Facts of the Case

  • The petitioner filed its return of income for AY 2018–19.
  • The return was processed under Section 143(1) of the Income Tax Act.
  • No scrutiny assessment was conducted for the relevant year.
  • The petitioner claimed that:
    • The processing of return was incorrect and not in accordance with law.
    • Legitimate refund due was denied without any valid basis.
  • A rectification application dated 28 May 2020 was filed but remained undecided.

Issues Involved

  1. Whether the Income Tax Department failed to correctly process the return under Section 143(1).
  2. Whether non-grant of refund despite entitlement is legally sustainable.
  3. Whether delay in disposal of rectification application under Section 154 is justified.
  4. Whether mismatch in TDS records can be a valid ground to deny refund.

Petitioner’s Arguments

  • The return processing was erroneous and contrary to law.
  • The petitioner was unlawfully denied refund along with interest.
  • Despite filing a rectification application, the same was not adjudicated for a prolonged period.
  • No scrutiny proceedings were initiated, yet refund was withheld. 

Respondent’s Arguments

  • The Revenue submitted that there was a mismatch in TDS certificates amounting to ₹11,78,811/-.
  • It was argued that correction of TDS records by the deductor was required.

Court’s Findings / Order

  • The Court acknowledged the grievance regarding pending rectification and refund.
  • It granted liberty to the petitioner to approach the deductor/vendor for correction of TDS mismatch.
  • The Court directed the Assessing Officer to:
    • Decide the rectification application dated 28 May 2020,
    • Grant TDS credit,
    • Issue refund along with applicable interest,
    • Within 12 weeks.
  • The writ petition was disposed of with directions.

Important Clarification by Court

  • Mere TDS mismatch cannot indefinitely delay refund if rectification is pending.
  • The Assessing Officer is duty-bound to decide rectification applications within a reasonable time.
  • Taxpayer cannot be prejudiced due to procedural lapses or third-party errors (deductor issues).

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:522-DB/MMH09022022CW24772022_140303.pdf

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