Delhi High Court rules against withholding refund to verify deduction claim

Delhi High Court rules against withholding refund to verify deduction claim

The amount was reserved on the pretext that it would affect the revenue department adversely

The Delhi High Court has held that refunds cannot be withheld just to verify the claim for deduction under the Income Tax Act,1961.

In its order early this year, the respondent had confirmed a refund amounting to Rs.21.80 crores, along with interest, to the petitioner True Blue India. But later withheld it. In June, the petitioner challenged the order passed under the IT Act.

It was contended that the refund due to the petitioner was liable to be released at the time of processing of the return. The petitioner contended that the deduction had also been allowed by the respondents in the Assessment Years 2017-18 and 2018-19.

It maintained that the total deduction of Rs.10,44,91,121 claimed under the IT Act pertained to the old unit (Unit 1), while Rs.50,95,912 was for the new unit (Unit 2).

It is settled law that the refund due to the petitioner is liable to be released at the time of issuance of the intimation/order unless an order for withholding of the refund has been passed explicitly recording that the grant of refund would adversely affect the revenue department.

The court observed that the refund could not be withheld just because the respondent wanted to verify the claim for the deduction and served a notice to the petitioner.

Ruling over the matter, Justice Manmohan and Justice Manmeet Pritam Singh Arora held that the impugned order lacked sufficient reasoning that the revenue department would be adversely affected by the grant of refund.

While the appellant was represented by lawyer Ananya Kapoor, the respondent was advised by lawyers Sunil Agrawal, Tushar Gupta, and Uthkarsh Tiwari.