N.K.SUD, J. - (1.) THE petitioner, a co-operative society, is aggrieved by the letter of the Chief CIT, Chandigarh, dt. 20th June, 1996, declining its prayer for issue of refund of Rs. 37,41,050 arising as a result of relief allowed in the appellate order passed by the CIT(A), Rohtak, dt. 15th March, 1995. Before resolving the controversy, the relevant facts may first be taken note of.
(2.) THE petitioner filed its return of income for the asst. yr. 1992-93 on 31st Oct., 1992, declaring an income of Rs. 73,31,281, against which a sum of Rs. 35 lacs had been deposited as advance tax and Rs. 2,41,050 had been deducted as tax at source. Thus, the total amount of prepaid tax was Rs. 37,41,050. The return was processed under S. 143(1)(a) of the IT Act, 1961 (for short "the Act"), on 25th March, 1994, and after allowing credit for the prepaid taxes, a demand of Rs. 1,13,639 was created. However, since there was some mistake in the calculation, the intimation under S. 143(1)(a) of the Act was rectified on 20th Sept., 1994, and instead of demand of Rs. 1,13,639 originally determined as payable by the petitioner, a sum of Rs. 9,68,771 was found to be refundable to it. This amount of refund was adjusted against the outstanding demand for the asst. yr. 1990-91. The petitioner filed a revised return on 6th Oct., 1994, claiming that its entire income was exempt under S. 80P(2)(a)(iii) of the Act. Thus, the taxable income as per the revised return was declared as nil. Meanwhile, the AO had undertaken the proceedings for framing a regular assessment under S. 143 (3) of the Act. This assessment was framed on 9th Dec., 1994. The AO ignored the revised return on the ground that it had been filed beyond the period of limitation. He also rejected the claim for exemption under S. 80P(2)(a)(iii) of the Act on merits as well. He determined the total taxable income at Rs. 1,77,35,166. The tax on this income worked out to Rs. 91,54,451. After giving credit for Rs. 27,72,979 which was the amount of prepaid taxes as reduced by the refund already issued, an additional demand of Rs. 63,82,172 was created. Against the additional demand, the following amounts were paid/adjusted : The petitioner filed an appeal against the assessment order under S. 143(3) of the Act before the CIT(A), Rohtak, which was allowed vide order dt. 15th March, 1995, and the petitioner's claim for deduction under S. 80P(2)(a)(iii) was upheld. The AO vide order dt. 24th April, 1995, gave effect to the appellate order and after allowing the relief given in appeal determined the taxable income at nil. However, he did not issue any refund. The petitioner, therefore, addressed a communication dt. 5th Jan., 1996, to the AO pointing out that in view of the reduction of its income to nil as a result of the appellate order, no tax was payable by it and, therefore, the entire amount paid or adjusted towards tax for asst. yr. 1992-93 be refunded to it. The AO vide order dt. 23rd Feb., 1996, granted a refund of only Rs. 42 lacs which was the amount paid/adjusted after the regular assessment framed under S. 143(3) of the Act. He, however, refused to refund the amount adjusted against the tax recovered under S. 143 (1)(a) of the Act on the basis of the income returned by the petitioner. The petitioner represented to the Chief CIT North-West Zone, Chandigarh, against the refusal of the AO to issue full refund. This representation was also rejected by the Chief CIT vide letter dt. 20th June, 1996, in the following terms: "2. I have considered the points made in your petition and have carefully examined the assessment records. It is seen that an additional demand of Rs. 63,82,172 was raised on 9th Dec., 1994, consequent to the passing of assessment order under S. 143(3). Against this, the tax paid by you was Rs. 42 lakhs, and following the appellate order passed by the CIT(A), Rohtak, this amount has been refunded along with the interest. I further notice that the prepaid taxes (viz., Rs. 35 lacs as advance-tax and Rs. 2,41,050 as TDS) had been duly adjusted when the return filed by you was processed under S. 143(1)(a) and in fact a refund was also issued at that time. Provisions of S. 240 also indicate that tax which is related to the income returned by the assessee cannot be refunded." In the writ petition, reference was made to S. 240 of the Act to show that it did not empower the respondents to retain the tax adjusted as per the processing made under S. 143(1)(a) of the Act when after the appellate order, the taxable income of the petitioner was reduced to nil and, therefore, no tax was payable by it. It was also averred that in accordance with S. 143(4) of the Act, once a regular assessment under sub-s. (3) of S. 143 or S. 144 was made, any tax or interest paid by the assessee under sub-s. (1) is deemed to have been paid towards regular assessment. It was, therefore, claimed that as soon as the assessment under S. 143(3) of the Act was framed by the AO, even the tax paid/adjusted in demand under S. 143(1)(a) of the Act assumed the nature of tax paid in the regular assessment and, consequently when, as a result of the appellate order, the taxable income was reduced to nil, the assessee became entitled to entire amount of tax paid/adjusted and not merely tax which had been paid/adjusted against the additional demand created under S. 143(3) of the Act.
(3.) WRITTEN statement on behalf of respondent No. 1 has been filed in which reliance has been placed on the language of sub-s. (3) of S. 143 of the Act, to highlight that while making a regular assessment under that sub-section, the AO can only determine the sum payable by the assessee. Rs. Paid on 2nd Feb., 1995 21,00,000 Paid on 28th Feb., 1999 16,95,123 Adjusted out of refund due to the petitioner in another assessment year 4,04,877 Total 42,00,000 He has no power to determine refund under this provision. Reliance was also placed on cl. (b) of the proviso to S. 240 of the Act to contend that the refund would become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee.;