ITR Refund Delays in FY 2024–25: CBDT Chairman Explains the Real Reasons

The recent delay in income tax refunds for FY 2024–25 has caused uncertainty among taxpayers across India. While many expected quicker processing after filing their Income Tax Returns (ITRs) by the extended deadline of September 16, several refunds are still pending.

On Monday, the Central Board of Direct Taxes (CBDT) Chairman, Ravi Agrawal, provided clarity on the reasons behind these delays and the steps being taken by the department.

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Current Status of ITR Refunds: What the CBDT Chairman Said

According to the CBDT Chairman, low-value refunds have already begun to be released, and the remaining refunds are expected to be processed by end of November or December 2024.
He clarified that the delay is largely due to the tax department identifying cases where wrongful deductions were claimed, necessitating verification before the refunds could be released.

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Wrongful Deduction Claims: Core Reason Behind Delays

The department has detected many returns where taxpayers claimed:

• High-value deductions, or

• Red-flagged deduction claims that triggered system alerts under risk-based scrutiny.

As a result, these cases require manual or automated verification before approval.
The Chairman also noted that several taxpayers have been asked to file revised returns where errors or omissions were identified.

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Data Trends: Refund Issuance Has Dropped by 18%

According to the PTI report, refund issuances between April 1 and November 10 dropped by:

• 18%,

• Down to ₹2.42 lakh crore,

• Because the number of refund claims decreased and TDS rates were rationalised.

The Chairman mentioned that this may be contributing to the negative growth in refunds issued this year.

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Efforts to Reduce Direct Tax Litigation

The CBDT and appellate authorities are working to reduce pendency in direct tax disputes.
In comparison with the previous year:

• 40% more appeals have been disposed of

• Pendency is being “liquidated” through overtime efforts.

This aligns with the government’s broader push to simplify tax administration and reduce taxpayer litigation.

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New ITR Forms Coming Under the Simplified Income Tax Act, 2025

The Income Tax Department will soon notify:

• New ITR forms, and

• Rules under the simplified Income Tax Act, 2025,

which will come into effect from the next financial year.

This is part of the government’s ongoing reforms aimed at simplifying tax compliance and refund processes.

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Relevant Statutes, Constitutional Provisions & Judicial Precedents

1. Statutory Provisions

Income-tax Act, 1961

• Section 237–245: Deal directly with refund claims, assessment of refunds, interest on refunds, adjustment of refunds against tax liabilities, and withholding of refunds.

• Section 139: Filing of returns and revised returns.

• Section 143(1): Intimation and processing of returns, including automated verification.

• Section 143(2) & 143(3): Scrutiny provisions relevant for cases flagged for high-risk claims.

• Section 244A: Interest payable to taxpayer for delays in refund (subject to exclusions if delay is attributable to the taxpayer).

• Section 119: CBDT’s power to issue circulars for proper administration of the Act, including refund management.

2. Constitutional Provisions

While tax administration is governed by statute, some constitutional provisions indirectly relate:

• Article 265: “No tax shall be levied or collected except by authority of law.”
  – This ensures that refunds are part of lawful tax administration.

• Article 14: Ensures fairness and non-arbitrariness in taxation procedures.

• Article 300A: Right to property, relevant when refund amount constitutes taxpayer’s lawful money.

3. Judicial Precedents

Some relevant judgments on tax refunds and delays:

• Sandvik Asia Ltd. v. CIT (2006) 280 ITR 643 (SC)
  Held: Excessive delay in refund may require compensation beyond Section 244A interest.
  (Later reconsidered but still relevant for taxpayer rights.)

• CIT v. Gujarat Fluoro Chemicals (2013) 1 SCC 100
  Held: Only statutory interest under Section 244A is payable; no additional compensation unless specified by law.

• Union of India v. Tata Chemicals Ltd. (2014) 6 SCC 335
  Held: Taxpayer is entitled to interest on refund as a matter of right; refund is not a bounty.

• Ajanta Pharma Ltd. v. CIT (2010) 9 SCC 455
  Emphasised that tax administration must be transparent and equitable.

These cases establish the principle that refunds must be processed promptly, and delays must be justified and lawful.

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Conclusion: Refunds Will Be Released by December, Verification Is Key

The CBDT Chairman’s update provides much-needed clarity.
Refund delays in FY 2024–25 are not due to systemic backlogs but are largely the result of:

• Verification of wrongful or high-value deduction claims,

• Reduction in refund claims due to TDS rationalisation, and

• Risk-based scrutiny of flagged returns.

Taxpayers with accurate returns and low-value refunds are already receiving their amounts, while others may need to respond to notices or file revised returns if discrepancies exist.

With the upcoming simplified Income Tax Act, 2025, and new ITR forms, the system aims for quicker and more transparent refund processing in future fiscal years.

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