Income Tax Refunds: Common Grounds for Denial and Legal Remedies in India

When you pay more income tax than what you actually owe, whether through TDS, advance tax, or self-assessment, you’re eligible for a refund from the Income Tax Department. This process is managed by the Centralized Processing Center (CPC) and typically starts after you e-file your Income Tax Return (ITR) through the government’s Income Tax e-Filing Portal.

Many taxpayers find that their refunds get denied, delayed, or never credited, often due to avoidable technical reasons. Here’s a look at the most common causes—and what you can do to fix them.

Why Income Tax Refunds Get Denied or Delayed

1. Non-Compliance with Procedural Requirements

Common Issues:

• PAN not linked with Aadhaar
• Unvalidated bank accounts
• Name mismatch or incorrect IFSC code
• Closed or inactive bank account
• Technical glitches in the portal

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In Neema Nidhi Ltd v. ACIT (2022, Kerala HC), the Court directed the CPC to process the refund within two months, despite delays caused by portal errors, reinforcing that technical lapses by the department must not prejudice the taxpayer.

2. Delays Despite Full Compliance

Common Scenario:

A taxpayer files their return correctly, verifies it on time, and still does not receive the refund. Courts have ruled in favour of granting interest on delayed refunds, even when the delay was due to departmental inaction.

• Coda Global LLC v. DCIT (2024, Madras HC) – Refund of Rs. 2.27 crore was delayed even after the taxpayer’s request to enable SWIFT/IBAN codes. The Court ordered the refund within two months, with interest from May 2022 to October 2023.
• Mangalam Arts v. DCIT (2022, ITAT Jaipur) – Held that an intimation under Section 143(1) doesn’t equate to a refund; interest must accrue until the actual payment.

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3. Improper Adjustment Against Old Demands

Common Scenario:

Refunds are withheld against past assessment year demands that are under dispute or already settled.

In Readers Digest (India) Pvt Ltd v. DCIT (2024, Delhi HC), the Court annulled adjustments made against AYs 2008–11, ordered a recalculation of the refund, and directed the department to pay interest till the date of actual remittance.

4. Delay in Issuing Refund Due to Reassessment or Pending Cases

Courts have stressed that refunds should not be withheld solely because reassessment proceedings are pending, unless there is a statutory basis for doing so.

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5. Jurisdictional and Procedural Errors

In Punnorath Meethal Sankaran v. ITO (2023, Kerala HC), the Court quashed the refund rejection because it was issued by the Chief Commissioner, who lacked jurisdiction under Section 119(2)(b) for claims exceeding Rs. 10 lakh.

6. Disputes Over Interest on Refunds

Common Dispute:

The department either refuses interest on refunds or pays less than what is statutorily due.

• Wipro Ltd v. JCIT (2021, Karnataka HC) – Directed the department to pay additional 3% interest for delays and warned of personal liability on officials for non-compliance.
• Dwejesh Acharya v. ITO (2023, Rajasthan HC) – Awarded 6% interest for delays under the Vivad Se Vishwas Scheme.

7. Late Filing of ITR and Refund Claim Rejection

In Madhani Prakash Engineers JV v. Union of India (2023, Bombay HC), the Court held that a 43-day delay in filing ITR was not grounds to reject a genuine refund claim and directed CBDT to reconsider it.

Legal Remedies and Grievance Redressal for Income Tax Refund Delays in India

When income tax refunds are delayed or denied, taxpayers in India have multiple legal and administrative remedies to get the issue resolved. The Income Tax Department offers an online grievance mechanism through its e-Filing portal, along with additional escalation options for unresolved matters.

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How to File a Grievance for a Refund Issue

The easiest and most direct way to raise a complaint is through the Income Tax e-Filing Portal.

To do this:

• Log in to the Income Tax e-Filing Portal.
• Click on "Grievances" in the menu and select "Submit Grievance."
• Choose "CPC-ITR" as the department if your issue is related to refund processing.
• Under the category, select "Refund" and then the sub-category (e.g., "Refund not received").
• Enter the relevant assessment year, explain the issue clearly, and upload supporting documents like your ITR-V acknowledgment, refund intimation, or bank statement.

If you are not a registered user (i.e., you don’t have a PAN or TAN), you can still raise a grievance:

• Go to the "Contact Us" section on the portal.
• Choose "I do not have a PAN/TAN" and proceed with the grievance submission form.

For assistance, you can also:

• Email: webmanager@incometax.gov.in
• Call the CPC helpline: 1800 103 0025, 1800 419 0025
• Or reach Aayakar Sampark Kendra: 1800 180 1961, 1961

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Summary of Common Grounds for Refund Denial

Reason for Denial/Delay	Details
PAN not linked with Aadhaar	Refund fails if PAN is inoperative; link via e-Filing portal.
Bank account not pre-validated	Must be pre-validated; failure leads to denial.
Name mismatch	Bank account name must match PAN card; rectify the discrepancy.
Invalid IFSC code	Ensure the correct IFSC code; an incorrect code causes failure.
Closed bank account	Update bank details if an account is closed.
Discrepancies in ITR	Check intimation, rectify errors via the e-Filing portal.
Late filing of ITR	Seek condonation of delay; no guarantee of acceptance.

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