CBDT Procedure for Delayed Income Tax Refund Claims Under Section 119(2)(b)

Summary: Taxpayers who have paid income tax exceeding their actual liability are generally required to file their return of income within the due date specified under Section 139 of the Income-tax Act, 1961, to claim a refund. This requirement applies even if the total income is below the taxable limit, as in cases where tax has been deducted at source (TDS) or advance tax has been paid. However, recognising genuine hardship, Section 119(2)(b) empowers the Central Board of Direct Taxes (CBDT) to authorise tax authorities to admit delayed refund claims. Amended CBDT Circulars prescribe different authorities for condonation based on the amount of refund claimed, ranging from the Commissioner of Income Tax for claims up to ₹50 lakh to the CBDT for claims exceeding ₹3 crore. Delayed refund claims are generally entertained in cases involving excess TDS, Tax Collected at Source (TCS), or advance tax, are ordinarily restricted to the last six assessment years, and do not carry interest. The authorities verify the genuineness of the claim before granting the refund. Although an outstanding tax demand can be adjusted against the refund under Section 245, a possible future tax liability cannot be a ground for withholding a refund.

Can You Claim a Refund of Excess Income Tax Paid?

When an assessee has paid tax exceeding the amount actually payable, the natural question is whether the excess tax can be refunded.

To claim a refund of excess tax paid, Section 239 provides that the assessee must file a return of income in accordance with the provisions of Section 139. Further, the return must generally be filed within the due date prescribed under Section 139.

Is Filing an Income Tax Return Mandatory to Claim a Refund?

Consider a case where an assessee has only interest income of ₹2,00,000, on which tax of ₹20,000 has been deducted at source (TDS) at 10%. Since the total income is below the taxable limit, the assessee may not otherwise be required to file a return of income.

However, if the assessee wishes to claim a refund of the TDS of ₹20,000, filing the return of income within the prescribed due date under Section 139 becomes necessary.

Due Dates for Filing Income Tax Returns Under Section 139

From Assessment Year 2022-23 onwards, the due dates for filing returns are:

Companies, Audit Cases and Partners of Audit Firms

Where the assessee is:

• A company;
• A person (other than a company) whose accounts are required to be audited under the Income-tax Act or any other law; or
• A partner of such firm or spouse covered by Section 5A,

Due Date: 31st October

Other Taxpayers

For all other assessees:

Due Date: 31st July

Effect of Extended Due Dates

If the Government extends the due date for filing the return, the extended due date shall be considered as the due date for all relevant purposes.

CBDT Relief for Delayed Refund Claims

Recognising that genuine hardship may prevent timely filing of refund claims, the CBDT has issued Circulars under Section 119(2)(b).

Section 119(2)(b): Power to Condon Delay

Section 119(2)(b) authorises the CBDT to empower income-tax authorities to admit applications for exemption, deduction, refund or any other relief after expiry of the prescribed time limit where doing so would avoid genuine hardship.

CBDT Guidelines for Delayed Refund Applications

CBDT Circular No. 9/2015 dated 9 June 2015, as amended with effect from 1 June 2023, prescribes the authority competent to condone delay based on the amount of refund claimed.

Refund up to ₹50 Lakh

Application should be made to the Commissioner of Income Tax (CIT) or Principal Commissioner of Income Tax (PCIT) having jurisdiction.

Refund Above ₹50 Lakh but up to ₹2 Crore

Application should be made to the Chief Commissioner of Income Tax (CCIT).

Refund Above ₹2 Crore but up to ₹3 Crore

Application should be made to the Principal Chief Commissioner of Income Tax (PCCIT).

Refund Above ₹3 Crore

Application should be made directly to the Central Board of Direct Taxes (CBDT).

When Can a Delayed Refund Claim Be Filed?

CBDT has clarified that delayed refund applications may be filed in the following situations:

1. The refund arises due to:
   • Tax Deducted at Source (TDS);
   • Tax Collected at Source (TCS); or
   • Excess payment of Advance Tax.
2. The refund claim relates to the last six assessment years only.
3. No interest is payable on the delayed refund.
4. The Income-tax Department will verify the genuineness of the claim and, wherever required, the Assessing Officer may complete the assessment before granting the refund.
5. After receipt of the condonation application, the process is generally expected to be completed within six months.

Adjustment of Refund Against Outstanding Tax Demand Under Section 245

Section 245 permits the Income-tax Department to adjust a refund against an existing outstanding tax demand.

Where assessment or reassessment proceedings are pending, the Assessing Officer may, after recording reasons in writing and obtaining prior approval of the Principal Commissioner or Commissioner, withhold the refund for up to 60 days from the date of completion of such assessment or reassessment.

Future Tax Liability Cannot Be a Ground to Withhold Refund

A refund cannot be withheld merely because the Department anticipates that a tax demand may arise in future.

Under Section 245, only an existing outstanding demand as on the date the refund becomes due can be adjusted against the refund. A possible future liability is not a valid ground for withholding a refund.

Frequently Asked Questions (FAQs)

1. Can I claim a refund if I paid more income tax than I actually owe?

Yes. If you have paid excess income tax through TDS, TCS, advance tax, or self-assessment tax, you can claim a refund by filing your income tax return, subject to the provisions of the Income-tax Act.

2. Is filing an Income Tax Return (ITR) mandatory to claim a refund?

Yes. Generally, a refund can be claimed only by filing a return of income under Section 139 of the Income-tax Act, even if your total income is below the taxable limit.

3. Can I get a refund if my income is below the taxable limit but TDS has been deducted?

Yes. If tax has been deducted at source despite your income being below the taxable limit, you should file your ITR to claim the refund of the excess TDS.

4. What if I miss the due date for filing my return but am entitled to a refund?

You may seek condonation of delay under Section 119(2)(b) by making an application to the appropriate income-tax authority, subject to the CBDT guidelines.

5. Which authority can approve a delayed refund claim?

The authority depends on the refund amount:

• Up to ₹50 lakh: Commissioner/Principal Commissioner of Income Tax (CIT/PCIT)
• Above ₹50 lakh and up to ₹2 crore: Chief Commissioner of Income Tax (CCIT)
• Above ₹2 crore and up to ₹3 crore: Principal Chief Commissioner of Income Tax (PCCIT)
• Above ₹3 crore: Central Board of Direct Taxes (CBDT)

6. For how many years can a delayed refund claim be made?

As per the CBDT Circular, delayed refund claims are generally entertained for the last six assessment years, subject to the prescribed conditions.

7. Can I claim interest on a delayed refund allowed under Section 119(2)(b)?

No. As per the CBDT guidelines discussed in the article, interest is generally not payable on refunds granted pursuant to condonation of delay.

8. In which cases can a delayed refund application be filed?

Delayed refund applications are generally considered where the refund arises due to:

• Tax Deducted at Source (TDS)
• Tax Collected at Source (TCS)
• Excess payment of Advance Tax

9. Will the Income Tax Department verify my delayed refund claim?

Yes. The tax authorities will verify the genuineness of the refund claim. Where necessary, the Assessing Officer may complete the assessment before the refund is granted.

10. Can the Income Tax Department adjust my refund against outstanding tax demand?

Yes. Under Section 245, the Department may adjust the refund against an existing outstanding tax demand after following the prescribed procedure.

11. Can my refund be withheld because the Department expects a future tax demand?

No. A possible future tax liability is not a valid ground for withholding a refund. Only an existing outstanding demand can be adjusted against the refund under Section 245.

12. How long does it take to process a condonation application for a delayed refund?

According to the CBDT guidelines referred to in the article, the processing of a condonation application is generally expected to commence and be dealt with within six months.