The Delhi High Court has taken a strong view of the prolonged delay in granting an income tax refund to Campus Activewear Limited, directing the Assessing Officer (AO) to personally appear before the Court if the pending refund, along with applicable interest, is not released before the next hearing.
The order highlights the Court’s concern over prolonged administrative delays, technical issues on the Income Tax Department’s portal and the failure of authorities to comply with directions concerning legitimate tax refunds.
Delhi High Court Questions Four-Year Delay in Refund
The matter concerns Campus Activewear Limited v. Commissioner of Income Tax, filed as W.P.(C) 6934/2024, relating to Assessment Year 2021-22.
A Division Bench comprising Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta was informed by counsel appearing for the Income Tax Department that the necessary exercise for processing the petitioner’s refund was underway. The Department assured the Court that the required action would be completed within four weeks.
The Court, however, made it clear that another assurance would not be sufficient if the refund remained unpaid.
It directed that if the amount due to Campus Activewear, together with applicable interest, was not paid by the next date of hearing, the Assessing Officer would have to remain personally present before the Court and explain the reasons for the “inordinate delay” in complying with the Court’s directions and releasing the refund.
The matter has now been listed for September 14.
₹10.49 Crore Demand Reflected on ITBA Portal
The dispute has its roots in an income tax demand reflected against Campus Activewear for AY 2021-22.
According to the company, although it had received an intimation dated December 28, 2023, no final assessment order or corresponding assessment intimation had been made available to it. Despite this, a demand of approximately ₹10.49 crore appeared on the Income Tax Business Application (ITBA) portal.
The company approached the Delhi High Court in May 2024 seeking appropriate relief against the demand and the consequential withholding of its refund.
During the proceedings, the Income Tax Department informed the Court that the petitioner’s refund had already been processed but could not be completed because of a technical issue.
Court Points to Possible Technical Glitch
The Delhi High Court had earlier observed that there appeared to be a technical glitch or misconception on the part of the Department concerning the demand shown for AY 2021-22.
The Court consequently directed the Assessing Officer to provide the petitioner with a copy of the intimation or order by which the assessment had allegedly been finalised.
The Court further directed that if the demand appearing on the ITBA portal did not actually exist, the Department should remove it from the system.
Importantly, where the petitioner was found entitled to a refund, the Department was directed to release the amount along with applicable statutory interest. If the refund could not be released, the authorities were required to communicate the reasons for such inability.
Repeated Adjournments and Failure to File Reply
The proceedings also reflect the Court’s dissatisfaction with the manner in which the matter was handled by the Revenue.
After the petition was filed, the matter was repeatedly adjourned to enable the Income Tax Department to obtain instructions.
On May 8 of the previous year, the Court granted a final opportunity to the Revenue to file its response. However, the Department failed to file the reply.
The Court subsequently imposed costs of ₹5,000 for the failure.
Despite the passage of considerable time, the refund issue remained unresolved. The Department again assured the Court on August 12 that the necessary processing would be completed within four weeks.
Against this background, the latest direction requiring the AO to personally appear if the refund is not paid demonstrates the seriousness with which the Court is viewing the prolonged delay.
Interest on Delayed Income Tax Refund
The case also underscores an important principle concerning interest on delayed income tax refunds.
Where a taxpayer is legally entitled to a refund, the Income Tax Act provides for payment of applicable interest subject to the statutory conditions. Therefore, merely processing the principal refund after prolonged litigation may not necessarily bring the dispute to an end where statutory interest is also payable.
The Court’s direction specifically refers to payment of the refund along with applicable interest, reinforcing the importance of timely compliance with statutory refund obligations.
Significance for Taxpayers
The Campus Activewear case is significant for taxpayers facing prolonged refund delays, unexplained demands or discrepancies between actual assessment records and amounts appearing on the Income Tax Department’s online systems.
A demand appearing on the portal, particularly where the taxpayer has not been furnished the relevant assessment order or intimation, can have serious financial consequences because it may affect the release of legitimate refunds.
The proceedings also demonstrate that taxpayers can seek judicial intervention where administrative or technical issues remain unresolved for an unreasonable period despite repeated representations.
At the same time, the case illustrates that courts may insist upon accountability from tax authorities when their directions are not complied with within a reasonable period.
Key Takeaway
The Delhi High Court’s latest order sends a clear message that technical difficulties and administrative processing cannot indefinitely justify withholding a taxpayer’s legitimate refund.
If Campus Activewear’s refund, together with applicable interest, is not released before the next hearing, the concerned Assessing Officer will be required to appear personally and explain the prolonged delay.
The case is therefore relevant not only to Campus Activewear but also to taxpayers dealing with delayed income tax refunds, incorrect portal demands, assessment-related discrepancies and prolonged departmental inaction.
Case No.: W.P.(C) 6934/2024
Court: Delhi High Court
Assessment Year: 2021-22
Next Hearing: September 14
Issue: Delay in income tax refund and disputed demand reflected on ITBA portal.