Form 26B Under Income Tax Rules Not Required For Refund Once Form 5 Under 'Vivad Se Vishwas' Act Is Issued: Allahabad High Court

“A perusal of the Rules would reveal that Form 26B is required to filled up if the assessee claims refund paid under Chapter XXVII-B of the Act, 1961. The Stage of requirement of filling up the Form 26B was long over in the year 2008-09 itself and the present refund was being sought by the petitioner in terms of the provisions of the VSV Act, 2020, which did not require filling up any form, as claimed by the respondents, and as such, the demand made has no sanction in law”, held Chief Justice Arun Bhansali and Justice Kshitij Shailendra.

Case Background

Petitioner-Dish TV India Ltd. filed an Income Tax Appeal against a demand of Rs.2.25 Cr made due to short payment of TDS during assessment of its returns for the Financial Year 2008-09. During the pendency of the said appeal, the Vivad Se Vishwas Act, 2020 was notified by the Central Government. Petitioner submitted Forms 1 and 2 for the settlement of disputed tax for the Financial Year 2008-09, indicating the amount payable at Rs. 6.05 lakhs.

Petitioner's application was accepted and a certificate in Form 3 was issued fixing the amount refundable to the petitioner at Rs. 2.19 Crores. Subsequently, petitioner withdrew the Income Tax Appeal and the respondent issued an order for final settlement of Tax under Section 5(2) of the VSV Act, 2020 through Form 5.

However, despite repeated notice the said amount was never refunded to the petitioner. Aggrieved by the same, petitioner filed the writ petition before the High Court for payment of the refundable amount along with interest.

Counsel for respondents argued that on 19.11.2024 a communication was issued to the petitioner stating that he was required to submit Form 26B of the Income Tax Rules in order to make a claim for refund through the TRACES portal. It was stated that once the petitioner complied with the said direction, he would be refunded the amount due to him. The respondents also submitted that as per Section 7 of the VSV Act, petitioner was not entitled to the payment of any interest

Per contra, petitioner contended that this act by the respondents was beyond the scope of the VSV Act. It was argued that as per the Form 5 issued on 20.09.2022, they were required to refund the sum of Rs.2.19 Crores along with interest as per Section 244A of the Income Tax Act, 1961. Petitioner submitted that the demand of submitting Form 26B was only made in order to deprive him of his refund.

High Court Verdict

The Court held that the respondents could not construe a requirement to fill Form 26B of the Income Tax Rules to seek refund, two years after the present petition had been filed. It was held that once Form 5 under the VSV Act had been issued, petitioner was entitled to the refund.

“The said act of the respondents, has no basis inasmuch as once Form 5 under the VSV Act, 2020 was issued entitling the petitioner to a refund of Rs. 2,19,42,954/-, there was no question of the respondents then requiring to file Form 26B as now sought to be demanded by the respondents,” held the Court.

Regarding the demand of interest raised by the petitioner, the Court relied on the decision of the Delhi High Court in Ms. Anjul v. Office of PCIT to hold that where the State received money without having had the right to do so and retains it, it is responsible for returning the sum with interest.

Further, examining Section 7 of the VSV Act, the Court held that it had nothing to do with the payment of interest for the period after Form 5 had been issued to the petitioner.

“A bare perusal of the Explanation would reveal that the Explanation pertains to payment of any amount under the Income Tax Act for the period before filing declaration under sub- section (1) of Section 4 of the VSV Act, 2020 and nothing to do with the entitlement to interest for the period after issuance of Form No. 5 indicating entitlement of the petitioner to the amount of refund.”

Accordingly, respondents were directed to pay the refund due to the petitioner along with an interest of 6% per annum.

Case Title: Dish TV India Limited v. Commissioner of Income Tax (TDS) and 2 Ors. [WRIT TAX No. - 1953 of 2024]