Rs 5.31 lakh income tax refund denied as taxpayer did not claim it in the original ITR; he approaches ITAT Delhi and wins the case to get tax refund with interest

When a taxpayer from Jorbagh, New Delhi, did not file his original income tax return (ITR) by the due date for AY 2019-2020, he received a tax notice from the Income Tax Department. The Income Tax Department sent this notice as they got information from their Insight Portal that the taxpayer carried out some high-value transactions but filed no Income Tax Return (ITR).

In technical terms, a Section 148 tax notice was sent on March 27, 2023. In response to this notice, the taxpayer filed an ITR declaring a business loss of Rs 1.38 crore and claimed a Rs 5.31 lakh tax refund from the TDS that was deducted.

Overall, his Section 148 ITR showed nil taxable income and instead sought a tax refund of Rs 5.31 lakh. The Income Tax Assessing Officer (AO), while framing the assessment, denied the tax refund solely on the ground that such tax refund could not be claimed in an ITR filed under Section 148 since no original ITR was filed under Section 139.


The Commissioner of Appeals (CIT A) said that he received a tax notice on suspicions of not disclosing high-value transactions, while the taxpayer was actually claiming a tax refund in that ITR for the first time.

The CIT(A) thus upheld the action of the Assessing Officer by observing that proceedings under Section 147 are intended for the benefit of the Income Tax Department and not to give the taxpayer a new right to claim a tax refund.

The CIT(A) relied principally upon the judgment of the Hon'ble Bombay High Court in K. Sudhakar S. Shanbhag case following the decision of the Hon'ble Supreme Court in a case involving Sun Engineering Works Pvt. Ltd.

The taxpayer from Jorbagh appealed to ITAT Delhi and on August 11, 2026, won the case there. S. Rifaur Rahman, Accountant Member and Raj Kumar Chauhan, Judicial Member of ITAT Delhi, heard his case. Chartered Accountant R.S. Singhvi, CA Shri Satyajeet Goyal and CA Shri Rajat Garg represented the taxpayer.

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Summary of the judgement

As explained by Chartered Accountant Suresh Surana to ET Wealth Online, in this case, ITAT Delhi decided the issue in favour of the taxpayer and directed the Income Tax Department to issue a tax refund of Rs 5,31,680 along with consequential statutory interest.

The ITAT Delhi disagreed with the Income Tax Department’s interpretation and observed that Section 237 creates a substantive right to refund where the tax already paid or collected exceeds the amount properly chargeable from the taxpayer.

In the given case, Surana says the reassessment itself resulted in Nil taxable income. Therefore, there was no tax liability against which the TDS already collected could be retained.

ITAT Delhi also noted that the Income Tax Department could not point to any statutory provision specifically prohibiting a tax refund merely because the relevant income tax return (ITR) was filed in response to a Section 148 notice.

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Surana says that ITAT Delhi relied on an Allahabad High Court judgement titled CIT v. Vali Brothers and Rajasthan High Court’s judgement in the case of Kalindee Rail Nirman (Engineers) Ltd. v. CIT, which supported the principle that once reassessment proceedings determine the correct tax liability, excess tax collected must be refunded and such statutory entitlement cannot be defeated on technical grounds.

The Income Tax Department’s reliance on Sun Engineering Works Pvt. Ltd. judgement was distinguished (different from this case) because the taxpayer was not attempting to raise a new deduction or reopen an issue unrelated to reassessment. The refund was simply a consequential result of the assessment determining Nil taxable income.

Thus, it was held that once the reassessment determined the taxpayer’s taxable income at Nil, the TDS already collected became refundable under Section 237. Denying the refund solely because no original return was filed under Section 139 would prioritize procedural rules over the actual tax liability established in the assessment.

Surana says that ITAT Delhi also observed that retaining the tax so deducted and which is admittedly not chargeable would be inconsistent with Article 265 of the Constitution of India, which provides that no tax can be collected except by authority of law.

Accordingly, the taxpayer won because his entitlement to refund flowed directly from the completed reassessment and was not an independent or fresh claim. The ITAT therefore directed the AO to refund Rs 5,31,680 together with the statutory interest admissible under the law, and allowed the taxpayer’s appeal.