Court Orders Fresh Review of Tax Refund Withholding in FIS Payment Solutions Case

Get the full picture - access the original judgement of the court order here

Case Name:

M/s FIS Payment Solutions & Services India Private Limited vs. Deputy Commissioner of Income Tax-9(1) & Anr. (High Court of Delhi)

W.P.(C) 3273/2020 & CM APPL.23360/2020

Date: 21st September 2020

Key Takeaways:

1. The court emphasized the importance of following established guidelines when withholding tax refunds.

2. The judgment highlights the need for tax authorities to provide clear justifications for withholding refunds.

3. The case underscores the court's role in ensuring fair treatment of taxpayers in refund matters.

Issue: 

Was the Income Tax Department's decision to withhold the tax refund for Assessment Year 2018-19 justified and in accordance with established legal guidelines?

Facts:

1. The petitioner, M/s FIS Payment Solutions & Services India Private Limited, claimed entitlement to a tax refund for Assessment Year 2018-19.

2. This was the second round of litigation between the parties regarding this refund.

3. In an earlier writ petition (W.P. (C) 2243/2020), the court had directed the tax authorities to refund the amount within four weeks, unless they had valid justification for withholding it.

4. On March 3, 2020, the Assessing Officer proposed to withhold the refund pending completion of scrutiny assessment proceedings.

5. On March 9, 2020, the Principal Commissioner of Income Tax-3 approved withholding the refund under section 241A (of Income Tax Act, 1961).

6. The petitioner challenged these decisions in the current writ petition.

Arguments:

Petitioner's Argument:

- The orders to withhold the refund were contrary to the guidelines set by the Delhi High Court in the Mapel Logistics Pvt. Ltd. case.

- The tax authorities should reconsider their decision in light of these guidelines.

Respondent's Argument:

- The specific arguments of the tax authorities are not detailed in the judgment, but they likely justified their decision based on pending scrutiny proceedings.

Key Legal Precedents:

1. Mapel Logistics Pvt. Ltd. vs. Principal Commissioner of Income Tax (2019) 112 Taxman 199 (Delhi):

This case established guidelines for withholding tax refunds. 

2. M/s. FIS Payment Solutions & Services India Private Limited vs. Deputy Commissioner of Income Tax-9(1) & Anr. (W.P. (C) 2243/2020):

The earlier order in this case directed the tax authorities to refund the amount unless they had valid justification for withholding it. 

Judgment:

1. The court allowed the petition and remitted the matter back to the Assessing Officer.

2. The Assessing Officer was directed to pass a fresh speaking order within six weeks.

3. The petitioner should be given an opportunity to be heard and to place on record the additional affidavit dated 01.06.2020.

4. The fresh order should be in accordance with the law and the guidelines established in the Mapel Logistics case. 

FAQs:

1. Q: What does "remitting the matter back" mean?

  A: It means the court is sending the case back to the tax authorities to reconsider their decision and make a new order.

2. Q: What is a "speaking order"?

  A: A speaking order is a detailed order that clearly explains the reasons and justifications for the decision made.

3. Q: Why did the court not decide on the refund itself?

  A: The court wants to ensure that the tax authorities follow proper procedures and guidelines when making their decision, rather than making the decision for them.

4. Q: What are the implications of this judgment for taxpayers?

  A: This judgment reinforces the importance of tax authorities providing clear justifications for withholding refunds and following established guidelines, which can potentially benefit taxpayers in similar situations.

5. Q: How long does the Assessing Officer have to make a new decision?

  A: The court has given the Assessing Officer six weeks to pass a fresh speaking order.

1. The present writ petition under Articles 226/227 of the Constitution of India, has been instituted on behalf of M/s FIS Payment Solutions & Services India Private Limited, the petitioner herein, praying as follows:

(a) Issue a writ of mandamus or any other appropriate writ quashing proceedings undertaken by the First respondent vide letter dated 03.03.2020 seeking to withhold the refunds for Assessment Year 2018-19 and the approval granted by the Second respondent on 09.03.2020 to invoke section 241A (of Income Tax Act, 1961) on the request made by the First Respondent on 03.03.2020.

(b) Issue a writ of mandamus or any other appropriate writ directing the respondent/s to release the refund of INR 74,88,99,152/- along with applicable interest under section 244A (of Income Tax Act, 1961), till the date of issuance of the refund, for Assessment Year 2018-19.

(c) Pass such other orders which this Hon’ble Court may deem fit and proper on the facts and in the circumstances of the case.

2. It is observed that this is the second round of litigation between the parties qua the refund of tax, which the petitioner claims to be entitled to, in relation to the Assessment Year 2018-19.

3. In the earlier round where similar relief was prayed for, a Coordinate Bench of this Court in writ petition being W.P. (C) 2243/2020 titled as ‘M/s. FIS Payment Solutions & Services India Private Limited vs. Deputy Commissioner of Income Tax-9(1) & Anr.’, on 03.03.2020, was pleased to pass the following order:-

“Issue notice. Mr. Bhatia accepts notice. The petitioner seeks refund of the tax from the respondents. In relation to the Assessment Year 2017- 18, the petitioner’s assessment has been completed under Section 143(3) (of Income Tax Act, 1961). So far as the Assessment Year 2018-19 is concerned, the petitioner’s return, as filed, has been processed under Section 143(1) (of Income Tax Act, 1961). The amount due towards refund for both the assessment years is substantial. Prima-facie, it appears that there is no justification for the respondents not granting the refund when the same is due.

We, therefore, direct the respondents to refund the amounts for both the assessment years along with interest as applicable, to the petitioners within four weeks from today. In case the respondents have any valid justification for withholding the refund, or any part thereof, they shall file their counter-affidavit positively within the same period clearly stating as to why the refund/ partial refund is not due. No further time shall be granted for the said purpose.

List on 06.05.2020.

Order Dasti under the signatures of the Court Master.”

4. On the very same day, vide order dated 03.03.2020, a proposal was made by the Assessing Officer to withhold the subject refund, pending completion of scrutiny assessment proceedings for the Assessment Year 2018-19 under the provisions of Section 143(3) (of Income Tax Act, 1961), 1961 (hereinafter referred to as ‘the said Act’).

5. The Principal Commissioner of Income Tax-3 vide order dated 09.03.2020 granted approval for withholding of the refund for the Assessment Year 2018-19 under section 241A of the Income Tax Act, 1961.

6. The limited relief prayed for on behalf of the petitioner in these proceedings is that the orders impugned in these proceedings are in the teeth of the guidelines enunciated by this Court in Mapel Logistics Pvt. Ltd. vs. Principal Commissioner of Income Tax, reported as (2019) 112 Taxman 199 (Delhi), and may, therefore, be remitted back to the Respondents for de novo consideration, in accordance with law.

7. Having heard learned counsel appearing on behalf of the parties and in view of the guidelines in Mapel Logistics (supra), as well as, the directions contained in the said order dated 03.03.2020 rendered by the Coordinate Bench, we allow the present petition and remit the matter back to the Assessing Officer to pass a fresh speaking order, after affording an opportunity of being heard to the petitioner and further permitting them to place on record the additional affidavit dated 01.06.2020, filed before this Court, in accordance with law, within a period of six weeks from today.

8. No further directions are called for.

9. With the above direction, the present petition is disposed of. The pending application also stands disposed of.

10. A copy of this judgment be provided electronically to the learned counsel for the parties and be also uploaded on the website of this Court forthwith.

SIDDHARTH MRIDUL

(JUDGE)

TALWANT SINGH

(JUDGE)

SEPTEMBER 21, 2020