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Para Order - Instructions to subordinate authorities - Authorisation regarding condonation of delay in filing refund claim - Condonation of Delay in Filing Refund SchemeExtract Condonation of Delay in Filing Refund Scheme Instructions to subordinate authorities - Authorisation regard ing condonation of delay in filing refund claim 1 Order [F. No. 225/208/93-IT(A-II)], dated 26-10-1993 Section 119(2)(b) of the Income-tax Act, 1961 - Central Board of Direct Taxes - Instructions to subordinate authorities - Authori sation regarding condonation of delay in filing refund claim 1. I am directed to enclose a copy of the order under section 119(2)(b) from file of even number dated 12-10-1993 (see Annex One ) and also the Circular Number 670 ( Annex Three ) of even date from the same file. 2. In this context, I have been directed to draw your attention to Instruction No. 1867, dated 30-11-1990 (see Annex Two ) and to inform you that paras 2, 3 and 4 of the said Instruction shall continue to be applicable. The Chief Commissioner/Director Gener al/Commissioner of Income-tax/Director of Income-tax should not only see that the conditions laid down by the various Circulars of the Board are satisfied, but should also look further into the facts of the case and examine other aspects such as the source of income, whether the income returned is reasonable considering the extent of profits disclosed, whether books of account had been maintained and whether there was any manipulation of accounts in the course of the delayed filing of the claim of refund, etc., for deciding the genuineness of the claims. 3. The powers delegated under section 119(2)(b) should be invoked only in suitable cases after scrutiny as suggested above and the claim should not be disposed of in a routine manner. annex one Order [F. No. 225/208/93-IT(A-II)], dated 12-10-1993 1. In continuation of earlier orders dated 5-2-1988 and 17-8-1988 issued from F. No. 225/201/87-IT(A-II), the Central Board of Direct Taxes, in exercise of the powers conferred by clause (b) of sub-section (2) of section 119 of the Income-tax Act, 1961, hereby order that, in all cases where an otherwise valid refund claim under section 237 of the Income-tax Act, 1961, is filed by an assessee after the expiry of the statutory time limit pre scribed under section 239 of the Act, the Assessing Officer, having jurisdiction over the case, may admit the said refund claim and dispose of the same on merits and in accordance with law provided the following conditions are satisfied : (i) the refund arises as a result of excess tax deducted at source, collected at source and payments of advance tax under the provisions of Chapters XVII-B, XVII-BB and XVII-C respectively and the amount of refund does not exceed Rs. 1 lakh for any assessment year; (ii) the returned income is not a loss where the assessee claims the benefit of carry forward of the loss; (iii) the refund claimed is not supplementary in nature, i.e., claim for additional amount of refund after the completion of the original assessment for the same assessment year; and (iv) the income of the assessee is not assessable in the hands of any other person under any of the provisions of the Act. This order will be effective from 1-11-1993. annex two Instruction No. 1867, dated 30-11-1990 1. Reference is invited to the earlier instructions/circulars issued by the Board regarding condonation of delays in claiming refunds, etc., by invoking the provisions of section 119(2)(b) of the Income-tax Act, specifically the following : (i) Instruction No. 1795, dated 17th August, 1988 and Letter No. 225/263/88-IT(A-II), dated 23rd January, 1989 stating that the Assessing Officer shall, before entertaining a belated refund claim, obtain the prior approval of the Commissioner of Income-tax where the refund claim does not exceed Rs. 1,000 and of the Chief Commissioner of Income-tax/Director General of Income-tax where the refund exceeds Rs. 1,000 but does not exceed Rs. 10,000; and (ii) Order No. 225/201/87-IT(A-II), dated 5-12-1988 clarify ing that the Board has delegated the power to condone the delay in case the refund does not exceed Rs. 10,000, provided the Chief Commissioner of Income-tax/Director General of Income-tax or the Commissioner of Income-tax as the case may be, is satisfied that the conditions laid down in the various instructions/circulars on the subject are satisfied. However, such delegation was restrict ed to condonation of delay and not rejection thereof. 2. Some Chief Commissioners have recommended the cases of con tractors and other persons engaged in business, who had made applications under section 119(2)(b) of the Income-tax Act for the purpose of claiming refunds of income-tax deducted at source from contract receipts, etc., for rejection as they were not satisfied that the income returned by the said persons was full and true or even reasonable considering the extent of profit disclosed. It was also noticed that such persons were not main taining any books of account and, therefore, the possibility of purposely delaying the filing of the returns so as to avoid scrutiny by the Department could not be ruled out. Needless to say that such cases were not found to be of genuine hardship. 3. The Board has been accepting such recommendations as it would be against public policy to condone such delays thereby giving an extended time to such assessees to manipulate their accounts so as to evade taxes. 4. The Board now desire that the Chief Commissioners/Directors General/Commissioners should not only see that the conditions laid down by the various Board's circulars are satisfied, but also look further into the facts of the case and examine the source of income, whether the income has been reflected in other years or not whether there is any scope for manipulation of accounts due to the delay in filing the claim of refund, etc., before applying the provision of section 119(2)(b) of the Income-tax Act. It is desired that only genuine cases should be consid ered for the purpose of applying the provisions of section 119(2)(b) of the Act and the applications should not be disposed of in a routine manner. annex three Circular No. 670, dated 26-10-1993 1. I am directed to forward herewith the order contained in F. No. 225/208/93-IT(A-II), dated 12th October, 1993, passed by the CBDT in exercise of the powers conferred on it under section 119(2)(b) of the Income-tax Act. By virtue of this order the Assessing Officers can admit belated refund claims under section 237 of the Income-tax Act in cases where refunds may arise as a result of tax deducted/collected at source and advance tax pay ments where the amount of such refund does not exceed Rs. 1 lakh for any assessment year. 2. Board have also decided that in such cases— (i) where the refund does not exceed Rs. 10,000 for any assessment year the Assessing Officer shall obtain the prior approval of the CIT before entertaining a belated refund claim; and (ii) where the refund exceeds Rs. 10,000 but does not exceed Rs. 1,00,000 for any assessment year the Assessing Officer shall obtain the prior approval of CCIT or DGIT before entertaining a belated refund claim. 3. The CCIT/DGIT/CIT, as the case may be, shall ensure that the conditions laid down under Board's order under section 119(2)(b) referred to above are fulfilled. 4. Where a Chief Commissioner of Income-tax/Director General of Income-tax/Commissioner of Income-tax/Director of Income-tax finds that the four conditions laid down in the order under section 119(2)(b), dated 12-10-1993 are satisfied but still it is not a case of "genuine hardship", he should refer the belated refund application to the Board for final decision. 5. This order is effective from 1-11-1993 and will apply to all claims of refund pending as on that date and also in respect of all refund claims filed on or after that date. 2 Circular No. 8/2001, Dated 16-5-2001 1. The Board's order under section 119(2)(b), dated 12th October, 1993 and Circular No. 670, dated 26th October, 1993 [F. No. 225/208/93/IT(A-II)] lay down procedure for condonation of delay in belated claims of refunds. These provide that CIT has power to condone delay in case of genuine hardship of refund claims up to Rs. 10,000 and CCIT up to Rs. 1,00,000. The power of condonation in cases of refund claims of more than Rs. 1,00,000 as well as power of rejection in all cases lie with the Board. 2. Under the existing circular, apart from the conditions pre scribed under earlier orders dated 5-2-1988 and 17-8-1988, issued from [F. No. 225/201/87/IT(A-II)], the following additional conditions are required to be fulfilled before the condonation of delay in filing belated refund claims can be considered : (i) the refund arises as a result of excess tax deducted at source, collected at source and payments of advance tax under the provisions of Chapters XVII-B, XVII-BB and XVII-C, respectively and the amount of refund does not exceed Rs. 1 lakh for any assessment year; (ii) the returned income is not a loss where the assessee claims the benefit of carry forward of the loss; (iii) the refund claimed is not supplementary in nature, i.e., claim for additional amount of refund is made after the completion of the original assessment for the same assessment year; and (iv) the income of the assessee is not assessable in the hands of any other person under any of the provisions of the Act. 3. Subsequently the Karnataka High Court in the case of Associat ed Electro Ceramics v. Chairman, CBDT [1993] 201 ITR 501 held that the Board have power to condone the delay in cases having claim of carry forward of losses. The department did not file special leave petition against this order. Subsequently the matter was taken up with the Ministry of Law who also agreed with the view that the Board have power to condone the delay in filing the return under section 119(2)(b) of the Income-tax Act, 1961, in a case having claim of carry forward of losses. 4. Hence, conditions at Serial No. (ii) of order under section 119(2)(b), dated 12th October, 1993 stipulating that the delay cannot be condoned in cases where returned income is a loss and assessee claims benefit of carry forward of the loss, is not legally tenable. 5. In view of above, the board, hereby, clarify that delay in making refund claim as well as claim of carry forward of losses, both, can be condoned in cases where returned income is a loss, provid ed other conditions are satisfied. The monetary limits prescribed for condonation of delay in making refund claims, by different IT authorities, will apply to condonation of delay in cases of claim of carry forward of losses as well. 3 Circular No. 773, dated 15-2-1999 Modification of procedure regarding discharge by payee in case of income-tax refund orders 1. At present the payee is required to put his signature in the space provided for "Claimants signature" on the reverse of the refund order. The responsibility of the collecting bank in deal ing with "account payee" instruments is well-defined under the Negotiable Instruments Act. No specific purpose is served by obtaining this additional discharge on the reverse of this cheque. On the other hand, it sometimes happens that in the absence of the discharge of the payee, the refund order is returned unpaid, entailing additional workload on the part of the banks. 2. The Board has, therefore, decided to do away with the discharge of the payee on the reverse of the account payee In come-tax Refund Order as it does not serve any specific purpose. This relaxation will be applicable only where the Income-tax Refund Orders are issued in the form of a cheque after introduc tion of the Magnetic Ink Character Recognition (MICR) Technology for mechanised processing of cheques for clearance (which is presently prevalent in the four metropolitan cities of Calcutta, Chennai, Delhi and Mumbai). However, in cases where Refund Orders are issued in the old conventional form, the prevailing system of discharge of payee will continue.
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