Sections 237 and 239 of the Income Tax Act, 1961 deals with the procedure of the refund of the excess income tax paid by the assessee to the revenue department. Section 239 provides for the limitation period of one year within which the assessee should claim his income tax refund. However, this provision is omitted by the 2019 amendment to the Income Tax Act.

Now, it creates a diplomatic situation to claim for the refund of the income tax, as from now there is no limitation period available for claiming of such refund. Thus, it gives liberty to the taxpayer to claim his refunds of 10, 20 years back.

The Income tax refund usually happens in three situations namely:

At present,  the procedure of auto calculation is followed as the Income Tax Return (ITR) of the assessee is filed online. The system will auto calculate the refund due to the assessee and an intimation will be send to the taxpayer under Section 143 of the Income

Tax Act. This whole procedure is done online after the filing of ITR within the time period prescribed and there is no need on the part of the assessee to claim income tax return on her own.

In addition to this, if the assessee is claiming for the refund of previous years he has to file an application for the condonation of delay before the Assessing Officer (AO) under section 5 of the Limitation Act. If the application of the assessee is rejected by the AO, he can file an appeal under Section 260A to the High Court within 120 days of the order of Assessing Officer(AO).

However, this appeal will stand maintainable in the High Court if it involves the substantial question of law, otherwise it will get rejected prima facie by the High Court.

Thus, the assessee in the case of income tax refund has to frame his case in such a way to make his appeal maintainable in the High Court, if the same is rejected by the AO.

Apart from this remedy, there is one more remedy available to the taxpayer. In 2015, a circular was passed by the CBDT with the subject:

“Condonation of delay in filing refund claim and claim of carry forward of losses under Section 119(2)(b) of the Income Tax Act.”  In this circular the conditions for the condonation and the procedure to be followed is prescribed. These guidelines and conditions are mentioned below:

    • If the amount of claim is upto50 Lakhs the power of acceptance/rejection of such application will be vested with Principle Commissioner of Income Tax/ Commissioners of Income Tax. If the amount of claim exceeds 50 lakhs such application shall be considered by the board.
    • The limitation period of 6 years from the end of assessment is given under the circular. Thus, an assessee claiming for income tax refund should file such application within the period of 6 years.

In Tata Limited Capital 21 case the Supreme Court had discussed in detail the moral and the legal obligations on the part of Income tax department to make the refund of the excess amount due to the taxpayer, along with the interest. The court held that when the collection by the department is illegal there is a corresponding obligation on the part of the revenue to make the refund of such exceeding tax paid by the assessee.

Note:

1. Sec. 237: As per this provision if the assessee is able to satisfy the Assessing Officer that the tax which has been paid by him in the previous year exceeds the tax amount which he is actually liable to pay under the Income Tax Act, he shall be given the refund as per the processing of the revenue department.

2. Sec 143: Under this provision, the assessee will receive an intimation from the tax department in case it has been found that any refund is due to the assessee.

3. Sec.119(2)(b): This provision deals with the exemption and grants the power to the Income Tax Authority that in case of un avoidable hardships they can pass any special order which would solve the purpose of such enactment.

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