The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has directed the Assessing Officer to issue a ₹5,31,680 tax refund along with applicable statutory interest to a taxpayer whose refund claim was made in an income tax return filed in response to a notice under Section 148 of the Income Tax Act.
The matter concerned Assessment Year 2019-20, for which the taxpayer had not filed an original return under Section 139 within the prescribed period. Subsequently, the Income Tax Department issued a Section 148 notice on March 27, 2023, following information regarding high-value transactions available through the Insight portal.
In response to the reassessment notice, the taxpayer filed a return declaring a business loss of ₹1.38 crore and nil taxable income. The return also disclosed ₹5,31,680 as TDS credit and claimed the corresponding amount as a refund.
The Assessing Officer rejected the refund claim on the basis that no original return had been filed under Section 139 and that the refund was being claimed for the first time through the return submitted pursuant to Section 148 proceedings. The Commissioner of Income Tax (Appeals) subsequently upheld the decision.
The taxpayer challenged the order before the ITAT Delhi.
ITAT's Findings
The tribunal held that Section 237 of the Income Tax Act provides a substantive entitlement to refund where the amount of tax paid or collected exceeds the taxpayer's legally chargeable tax liability.
Since the reassessment proceedings ultimately determined the taxpayer's taxable income at nil, the tribunal found that the TDS collected was refundable.
The ITAT further observed that the Revenue had not identified any specific statutory provision that prohibited a taxpayer from receiving a refund solely because the return containing the claim was furnished pursuant to a Section 148 notice.
While examining the Revenue's reliance on the Supreme Court's ruling in Sun Engineering Works Pvt. Ltd., the tribunal distinguished that decision from the present circumstances. It noted that the taxpayer was not attempting to introduce an unrelated deduction or reopen an issue outside the scope of reassessment. Instead, the refund arose directly from the determination of the tax liability in the reassessment proceedings.
The tribunal also considered the decisions of the Allahabad High Court in CIT v. Vali Brothers and the Rajasthan High Court in Kalindee Rail Nirman (Engineers) Ltd. v. CIT.
The ITAT additionally referred to Article 265 of the Constitution, observing that tax cannot be retained where there is no lawful authority for its collection.
Accordingly, the ITAT directed the Assessing Officer to grant the ₹5,31,680 refund together with statutory interest admissible under law. CASansaar