Erroneous TDS Paid under Income Tax Due to Ignorance of Earlier Deduction Cannot be Retained by Revenue: Karnataka HC [Read Order]

The Karnataka High Court has condoned the delay in a 60‑year‑old farmer’s application seeking a refund of tax deducted at source (TDS), holding that an erroneous TDS paid under the Income Tax Act due to ignorance of earlier deduction by the Karnataka Mineral Development Corporation (KMDC) cannot be retained by the Revenue.

The petitioner, Murigeppa Kashappa Nara, had filed his return of income for Assessment Year 2018–19 but failed to place the relevant TDS certificates before the AO at the time of assessment.

The TDS had been deducted by KMDC while making payments to him, but this fact was not reflected in the records initially submitted. When the petitioner later discovered the omission, he filed a representation dated 27 February 2020 and subsequently moved an application under Section 119(2)(b) of the Income Tax Act seeking condonation of delay and refund of the excess TDS.

The Principal Commissioner of Income Tax rejected the application on the ground that it was filed belatedly, without examining the merits of the refund claim.

Challenging this rejection, the petitioner approached the High Court, arguing that the delay was inadvertent and that the refund was legitimately due since KMDC had already deducted TDS at source. The petitioner contended that denying the refund on a technical ground would amount to unjust enrichment of the Revenue.

Opposing the petition, counsel for the Income Tax Department argued that the petitioner had lost his right to claim the refund due to the delay and that the rejection was justified.

However, the Court found that the core facts were not in dispute: KMDC had indeed deducted TDS, and the petitioner had later produced the relevant certificates. The Court observed that the error arose from the petitioner’s failure to submit the documents earlier, but such delay could be condoned in the interest of justice, particularly when the tax had already been collected.

Justice M Nagaprasanna held that the peculiar facts of the case warranted condonation of delay and that the petitioner’s representation deserved fresh consideration. The Court clarified that it was not expressing any opinion on the merits of the refund claim, which must be independently examined by the competent authority. It directed the AO to consider the petitioner’s representation strictly in accordance with law and pass appropriate orders within an outer limit of four months.

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