TaxTMI 
TaxTMI 
DEFECTIVE INCOME TAX RETURN – A GROUND FOR REJECTION OF REFUND CLAIM?
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....EFECTIVE INCOME TAX RETURN – A GROUND FOR REJECTION OF REFUND CLAIM?<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Income Tax<br>Dated:- 11-6-2025<br>A return may be treated as defective on account of incomplete or inconsistent information in the return or in the schedule or for any other reasons. Notice u/s 139(9) of the income tax act is issued when the return is found defective, and a period of 15 days is provided to the assessee to resolve the same; however, if the assessee fails to do so, the return is considered as defective and treated as the return has never been filed. If the assessee fails to respond to the defective notice within stipulated period then his return may be treated as invalid and therefore consequences such as penalt....
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....y, interest, non-carry forward of losses, loss of specific exemptions may occur be in accordance with the Income Tax Act. The issue to be discussed in this article is as to whether the Revenue can refuse to refund the due amount if it founds that the return of the assessee is defective. Yes, it can be do so. But before that the assessee should be communicated of the same and to be given a reasonable opportunity for rectifying the defects. In MUKESH GARG VERSUS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 46-1 & ORS. - 2025 (6) TMI 165 - DELHI HIGH COURT, the petitioner filed its income tax return for the assessment year 2016-17 on 26.08.2016, declaring an income of Rs.29.35 crores. The petitioner computed the tax ....
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....payable after deducting the advance tax paid and taxes deducted at source as Rs.80.71 lakhs. The petitioner claimed that he has paid excess tax and he is eligible for the refund of Rs. 1.17 lakhs. The Centralized Processing Centre ('CPC' for short), Bengaluru, issued an intimation to the petitioner intimating the defects in the return filed by him. The original return filed by the petitioner was defective as the TDS claimed was not commensurate with the income offered to tax in terms of Section 139 (9) of the Act. The petitioner was given a period of 15 days to rectify the said defect. The petitioner filed the revised return after rectifying the defects as pointed out in the intimation on 16.08.2017. The petitioner did no....
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....t receive any information from the Revenue regarding his revised return or claim of refund. The time period of processing the return expired on 31.03.2018. However, the status of the petitioner's return continues to be reflected as 'under process'. The petitioner filed the present petition, inter alia, praying that the respondents be directed to process the petitioner's return in respect of Assessment Year [AY] 2016-17 and to refund an amount of Rs. 1,16,94,870/- on account of excess tax alongwith interest in accordance with law. The Revenue contended that the refund of the petitioner was not processed since the return filed by him is defective. The High Court posted the case for personal hearing on 19.05.2025. The Revenue con....
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....tended before the High Court that it is not required to pass any order or record reasons that the revised return is defective. However, the Revenue sought time to take instructions from the higher authorities and to affirm that- * the Revenue does not have access to any order whereby the petitioner's return has been found invalid after the petitioner had filed a return pursuant to the defects pointed out; * there is no recording of any sought, which records that the return as revised is invalid; * no intimation was sent to the petitioner that its return as revised is defective. The High Court gave time to the Department and posted the hearing on 22.05.2025. On that day the Revenue filed an affidavit affirming that- ....
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.... * the revenue did not have access to any order whereby the petitioner's return has been found invalid after the petitioner had filed a return pursuant to the defects pointed out; * there is no recording of any sought, which records that the return as revised is invalid; and * no intimation was sent to the petitioner that its return as revised is defective. On that day the Revenue further submitted before the High Court, that the revised return filed by the petitioner on 16.08.2017 was also considered defective and therefore, was not processed. The High Court did not accept the above contentions of the Revenue. From the affidavit filed by the Revenue it can be inferred that no intimation has been sent to the petitione....
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....r by the Revenue about the defective return. The High Court further observed that the objection to the effect that TDS does not match with the return of income of an assessee, cannot be considered as a ground for disregarding the return filed by an assesee. The finding of discrepancy between the return filed and the TDS collected/deposited by the deductors may pose a ground for further inquiry and to test whether the amount of income which has been disclosed by an assessee is true and correct. However, it cannot be a ground for the Revenue to totally ignore the same. The Revenue further submitted before the High Court that on account of a search conducted in respect of another person, notices under Section 153C of the Act were issued....
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.... for assessing the petitioner's income for AY 2016-17. The re-assessment proceedings culminated in an assessment order dated 31.05.2023 passed by the Assessing Officer under Section 153C of the Act, whereby the AO has made an addition of Rs. 76,62,180/- and the petitioner's income has been assessed at Rs. 3,15,67,800/-. However, the Revenue submitted that the petitioner may apply for rectification of the said assessment order to also include the refund and the Assessing Officer shall process the same. On this the petitioner submitted that the petitioner's requests to the aforesaid effect were not considered on the ground that the proceedings under Section 153C of the Act cannot accrue to the benefit of the assessee and no refund could be p....
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....rocessed as the initial return was found defective. The High Court, considering the submissions of the parties and after perusing the documents on record, held as detailed below- * the petitioner's return as rectified could not be ignored. * Since no addition has been made by the AO on the scrutiny of the return at the initial stage, the petitioner's claim for refund was required to be processed. The Revenue, on instructions, has made a statement that the petitioner's application for rectification of the assessment order passed under Section 153C of the Act to seek grant of refund on account of the excess tax paid after adjusting the tax liability in terms of the assessment order under Section 153C of the Act would be pro....
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....cessed. The High Court agreed to the said contention of the Revenue. The High Court held that the Revenue would be bound down to the statement made in the court. It is also made clear that the petitioner is at liberty to file the rectification application relying on the amount of Advance Tax and TDS as reflected in Form 26AS. The refund due to the petitioner was required to be processed; the assessment order passed under Section 153C determining a lesser amount of refund due to the additions made, cannot be considered as providing an advantage to the petitioner in proceedings under Section 153C of the Act.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....