Taxpayer Missed Original ITR, Still Gets Rs 5.31 Lakh Refund After Delhi ITAT Ruling

Missing the deadline for filing an income tax return can create complications, particularly when high-value transactions are already visible to the tax department. But can a taxpayer lose a genuine refund merely because the original return was never filed?

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has ruled that, in the facts of a recent case, the answer is no. It directed the Income Tax Department (ITD) to refund Rs 5,31,680 to a taxpayer, together with the interest payable under law.

What Triggered The Tax Notice

The case relates to assessment year (AY) 2019-20. The taxpayer, based in Jorbagh in New Delhi, had not filed his original income tax return under Section 139 within the prescribed time, according to a recent report by The Times of India.

The department later picked up information on its insight portal about certain high-value transactions linked to him. A notice under Section 148 was issued on March 27, 2023, reopening the assessment.

The taxpayer then filed a return in response to the notice. He declared a business loss of about Rs 1.38 crore and showed nil taxable income. At the same time, he sought a refund of Rs 5.31 lakh representing tax deducted at source (TDS).

The assessing officer, however, denied the refund. The reasoning was that the taxpayer had not filed an original return under Section 139 and was seeking the refund through the return furnished after the Section 148 notice.

The Commissioner of Income Tax (appeals) also backed the tax department's position. The taxpayer then moved the ITAT.

Why ITAT Allowed The Refund

The tribunal took a different view. It noted that the reassessment itself had resulted in nil taxable income. Once there was no tax payable, the TDS already collected could not simply be retained if it exceeded the tax legally due.

The ITAT relied on Section 237 of the Income Tax Act, which deals with refund of excess tax paid or collected. It also found that the department had not pointed to a specific provision barring such a refund merely because the return was filed in response to a Section 148 notice.

Importantly, the tribunal distinguished the refund from a new deduction or an unrelated claim being introduced during reassessment. Here, the refund flowed from the assessment outcome itself: taxable income had been determined at nil while tax had already been deducted.

The bench also referred to Article 265 of the Constitution, under which tax cannot be collected without authority of law.

The ruling does not mean taxpayers can safely ignore ITR filing deadlines. Failure to file can invite notices, interest, penalties and other complications depending on the facts. But the order underlines a separate principle: once the correct tax liability is determined, excess tax collected should not be retained merely because of a procedural lapse.

FAQs

1. Can a taxpayer get a TDS refund if the original ITR was not filed?
Yes, depending on the facts. The Delhi ITAT held that excess tax cannot be retained merely because the taxpayer missed filing the original return.

2. Why did the ITAT allow the Rs 5.31 lakh refund?
The reassessment resulted in nil taxable income, while TDS had already been deducted. The tribunal held that the excess amount was therefore refundable.

3. Does the ruling mean taxpayers can ignore ITR filing deadlines?
No. Missing the deadline can still lead to notices, interest, penalties and other complications; the ruling dealt specifically with refund of excess tax.