Facts of the Case

The petitioner, M/s M. J. Engineering Consultants Pvt. Ltd., filed its Income Tax Return (ITR) for Assessment Year 2015–16 on 11 September 2015, declaring income and claiming a refund of ₹11,27,410 along with applicable interest under Section 244A of the Income Tax Act, 1961.

However, the return was not processed by the Central Processing Centre (CPC) and was subsequently transferred to the jurisdictional Assessing Officer. Due to technical reasons not attributable to the assessee, the return was never processed within the statutory time limit prescribed under Section 143(1).

Despite filing multiple grievances and representations, including requests before higher authorities, the refund remained unissued as the Department treated the return as time-barred for processing.

Issues Involved

  1. Whether failure of the Assessing Officer to process the return within the prescribed time results in deemed intimation under Section 143(1).
  2. Whether the assessee is entitled to refund despite the return becoming time-barred for processing.
  3. Whether the assessee is required to file a separate claim for refund.
  4. Whether delay attributable to the Department can defeat the assessee’s statutory right to refund.

Petitioner’s Arguments

  • The petitioner contended that the refund claimed in the return is a statutory right and cannot be denied due to departmental inaction.
  • It was argued that the delay in processing was entirely attributable to the Income Tax Department and not to the assessee.
  • The petitioner emphasized that once the return is filed correctly, refund along with interest under Section 244A must be granted.
  • It was also contended that no separate application is required for claiming refund as it is inherent in the return filed.

Respondent’s Arguments

  • The Revenue submitted that the return could not be processed within the prescribed time due to technical and procedural constraints.
  • It was argued that since the time limit for processing had expired, the refund could not be granted unless extended by CBDT or court directions.
  • The Department relied on Assistant Commissioner of Income Tax vs Rajesh Jhaveri Stock Brokers Pvt. Ltd. to argue distinctions between intimation and assessment.

Court’s Findings

  • The Delhi High Court held that failure of the Assessing Officer to process the return within the prescribed time leads to the return being treated as “deemed intimation” under Section 143(1).
  • The Court observed that once a valid return is filed, the taxpayer is entitled to refund unless disputed through statutory notices.
  • It clarified that intimation and refund are distinct concepts, and delay in processing cannot extinguish the right to refund.
  • The Court emphasized that an assessee cannot be penalized for inaction of the tax authorities.
  • It rejected reliance on Rajesh Jhaveri Stock Brokers Pvt. Ltd. as it pertained to reassessment and was not applicable to the present case.
  • The Court further held that denial of refund would amount to unjust enrichment by the State, which is impermissible in law.

Court Order / Final Relief

  • Refund the excess tax amount to the petitioner; and
  • Pay applicable interest,

within four weeks from receipt of the order.

Important Clarifications by the Court

  • Return filed under Section 139, if not processed within time, becomes deemed intimation under Section 143(1).
  • Refund is a statutory right arising from excess tax payment under Section 237.
  • No separate refund claim is required; it is deemed part of the return.
  • Departmental delay cannot defeat taxpayer rights.
  • Interest liability increases if refund is withheld.

Sections Involved

  • Section 139 – Filing of Return
  • Section 140 & 140A – Verification and Self-Assessment Tax
  • Section 143(1) – Processing of Return / Intimation
  • Section 142(1), 143(2) – Notices
  • Section 237 – Refund of Tax
  • Section 244A – Interest on Refund
  • Section 119 – CBDT Powers

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3136-DB/MMH16082022CW115612022_094239.pdf

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