PCIT has No Power to Consider Merits of Refund Application under Income Tax Act: Kerala HC [Read Order]

The Kerala High Court has held that the Principal Commissioner of Income Tax (PCIT) has no power to consider the merits of refund application under the Income Tax Act, 1961.

Kaizen Projects and Constructions, the petitioner is the surviving partner of a partnership firm, which was dissolved due to the death of its Managing Partner.  The petitioner aged above 80 years, challenges orders passed by the Principal Commissioner of Income Tax, Kozhikkode under Section 119(2)(b) of the Income Tax Act, 1961 (“Act”) rejecting her applications for condonation of delay in filing income tax returns for the assessment years 2017-18, 2018-19, 2019-20, 2020-21, 2021-22.

The petitioner submitted that consequent to the filing of the applications seeking condonation of delay in filing returns for the assessment years mentioned above, the Department issued notice dated 7.7.2023 to the petitioner to furnish proof/supporting documents on or before 14.7.2023.  The petitioner sought one month to furnish documents as per communication dated 12.7.2023. 

Thereafter, on 12.8.2023, she uploaded the reply to the notices along with supporting documents in the Department's Portal and the same were acknowledged.  The petitioner alleged that without considering the documents submitted/uploaded by the petitioner in support of her contentions in the applications for condonation of delay in filing returns for the assessment years in question, the Department vide relying on Circular No.9/2015 dated 9.6.2015, rejected the applications stating that the assessee failed to furnish the details/evidence called for

On the other hand, Sri.P.G.Jayasankar, Standing Counsel for the Department, submitted that the Principal Chief Commissioner has not considered the merits of the claim, but since the assessee did not produce or furnish substantiating evidence about the claims made in the application, the Principal Commissioner of Income Tax rejected the application of the petitioner.

On a perusal of Section 119(2)(b) of the Act, it is evident that the said Section only empowers the Board to admit an application or claim for exemption, deduction, refund or any other relief under the Act, after the expiry of the period specified by or under the Act for making such application or claim and deal with the same on merits, under law. 

The Board has delegated such power to the Principal Chief Commissioner of Income Tax/the Principal Commissioner of Income Tax vide its circular No.9/2015 dated 9.6.2015.  A Division Bench of the Court had to consider the provisions of Section 119(2)(b) of the Act, wherein the Court thought that the Circular empowers the Principal Chief Commissioner/the Principal Commissioner of Income Tax to consider the merits of the refund claim while exercising the delegated power under Section 119(2)(b) of the Act, which would amount to circumvent the provisions of the Act. 

It has been further held that the Principal Chief Commissioner or the Principal Commissioner of Income Tax has no power to consider the merits of the refund application and what is required to be considered is the merits of the application for condonation of delay only. 

A single bench of Justice Dinesh Kumar Singh while allowing the petition, set aside the order and remitted the matter back to the file of the Principal Commissioner of Income Tax to pass fresh orders on the application of the petitioner-assessee for condonation of delay in filing the return. 

It was made clear that while considering the said applications for condonation of delay, the Principal Commissioner is not required to go into the merits of the petitioner’s claim.

To Read the full text of the Order CLICK HERE

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