Rs 17 Lakh Income Tax Refund Claim Was Denied As Taxpayer Did Not E Verify Itr Since He Was Busy Taking Care Of Late Father Itat Delhi Allows Refund For This Reason

When Mr Bhatia from Westend Colony, New Delhi received Rs 1.42 crore in rent from his various properties, he filed his income tax return (ITR) on September 3, 2015, claiming a tax refund of Rs 17 lakh. This refund was based on the advance tax he had paid and the TDS deducted from his rental income. However, Bhatia could not e-verify the ITR within the stipulated period of one month because he was busy looking after his 83-year-old father who was seriously ill and was being hospitalised time and again.But since he failed to e-verify the ITR, the ITR was not deemed as filed and consequently Bhatia’s Rs 17 lakh tax refund claim was denied.Feeling wronged, he decided to take legal action against the Income Tax Department.When the case reached the Income Tax Appellate Tribunal (ITAT) Delhi, the tribunal said that the only question to be decided by them was whether given the facts and circumstances, the tax department should deny the refund of TDS deducted merely on the technical ground that the filed ITR was not e-verified within a month and was belatedly e-verified and the delay was duly condoned by the CPC. ITAT Delhi said that according to Article 265 of the Constitution of India, no tax shall be levied or corrected except with authority of law. In view of the constitutional mandate, as enshrined in Article 265 , in case the refund is denied to Bhatia on technical grounds, it shall tantamount to unjust enrichment on behalf of Income Tax Department and violate the constitutional mandate of Article 265 Constitution o f India. Given these facts and under the circumstances, ITAT Delhi said the refusal to refund the Rs 17 lakh TDS by the Assessing Officer and the dismissal of the appeal by the JCIT(A) resulted in miscarriage of justice and the impugned order was accordingly set aside. The ground raised in the appeal was allowed, meaning Bhatia could get the due tax refund.Summary of the judgementChartered Accountant Suresh Surana explained to ET Wealth Online that in this case, the assessee, an individual deriving income from house property, business income from finance and interest on deposits, had filed his ITR for Assessment Year 2015-16 within the prescribed time on September 3, 2015. In the ITR, the assessee declared nil taxable income after setting off current year losses, unabsorbed depreciation and brought forward losses, and claimed a refund of approximately Rs 17.08 lakh, mainly on account of tax deducted at source from rental income.However, although the ITR was filed within time, the assessee could not complete the e-verification within the stipulated period. The reason provided was that he was occupied with the serious illness of his aged father, who required frequent hospital visits. Subsequently, the assessee filed a condonation request before the CPC, which was accepted, and the ITR was e-verified on February 16, 2018. Despite this, the ITR was not processed under Section 143(1), and the refund claimed by the assessee was not issued. The assessee thereafter made repeated requests and also filed a rectification application under Section 154, but the Assessing Officer rejected the refund claim on the ground that the return was not e-verified within the prescribed time. The JCIT(A) also confirmed the rejection.On appeal, the Delhi ITAT observed that the TDS amount had admittedly been deducted on the assessee’s rental income and was reflected in the records. The Tribunal noted that the delay in e-verification had occurred due to a sufficient and reasonable cause and, more importantly, the delay had already been condoned by the CPC. Surana says: “Therefore, once the condonation was accepted, the Revenue (IT department) could not continue to deny the refund merely on the basis of the earlier procedural delay.”The Tribunal further relied on the principle laid down in Article 265 of the Constitution of India, which provides that no tax shall be levied or collected except by authority of law. It held that where no tax was legally payable by the assessee and the amount had already been deducted at source, refusal to grant refund on a mere technical ground would amount to unjust enrichment by the Revenue. The Tribunal also referred to judicial precedents which emphasised that tax authorities are expected to collect only legitimate taxes and should not deny a lawful claim merely on procedural or technical grounds. Accordingly, the ITAT held that the rejection of the assessee’s refund claim by the Assessing Officer and the dismissal of the appeal by the JCIT(A) resulted in miscarriage of justice. The order of the lower authority was set aside and the Assessing Officer/CPC was directed to take necessary steps to grant the refund to the assessee in accordance with law.Surana says: “Thus, the assessee-landlord succeeded because the tax had already been deducted on his rental income, there was no final tax liability after the permitted set-off of losses, the delay in e-verification was supported by a reasonable cause and had been condoned by the CPC.”The ITAT held that the Revenue could not retain the TDS amount merely due to a procedural lapse, particularly when doing so would violate the constitutional principle that tax can be collected only with authority of law.