Taxpayers who file their (ITRs) within the due date but miss the deadline for e-verification may still be entitled to their refund, provided the delay has been condoned by the tax department.
In a recent ruling, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the Income Tax Department cannot deny a legitimate refund merely because an ITR was e-verified after the prescribed time if the delay has already been condoned by the Central Processing Centre (CPC). The tribunal observed that retaining such tax despite there being no tax liability would be contrary to Article 265 of the Constitution, which states that no tax shall be levied or collected except by authority of law.
What was the case?
The case involved a Delhi taxpayer who filed his income tax return for Assessment Year 2015-16 under Section 139(1) on September 3, 2015. In the return, he declared nil taxable income after setting off current-year losses, unabsorbed depreciation and brought-forward losses, and claimed a refund of about ₹17.08 lakh, primarily on account of tax deducted at source (TDS) from rental income.
However, he could not complete the mandatory e-verification within the prescribed time. Before the tribunal, the taxpayer submitted that the delay occurred because he was looking after his 83-year-old father, who was seriously ill and required repeated hospitalisation.
The subsequently filed a condonation request before the CPC, which accepted the request. The return was eventually e-verified on February 16, 2018. Despite the condonation, the return was not processed under Section 143(1), and the refund was not issued. A rectification application filed under Section 154 was also rejected by the Assessing Officer, and the rejection was later upheld by the first appellate authority.
The taxpayer then approached the ITAT.
What did the ITAT rule?
Allowing the appeal, the Delhi ITAT noted that there was no dispute that TDS had been deducted from the taxpayer’s rental income and that the credit was available in the department’s records.
The tribunal observed that the delay in e-verification had already been condoned by the CPC. Therefore, the Revenue could not continue to deny the refund on the very procedural ground that had already been condoned.
The bench further held that refusing to grant the refund despite there being no tax liability would amount to unjust enrichment by the Revenue. Referring to Article 265 of the Constitution, the tribunal observed that no tax can be levied or collected except with the authority of law. It added that retaining the TDS amount on a purely technical ground would violate this constitutional mandate.
Accordingly, the ITAT set aside the orders of the lower authorities and directed the Assessing Officer and the CPC to take the necessary steps to grant the refund in accordance with law.
What does the ruling mean for taxpayers?
The order clarifies that, in the facts of this case, the Delhi ITAT found that a refund could not be denied solely because the income tax return was e-verified after the prescribed time, since the delay had already been condoned by the CPC. The tribunal noted that the had been deducted and reflected in the department’s records and that there was no tax payable after the permissible set-off of losses.
The ITAT held that once the delay in e-verification had been condoned, the Revenue could not continue to reject the refund on the same procedural ground. It observed that retaining the amount despite there being no tax liability would amount to unjust enrichment and would be contrary to Article 265 of the Constitution.
The ruling was delivered on the specific facts of the case, where the taxpayer had filed the return within the statutory due date and the delay in e-verification had already been condoned by the CPC.