Six-Year Time Limit for Refund Applies Only to Tax Paid, Not to Payments on Exempt Income

Section 237 of ITA'61 provides that - "237. If any person satisfies the 1[Assessing] Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess."

The same is mirrored by Section 431 of ITA'25, which provides that -

"431. Refunds. If any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any tax year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess."

One must understand that as per Article 265 of the Constitution, Taxes cannot be collected without any authority of Law. In case a payment is made where no tax is payable, then the nature of the payment does not remain taxes at all. This brings us to the point that for refund of such payments, there should be no Limitation period as such as held in the case of LT. COL. NIKHIL SUBODH GAJJAR RETD Vs PRINCIPAL COMMISSIONER OF INCOME TAX AHMEDABAD 3 [2025-VIL-322-GUJ-DT]

Circular 9/2015 [F.NO.312/22/2015-OT], DATED 9-6-2015 specifies the time period for condonation of delay in filing refund claim. It states inter-alia as follows -

"SECTION 119 OF THE INCOME-TAX ACT, 1961 - INCOME-TAX AUTHORITIES - INSTRUCTIONS TO SUBORDINATE AUTHORITIES - CONDONATION OF DELAY IN FILING REFUND CLAIM AND CLAIM OF CARRY FORWARD LOSSES UNDER SECTION 119(2)(b) CIRCULAR 9/2015 [F.NO.312/22/2015-OT], DATED 9-6-2015

3. No condonation application for claim of refund/loss shall be entertained beyond six years from the end of the assessment year for which such application/claim is made. This limit of six years shall be applicable to all authorities having powers to condone the delay as per the above-prescribed monetary limits, including the Board. A condonation application should be disposed of within six months from the end of the month in which the application is received by the competent authority, as far as possible."

However, Circular No.9/2015 which prohibits entertaining an application for claim of refund/loss beyond six years from the end of relevant assessment year would not be applicable incase a petitioner is entitled to the refund of the payment made as taxes as disability pension received by the petitioner is falling under exempt income and therefore, the petitioner is not liable to pay any tax on such disability pension.

If the same analogy is applied for say Non-Profit Organisations, Trusts, etc, it means that the application of refunds has no time limit.