 239 and 240 together (paras 6, 7 and 10). Section 237 creates the entitlement to refund of tax exceeding what is properly chargeable, and a direction of the officer to refund is contemplated under it; clause (n) of section 246 gives an appeal to an assessee aggrieved by an order under section 237, and an assessee can be aggrieved only where the officer declines to refund, so any order of the officer of that character is an order under section 237 for the purpose of the right of appeal (para 10). Section 239 merely prescribes the procedure and limitation for claiming refund, and section 240, which follows it, is in the nature of a proviso to section 239 carving out an exception from the general rule requiring a claim: where the entitlement results from an order passed in appeal or other proceeding, no claim need be made and it is incumbent on the officer to refund automatically, no further satisfaction on his part being contemplated (para 10). On that construction the refusal here was in substance an order under section 237 and the appeal to the Appellate Assistant Commissioner lay (para 11). The availability of a mandamus under Article 226 or a civil suit does not deprive the assessee of a right of appeal conferred by statute; just as an appeal does not lie unless the statute provides it, a right so conferred cannot be taken away because another remedy also exists (para 12). The Full Bench decision in R.A. Boga v. AAC was distinguished as a case of remand for fresh assessment where the reassessment proceeding had not concluded, so that until it was completed and an excess established no question of refund arose; here the Revenue did not dispute that the assessment proceeding had ended with the liability determined at nil (para 13). The Court also noted, on Jaipur Udyog Ltd. v. CIT, that a provisional assessment binds neither side and that tax paid under it is liable to adjustment in the light of the final order, and that the bar on appeals against provisional assessments in section 141(7), deleted with effect from 1 April 1971, did not apply because the appeal was against the officer's order at the end of the assessment proceeding and not against the provisional assessment (para 14).
Section 240, which follows Section 239, is in the nature of a proviso to Section 239, which carves out an exception from the general rule laid down in s, 239 requiring the making of a claim for refund in the prescribed manner and within the prescribed limitation.
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Handle my notice → Ask a CA on WhatsAppIt is appealable. An order of the officer refusing to refund an amount the assessee claims to be in excess of the tax properly chargeable is, in substance, an order under section 237, and an appeal lies against it — under section 246(n) as it then stood, and under section 246A(1)(i) today. That the same obligation could also be enforced by a mandamus or a civil suit does not take away the statutory right of appeal. This was decided by the High Court (J.S. Verma J (the retrieved report names only this judge)) and bears on section 237, section 239, section 240, section 246, section 141 of the Income Tax Act 1961. It is reported as [1984] 148 ITR 49 (MP); High Court of Madhya Pradesh; assessment years 1962-63 and 1963-64. The practical value is the forum point. Where a consequential order determines the income at nil or at a reduced figure but the officer declines to release the money, the instinct is to go straight to a writ petition; this decision says the appellate remedy is available and the refusal is an order under section 237 whatever it is called — here it was only a note appended to the consequential order. It also sets out the relationship between the three sections cleanly: section 237 creates the entitlement, section 239 prescribes the procedure and limitation for claiming, and section 240 is in the nature of a proviso to section 239 carving out an exception, so that where the entitlement arises from an order in appeal or other proceeding no claim under section 239 need be made at all and the officer must refund automatically. But the quantum premise of the case has since been reversed by statute, and that is set out in the validity note: on the same facts today the assessee would not get the money back, because the tax deposited had been computed on precisely the income he had returned. Use this decision for the forum and for the scheme of the sections, not for the proposition that cancellation of an assessment produces a full refund. If it applies to you, the first step is this: Where a consequential or appeal-effect order refuses or withholds a refund, treat the refusal as an order under section 237 and file an appeal under section 246A(1)(i) rather than assuming a writ is the only remedy.
The assessee in both references was Badri Prasad Gour. For assessment year 1962-63 he filed a return on 4 March 1964 showing taxable income of Rs 68,272; a provisional assessment under section 141 was made the same day, the tax was determined at Rs 28,247 and he deposited it. For 1963-64 the returned income was Rs 55,617, the tax determined under section 141 was Rs 23,566, and that too was deposited. He died on 7 November 1964. Regular assessment was then made by the Income-tax Officer under section 143(1). His legal representatives appealed; the Appellate Assistant Commissioner reduced the taxable income but did not set aside the regular assessment. On further appeal the Tribunal cancelled the regular assessment for both years on the ground that the legal representatives had not been noticed by the officer before the regular assessment was made after the assessee's death. The Income-tax Officer then passed a consequential order for both years showing the revised income as nil, but appended a note stating that the amounts deposited as a result of the provisional assessment during the assessee's lifetime were not to be refunded. The legal representatives appealed to the Appellate Assistant Commissioner under section 246 against that refusal. The Appellate Assistant Commissioner held the appeal not maintainable and dismissed it; the Tribunal affirmed; a reference was refused and was then directed under section 256(2), the question being whether the appeal to the Appellate Assistant Commissioner was maintainable under section 246. The matter was decided on 1984-01-18 by the High Court (J.S. Verma J (the retrieved report names only this judge)). On those facts the High Court held as follows. The references were answered in the affirmative, in favour of the assessee and against the Revenue: in the facts and circumstances of the case the appeal filed before the Appellate Assistant Commissioner was maintainable under section 246 (para 15). Parties were to bear their own costs (para 16). The Income-tax Officer's order refusing to refund the tax deposited, which had become refundable once the income was assessed at nil after the Tribunal cancelled the regular assessment, was in substance an order made under section 237 and fell within clause (n) of section 246; the officer was bound by section 240 to make the refund and the assessee was not required to prefer any claim in the manner prescribed by section 239 (para 11).
The Court set out Chapter XIX and read sections 237, 239 and 240 together (paras 6, 7 and 10). Section 237 creates the entitlement to refund of tax exceeding what is properly chargeable, and a direction of the officer to refund is contemplated under it; clause (n) of section 246 gives an appeal to an assessee aggrieved by an order under section 237, and an assessee can be aggrieved only where the officer declines to refund, so any order of the officer of that character is an order under section 237 for the purpose of the right of appeal (para 10). Section 239 merely prescribes the procedure and limitation for claiming refund, and section 240, which follows it, is in the nature of a proviso to section 239 carving out an exception from the general rule requiring a claim: where the entitlement results from an order passed in appeal or other proceeding, no claim need be made and it is incumbent on the officer to refund automatically, no further satisfaction on his part being contemplated (para 10). On that construction the refusal here was in substance an order under section 237 and the appeal to the Appellate Assistant Commissioner lay (para 11). The availability of a mandamus under Article 226 or a civil suit does not deprive the assessee of a right of appeal conferred by statute; just as an appeal does not lie unless the statute provides it, a right so conferred cannot be taken away because another remedy also exists (para 12). The Full Bench decision in R.A. Boga v. AAC was distinguished as a case of remand for fresh assessment where the reassessment proceeding had not concluded, so that until it was completed and an excess established no question of refund arose; here the Revenue did not dispute that the assessment proceeding had ended with the liability determined at nil (para 13). The Court also noted, on Jaipur Udyog Ltd. v. CIT, that a provisional assessment binds neither side and that tax paid under it is liable to adjustment in the light of the final order, and that the bar on appeals against provisional assessments in section 141(7), deleted with effect from 1 April 1971, did not apply because the appeal was against the officer's order at the end of the assessment proceeding and not against the provisional assessment (para 14). In the words reproduced by the source cited on this page: "Section 240, which follows Section 239, is in the nature of a proviso to Section 239, which carves out an exception from the general rule laid down in s, 239 requiring the making of a claim for refund in the prescribed manner and within the prescribed limitation." The decision followed or applied Jaipur Udyog Ltd. v. CIT, [1969] 71 ITR 799 (SC) — relied on at para 14 on the non-binding character of a provisional assessment; R.A. Boga v. AAC of Income-tax, [1977] 110 ITR 1 (P&H) (FB) — distinguished at para 13.
It was decided by the High Court on 1984-01-18 and is reported as [1984] 148 ITR 49 (MP); High Court of Madhya Pradesh; assessment years 1962-63 and 1963-64. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 237, section 239, section 240, section 246, section 141, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The references were answered in the affirmative, in favour of the assessee and against the Revenue: in the facts and circumstances of the case the appeal filed before the Appellate Assistant Commissioner was maintainable under section 246 (para 15). Parties were to bear their own costs (para 16). The Income-tax Officer's order refusing to refund the tax deposited, which had become refundable once the income was assessed at nil after the Tribunal cancelled the regular assessment, was in substance an order made under section 237 and fell within clause (n) of section 246; the officer was bound by section 240 to make the refund and the assessee was not required to prefer any claim in the manner prescribed by section 239 (para 11). It arises in Refunds, Interest & Condonation and Appeals matters, on section 237, section 239, section 240, section 246, section 141 of the Income Tax Act 1961, and was decided by J.S. Verma J (the retrieved report names only this judge). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Look for the refusal wherever it appears — here it was a note appended to the order, not a separate order; substance governs. Do not concede that the appeal is bad because no claim was made under section 239: where the entitlement flows from an order in appeal or other proceeding, section 240 dispenses with the claim. Before advising on quantum, apply clause (b) of the proviso to section 240 and compute the tax chargeable on the income the client returned; only the excess over that figure is refundable on an annulment. Where the appellate order sets aside or cancels the assessment and directs a fresh assessment, expect no refund at all until that fresh assessment is made — clause (a) of the proviso, and the same distinction the Punjab and Haryana Full Bench decision in R.A. Boga drew and which this Court applied to hold that case distinguishable.
Superseded by amendment. The label is directed at the quantum premise, not at the answer to the referred question. The Court proceeded on the footing that once the regular assessment was cancelled and the income determined at nil, the whole of the tax paid under the provisional assessment became refundable. A proviso was added to section 240 with effect from 1 April 1989, clause (b) of which provides that where an assessment is annulled the refund shall become due only of the tax, if any, paid in excess of the tax chargeable on the total income returned by the assessee; the text of section 240 with that proviso was read for this note. On the facts here the tax deposited had been computed under section 141 on exactly the returned income, so under the present proviso, and on the Gujarat Full Bench decision in Saurashtra Cement and Chemical Industries Ltd. approved by the Supreme Court in CIT v. Shelly Products (2003) 261 ITR 367, no refund would be due at all. What survives untouched is the holding that a refusal to refund is an order under section 237 and is appealable, the right of appeal now being in section 246A(1)(i), whose text was read and which lists 'an order made under section 237'; and the construction of sections 237, 239 and 240 as a scheme. Note also that section 239 has since been amended: with effect from 1 September 2019 a claim for refund is made by furnishing a return under section 139 and the limitation periods in section 239(2) have been omitted. No search was made for later decisions following or doubting this judgment. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read from the indiankanoon print view; paragraphs 1 to 5, 6 to 12 and 13 to 16 were reproduced verbatim. Two gaps in the report. First, the case number of the present reference is not stated in what could be read: paragraph 1 records that the judgment also disposes of Misc. Civil Case No. 2 of 1981 (Smt. Mainabai v. CIT), so the present matter carries a different number which the retrieved text does not give. Second, the bench line in the retrieved report names only J.S. Verma J; a reference under section 256(2) would ordinarily be heard by a Division Bench and the second judge, if any, is not named in what could be read — no name has been supplied. Paragraph 3 records that the regular assessment was made under section 143(1), which is the pre-1989 provision and not the present intimation provision of the same number. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The references were answered in the affirmative, in favour of the assessee and against the Revenue: in the facts and circumstances of the case the appeal filed before the Appellate Assistant Commissioner was maintainable under section 246 (para 15). Parties were to bear their own costs (para 16). The Income-tax Officer's order refusing to refund the tax deposited, which had become refundable once the income was assessed at nil after the Tribunal cancelled the regular assessment, was in substance an order made under section 237 and fell within clause (n) of section 246; the officer was bound by section 240 to make the refund and the assessee was not required to prefer any claim in the manner prescribed by section 239 (para 11).
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