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ITR Refund: Many taxpayers file their Income Tax Returns (ITR) on time but delay the e-verification process. A refund can still be obtained in such cases, but there is a condition: the Income Tax Department must condone the delay in e-verification.

Recently, the Delhi Income Tax Appellate Tribunal (ITAT) delivered a significant verdict in favor of taxpayers. The tribunal ruled that if the Central Processing Centre (CPC) has condoned the delay, a refund cannot be withheld solely on technical grounds.

The ITAT stated that if a taxpayer has no outstanding tax liability, withholding their money would violate Article 265 of the Constitution. This article mandates that no tax can be levied or collected without the authority of law.

What was the case all about?

This matter concerned a taxpayer from Delhi who had filed their ITR on time under Section 139(1) for the Assessment Year 2015-16 on September 3, 2015.

They claimed set-offs for current-year losses, unabsorbed depreciation, and losses from previous years, resulting in a 'Nil' taxable income. The taxpayer also claimed a refund of approximately ₹17.08 lakh, primarily consisting of TDS deducted on rental income. However, they failed to complete the e-verification of the ITR within the stipulated timeframe.

The taxpayer informed the tribunal that their 83-year-old father was critically ill and required frequent hospital visits, which prevented the e-verification from being completed on time. They subsequently applied to the CPC to condone the delay, a request the CPC accepted. The e-verification was finally completed on February 16, 2018. Despite this, the Income Tax Department did not process the return under Section 143(1). The refund was not issued either.

Subsequently, the taxpayer filed an application for rectification under Section 154. However, the Assessing Officer rejected it. Later, the first appellate authority upheld this decision as well. The taxpayer then approached the ITAT.

What did the ITAT say?

The Delhi ITAT allowed the taxpayer's appeal. The Tribunal noted that there was no dispute regarding the fact that TDS had been deducted on the rental income; the Income Tax Department already possessed records of this. The ITAT observed that the CPC had already condoned the delay in e-verification. Therefore, the Income Tax Department could not withhold the refund on those grounds.

The Tribunal further stated that withholding a taxpayer's money when no tax is outstanding against them would amount to 'unjust enrichment' on the part of the government.

The ITAT also cited Article 265 of the Constitution, noting that no tax can be levied or collected without the authority of law. Withholding the TDS amount solely on technical grounds violates this constitutional principle.

On these grounds, the ITAT set aside the orders of the lower authorities. It also directed the Assessing Officer and the CPC to take the necessary steps to issue the refund in accordance with the law.

What does this decision mean?

The ITAT clarified that the refund could not be withheld in this case simply because the e-verification of the ITR was completed after the stipulated deadline. Crucially, the CPC had already condoned that delay.

The Tribunal also acknowledged that the TDS amount was already reflected in the department's records. Furthermore, after setting off losses, there was no outstanding tax liability against the taxpayer.

The ITAT held that once the delay had been condoned, withholding the refund on the same technical grounds was improper. Doing so would amount to unjust enrichment by the government and would also violate the spirit of Article 265 of the Constitution. However, the Tribunal also clarified that this decision was based on the specific facts of the case. In this instance, the taxpayer had filed the ITR on time, and the CPC had already condoned the delay in e-verification.

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