Facts of the Case

The petitioner, Mukesh Garg, filed a writ petition seeking a direction to the Revenue to process his return of income for Assessment Year 2016–17 and grant refund of ₹1,16,94,870/- along with statutory interest. The petitioner had filed his original return under Section 139(1) on 26.08.2016 declaring income of ₹2,39,05,340/- and claimed refund after accounting for advance tax and TDS.

On 10.08.2017, a notice under Section 139(9) was issued by the Centralized Processing Centre pointing out a defect on the ground that the TDS claimed did not match with the income offered. The petitioner filed a rectified return on 16.08.2017 within the prescribed period. Despite this, the return was never processed, and its status continued to reflect as “under process”, even after expiry of the statutory time limit on 31.03.2018.

Issues Involved

Whether the Revenue could refuse to process the petitioner’s rectified return and refund claim without passing any order declaring the return invalid under Section 139(9), whether mismatch of TDS could justify ignoring a duly filed return, and whether subsequent proceedings under Section 153C could deprive the assessee of refund arising from the original return.

Petitioner’s Arguments

The petitioner contended that once the rectified return was filed within time and no order declaring it invalid was passed or communicated, the Revenue was duty-bound to process the return and issue refund. It was argued that mere mismatch of TDS could not render a return non est. The petitioner further submitted that even subsequent assessment proceedings under Section 153C could not justify denial of refund lawfully due on processing of the return.

Respondent’s Arguments

The Revenue contended that the rectified return was also defective and therefore not processed. It was further submitted that assessment proceedings under Section 153C had been completed making additions, and the petitioner could seek refund, if any, by filing a rectification application against the assessment order.

Court Order / Findings

The Delhi High Court rejected the Revenue’s contention and noted that the Revenue had unequivocally admitted on affidavit that no order existed declaring the rectified return invalid and no intimation had ever been issued to the petitioner treating the return as defective. The Court held that in the absence of any such decision on record, the return could not be ignored.

The Court further held that mismatch between TDS and income declared cannot be a ground to disregard a return altogether; at best, it could trigger further inquiry. The Court observed that since no addition was made at the initial stage, the petitioner’s refund was required to be processed.

While noting that an assessment under Section 153C had subsequently been completed, the Court recorded the Revenue’s statement that a rectification application seeking refund after adjusting tax liability would be processed. The Court accepted the statement and held the Revenue bound by it.

Important Clarification

The Court clarified that a return filed and rectified under Section 139(9) cannot be ignored unless it is expressly declared invalid by a reasoned order. Subsequent proceedings under Section 153C do not erase the Revenue’s obligation to process refunds arising from a valid return, subject to lawful adjustments.

Final Outcome

The writ petition was disposed of. The Delhi High Court directed that the Revenue shall be bound by its statement to process the petitioner’s rectification application and refund claim after adjusting tax liability in terms of the assessment order under Section 153C. The petitioner was granted liberty to file a rectification application relying on Form 26AS. All pending applications were disposed of accordingly.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769676852_MUKESHGARGVsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLE461ORS..pdf

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