In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Delhi bench has instructed the Income Tax Department to release a ₹17.08 lakh refund to a taxpayer whose Income Tax Return (ITR) e-verification was delayed due to personal circumstances.
The tribunal determined that a condoned delay in e-verification could not be used to deny a legitimate refund, especially when the tax credit was already evident in department records.
Case Background: Mr. Bhatia's ITR Delay
The case involved Mr. Bhatia, a Delhi resident who filed his ITR for the Assessment Year 2015-16 on September 3, 2015. He reported rental income of approximately ₹1.42 crore and sought a refund of ₹17.08 lakh, which arose from advance tax payments and Tax Deducted at Source (TDS).
However, Mr. Bhatia was unable to complete the mandatory e-verification of his return within the stipulated timeframe. This delay was attributed to his commitment to caring for his 83-year-old father, who was critically ill and subsequently passed away. Consequently, his ITR was deemed invalid, and the refund was withheld.
CPC Condonation and Departmental Denial
Mr. Bhatia later approached the Centralised Processing Centre (CPC) to request condonation for the delay. The CPC accepted his explanation, and the return was successfully e-verified on February 16, 2018. Despite this condonation, the Income Tax Department did not process the return under Section 143(1) of the Income Tax Act.
Attempts to rectify the situation through an application under Section 154 were rejected by the Assessing Officer, a decision upheld by the first appellate authority. This prompted Mr. Bhatia to appeal to the ITAT.
ITAT's Landmark Ruling on Income Tax Refund
The Delhi ITAT ruled in favor of Mr. Bhatia, emphasizing that once the CPC had condoned the delay in e-verification, the department could not continue to deny the refund on the same procedural grounds. The tribunal noted that there was no dispute regarding the TDS deducted from the taxpayer’s rental income, and the corresponding tax credit was already available in the department's records.
Referring to Article 265 of the Indian Constitution, which states that no tax shall be levied or collected except by authority of law, the tribunal observed that withholding the refund despite no outstanding tax liability would amount to “unjust enrichment” by the Revenue. Accordingly, the ITAT set aside the orders of the lower authorities and directed the Assessing Officer and the CPC to process the return and grant the refund in accordance with the law.