ITAT held that a refund can be granted even when filed in a reassessment‑filed ITR, provided the reassessment itself shows no tax payable.
The refund of Rs 5,31,680 was allowed under Section 237 after the taxpayer declared a business loss of Rs 1.38 crore, resulting in nil taxable income.
Taxpayers seeking missed refunds must file the prescribed return; otherwise, condonation under Section 119(2)(b) or appeals in ITAT are the viable routes.
Background of the Case The Income Tax Department issued a Section 148 notice on 27 March 2023 to a Delhi taxpayer who had not filed an ITR for AY 2019‑20. The taxpayer responded by filing an ITR that reported a business loss of Rs 1.38 crore, bringing taxable income to nil, and claimed a refund of Rs 5,31,680 for TDS deducted that year. The department denied the refund, arguing the claim was made only after the Section 148 notice and not in an original Section 139 return.
ITAT’s Ruling and Legal Basis The Delhi ITAT examined whether a refund could be denied simply because it was filed in a reassessment‑filed return. Under Section 237, a refund is due when tax paid exceeds the chargeable amount. Since the reassessment determined no tax liability, the Tribunal ruled that the excess TDS was refundable. ITAT emphasized that the refund is a consequential relief from the assessment order, not an independent claim, distinguishing the case from the Supreme Court’s Sun Engineering Works judgment. The Tribunal also cited Article 265, which mandates that tax can be collected only by authority of law, reinforcing that the reassessment order itself created the refund right.
Implications for Taxpayers The decision does not open a blanket door for all missed refunds. Taxpayers must still file the prescribed return. If an original or belated return is not filed, they can seek condonation under Section 119(2)(b) from the Commissioner. Where reassessment proceedings are already underway, a valid refund claim made in the reassessment‑filed ITR can be appealed in ITAT. The ruling clarifies that the refund is tied to the reassessment outcome, so taxpayers should ensure accurate reporting and timely filing to secure refunds and avoid procedural pitfalls.
