Section 237

Section 237 — the law in short

What the courts have decided on section 237, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Shelly Products Supreme CourtCuts both ways
  My assessment was annulled by the Tribunal and the department cannot make a fresh one. Do I get back everything I paid, including the tax on my own returned income?
  No, not everything. The Supreme Court held that liability to income tax under section 4(1) does not depend on an assessment being made, and that the return itself is an admission of the tax due on the income disclosed. So where an assessment is annulled or set aside and no fresh assessment can be made, the assessee gets a refund of everything paid in excess of the tax chargeable on the returned income, but the department may keep the tax referable to that returned income. Retaining it does not offend Article 265.
• Incredible Unique Buildcon P Ltd v ITO High CourtHelps taxpayerHigh Courts differ
  My customer deducted TDS on my bills and deposited almost none of it, and I have no Form 16A. Can I still get the credit and stop the demand?
  Yes. The Court held that the bar in s.205 operates as soon as it is established that tax was deducted at source, whether or not the deductor deposited it and whether or not a TDS certificate was issued. Form 16A is not the only evidence of deduction; other reliable material — the return disclosures supported by ledger accounts — will do.
• Sanjay Sudan v ACIT High CourtHelps taxpayerHigh Courts differ
  My employer deducted TDS but never deposited it. The department has raised a demand on me and set my later refund off against it. Can it do that?
  No. s.205 bars a direct demand on the person from whose income the tax was deducted, and the Court held that adjusting a later year's refund against that demand is an indirect recovery of the same tax. The demand notice and the adjustment were quashed and the refund directed to be released.
• Vijay Singh Kadan v CCIT High CourtHelps taxpayer
  The department adjusted my refund first and issued the s.245 notice afterwards. Does the later notice fix it?
  No. The Delhi High Court held that a notice issued after the adjustment cannot correct the fatal error of not giving the notice the section makes mandatory. It also rejected the department's description of what it had done as mere withholding pending verification, where the demand said to need verification was itself under appeal with a stay application pending, and ordered the withheld amount paid with statutory interest.
• Indglonal Investment & Finance Ltd v ITO High CourtCuts both ways
  My client's assessment has become final and I now want the tax back because the levy was wrong. Can I run that argument as a refund claim, or in a writ petition based on Article 265?
  No. In a claim under Chapter XIX section 242 forbids the assessee from questioning the correctness of an assessment or other matter that has become final and conclusive, or asking for a review of it; the authorities cannot go behind the assessment order while examining a refund. Article 265 is not violated where tax has been collected under a valid enactment and the 'wrong' order has become final — the remedy is to attack the order itself, in appeal, revision or a writ, and refund follows only as a consequence of that.
• Saurashtra Cement and Chemical Industries Ltd v ITO High CourtHelps department
  The Tribunal has annulled my client's assessment as time-barred. Does he get back the whole of the advance tax, TDS and self-assessment tax he had paid?
  No. What Chapter XIX refunds is only the amount paid wrongly or in excess of what is properly chargeable under the Act; it does not authorise refund of tax that was properly collected. The failure of the regular assessment — whether by annulment or by its becoming time-barred — does not turn tax payable on the assessee's own returned income into tax wrongly collected.
• Smt. Shantibai v CIT High CourtHelps taxpayerSuperseded by amendment
  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.
• Mitsui Kinzoku Components India Pvt. Ltd. v. CIT (Appeals), NFAC ITATHelps taxpayerNo later treatment found
  I paid DDT at the full domestic rate years ago and never claimed the treaty rate in my return. Is there any way to get the excess back now?
  The Delhi Tribunal allowed exactly that route. The company had paid DDT at 16.61 per cent on dividend to its Japanese parent for FY 2010-11, and after the Supreme Court's decision in Tata Tea and the Tribunal's decision in Giesecke & Devrient it applied to the Assessing Officer under s.237 on 27 November 2020 for refund of the excess of 6.61 per cent. The Tribunal held the claim maintainable notwithstanding that it had not been made in the return, followed the Bombay High Court in Colorcon Asia, and directed the Assessing Officer to charge tax on the dividend distributed to Mitsui Mining and Smelting Company Limited, Japan at ten per cent under Article 10 of the India-Japan treaty; all three appeals were allowed.
• Section 84 of the Black Money Act - the Income-tax Act provisions applied CBDT Circulars & InstructionsCuts both waysNo later treatment found
  Which provisions of the Income-tax Act apply to the Black Money Act, and can the officer borrow one that is not on the list?
  Section 84 applies a closed list: clauses (c) and (d) of s.90(1), clauses (c) and (d) of s.90A(1), ss.119, 133, 134, 135 and 138, the whole of Chapter XV, and ss.237, 240, 245, 280, 280A, 280B, 280D, 281, 281B and 284 of the Income-tax Act, with necessary modifications, as if they referred to undisclosed foreign income and asset instead of to income-tax. The list is expressed as an enumeration and the decided points located in this area turn on what is left out of it. Sections 234A, 234B and 234C are not on it, which is why the Chennai Bench in Pascal Postel held that the interest charge in s.40(2) has no advance-tax machinery to operate on; s.230 is not on it either, which is the omission on which Preetha Krishna (Madras High Court) is understood to turn, though no copy of that judgment was opened for this note.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.