Background and Practical Problem
It is a well-established principle under Section 119(2)(b) of the Income-tax Act, 1961 that the CBDT may, in cases of genuine hardship, allow delayed filing of income-tax returns by condoning the delay. Over the years, many taxpayers and professionals have relied on this provision, and I have personally written extensively on the subject. (Those interested can refer to earlier articles available under my name.)
However, this article focuses on a specific practical issue: what happens after condonation is granted and the return is filed?
In numerous cases, taxpayers who received condonation orders and filed their returns as instructed later found that no intimation under Section 143(1) was issued by the CPC. As a result, refunds remained pending, even though the return was otherwise valid and complete. This created a procedural deadlock for a large number of taxpayers, especially those who were expecting refunds.
To address this, the CBDT has issued Circular No. 07/2025 dated 25th June 2025, exercising its powers under Section 119 to allow processing of such condoned returns beyond the standard statutory timelines.
Why This Circular Was Needed
Under the second proviso to Section 143(1), any return filed must be processed within nine months from the end of the financial year in which it is filed. But in cases where the ITR was filed late (though condoned), this time limit had often already lapsed. As a result, the CPC system was unable to process these returns, even after condonation was granted.
This led to several genuine cases where returns were accepted but could not be processed due to system constraints, resulting in a denial of refund and intimation to the taxpayer.
Circular 07/2025 resolves this issue by granting a special window to process such ITRs.
Key Provisions Covered
|
Provision |
Relevance in this context |
|
Section 119(2)(b) |
Power to condone delay in ITR filing; the legal basis for all condonation applications |
|
Section 143(1) - Second Proviso |
Prescribes the 9-month time limit for processing ITRs; this condition has now been relaxed |
|
Sections 143(3), 144, 147, etc. |
If assessment/reassessment has already been completed, the benefit of this circular won't apply |
|
Section 244A |
Governs interest on refund; interest applies once return is processed |
|
Section 139AA / Circular 03/2023 |
PAN-Aadhaar linking is mandatory for refund issuance |
What CBDT Circular 07/2025 Provides
- Extended Time for Processing Returns: Returns filed electronically on or before 31st March 2024, under valid condonation orders, shall now be processed. The CPC can issue intimation up to 31st March 2026, even if the original processing time has lapsed.
- Cases Excluded from Benefit: If any assessment, reassessment, or best judgment order has already been passed for the same AY, then the return will not be processed under this circular.
- Refunds with Interest: Eligible taxpayers will receive their refunds with applicable interest under Section 244A, as per standard rules.
- PAN-Aadhaar Linkage Mandatory: Refund will not be issued unless PAN is linked with Aadhaar, as per CBDT Circular No. 03/2023.
- System Implementation: The Director General of Income-tax (Systems) will put in place the technical procedures for processing such returns through CPC.
Important Dates to Remember
|
Event |
Deadline |
|
Condoned ITR must be filed |
On or before 31st March 2024 |
|
Original 143(1) processing deadline |
Already expired |
|
New deadline for CPC to issue intimation |
Up to 31st March 2026 |
Earlier Circulars Referred
- Circular No. 09/2015 - Explains which authorities can condone delay and the monetary limits involved
- Circular No. 07/2023 - Provided similar relief in earlier cases, setting the precedent for current relaxation
- Circular No. 11/2024 - Clarifies that condonation applications must be filed within 5 years from the end of the relevant AY
- Circular No. 03/2023 - Mandates PAN-Aadhaar linkage for processing refunds
What Taxpayers and CAs Should Do Now
- Identify Relevant Clients: Review client files where returns were filed under condonation but remain unprocessed.
- Check for Completed Assessments: If any regular or reassessment order has already been passed for that year, the benefit of this circular will not apply.
- Ensure PAN-Aadhaar Linking: Verify that PAN is linked with Aadhaar in the income-tax portal. Without linkage, no refund will be issued.
- Monitor CPC Status: Track processing and intimation status on the income-tax portal. If no action is seen by March 2026, consider filing a grievance.
Maintain Proper Documentation
- Copy of condonation order
- ITR-V or acknowledgement
- Proof of PAN-Aadhaar linkage
- Bank details for refund credit
Legal Clarifications
- No Fresh Demand Possible: This circular is remedial and cannot be used to raise new tax demands under Section 143(1).
- Refund Interest Applicable :Interest under Section 244A is applicable on the refund amount from the date of excess payment to the date of refund.
- Strict Five-Year Limit for Condonation :Applications for condonation must still be filed within five years from the end of the relevant assessment year (as per Circular 11/2024).
Conclusion
If you have filed an ITR after receiving a condonation order and before 31st March 2024, but have not yet received any intimation or refund, this circular gives you hope. Your return can now be processed up to 31st March 2026, provided your PAN is linked with Aadhaar.
If you are facing difficulties in obtaining condonation, filing the return, or tracking refund status, feel free to get in touch.
Phone: 981864048Email:varunmukeshgupta96@gmail.com
CAclubindia
