SIMRAN RAVI ANANDANI,BENGALURU vs. ITO, WARD IT-1(1), BENGALURU

ITITA 57/BANG/2025Status: DisposedITAT Bangalore14 November 2025AY 2019-208 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to a refund of the TDS amount of Rs. 14,76,398/-. The Tribunal noted that the interest income earned by the assessee on her NRE account deposits in bonds was exempt from tax under Section 10(4) of the Act. Consequently, the TDS provisions under Section 195(2) were not applicable. The banks had mechanically deducted the TDS amount due to a misconception of the provisions. The Tribunal found that the AO and DRP had erred in rejecting the refund claim solely on the basis that the return was filed under Section 148 and not Section 139. The Tribunal relied on the judgment of the Hon'ble Jurisdictional High Court in Karnataka State Co-operative Apex Bank Ltd. vs. DCIT, which distinguished the Supreme Court's decision in CIT vs. M/s. Sun Engineering Works (P.) Ltd. The Tribunal reasoned that proceedings under Section 148 were the first assessment in this case, and all claims should have been considered. The retention of the wrongly deducted TDS amount by the department would amount to unjust enrichment. Therefore, the Tribunal allowed the appeal and directed the AO to refund the TDS amount without delay.

What were the facts?

The assessee, Ms. Simran Ravi, an NRI, had NRE and NRO accounts in India. She did not file a return of income under Section 139 for Assessment Year 2019-20 as she had no taxable income. However, her case was reopened under Section 148 due to interest income earned on deposits in her NRE account used for bonds. The assessee provided documentation to support the source of funds. Subsequently, she filed a return under Section 148 and claimed a refund of Rs. 14,76,398/- representing TDS deducted by banks on interest income, which she contended was exempt under Section 10(4) and thus not subject to TDS under Section 195(2). The Assessing Officer (AO) rejected the refund claim, stating that a refund could only be claimed if the return was filed under Section 139. The Dispute Resolution Panel (DRP) upheld the AO's view. The assessee appealed to the ITAT.

What were the issues?

1. Whether the assessee is entitled to claim a refund of TDS amounting to Rs. 14,76,398/- when the return of income was filed under Section 148, not Section 139, as per Section 239(1) of the Income Tax Act, 1961. 2. Whether the revenue can retain the TDS amount deducted on interest income which is exempt under Section 10(4) of the Act, leading to unjust enrichment, in light of Section 237 and Article 265 of the Constitution of India. Assessee's contentions: - The interest income on NRI bonds is exempt under Section 10(4), making TDS deduction under Section 195(2) inapplicable. - Banks mistakenly deducted TDS, and the revenue cannot retain this amount, leading to unjust enrichment (Reliance on CIT vs. Vali Brothers, A. Balakrishnan v. General Manager, Hindustan Machine Tools Ltd., and Article 265 of the Constitution). - A return filed under Section 148 is deemed to be a return filed under Section 139, making the refund claim valid (Reliance on R. Seshammal Vs Income Tax Officer). - The DRP erred in relying on CIT vs. M/s. Sun Engineering Works (P.) Ltd. as it is distinguishable. Revenue's contentions: - The revenue contended that the assessee is not entitled to a refund as the return was not filed under Section 139, as prescribed by Section 239(1). (Implied from AO's and DRP's actions and the Ld.DR's reliance on CIT vs. M/s. Sun Engineering Works (P.) Ltd.)

Which sections of the Income-tax Act were involved?

Section 10(4),Section 195(2),Section 139,Section 148,Section 239(1),Section 237,Section 265

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE

Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.

For Appellant: Shri Ravi Shankar SV., Advocate
For Respondent: Dr. Divya K.J, CIT-DR

PER SOUNDARARAJAN K., JUDICIAL MEMBER

This is an appeal filed by the assessee challenging the final assessment order passed by the AO on 14/11/2024 in respect of the A.Y. 2019-20 and raised the following grounds:

“1. The order of the learned authorities below in so far as it is against the appellant is opposed to law, equity, facts, weight of evidence, probabilities and circumstances of the case.

2.

The learned below authorities erred in concluding the assessment by rejecting the refund of Rs 14,76,398/- IT(IT)A No. 57/Bang/2025 claimed by the appellant, without issuing the notices or show cause

The order continues below.

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