Income Tax: Is your refund being held up over defective I-T return? This is what you should do

The deadline to file an income tax return (ITR) passed on July 31, 2024, following which eligible taxpayers received either a refund or an income tax (I-T) notice intimating them that there was something amiss in their income tax return (ITR).

It could be because of a defective I-T return or a pending assessment. Let us understand more about this here:

What is a defective I-T return?

A tax return is considered defective if it contains incomplete or inconsistent information, whether in the return, in the schedules, or for any other reason.

If your return is found defective, the Income Tax Department will send you a defective notice under section 139(9) of the Income Tax Act via email to your registered email ID or post. The notice can be viewed by logging in to the e-filing portal.

“I-T notice of a defective return might have been sent for any of the reasons such as you disclosed lower income than actual. i.e., you underreported your income, or you filed the return on a wrong income tax form, or you didn't disclose your FD (fixed deposit) income or the income from investments, and so on and so forth,” says Chirag Chauhan, a Mumbai-based chartered accountant.

“However, regardless of the defective returns, the tax refunds are 30-35 per cent lower this year when compared to the last year,” he adds.

What are the common errors?

The common errors that render a return ‘defective’ include the following:

A. Gross receipts shown in Form 26AS on which credit for TDS has been claimed are higher than the total of the receipts shown under all heads of income.

B. There is a mismatch between the taxpayer's name on the PAN and the name on the income tax return.

C. Credit for TDS has been claimed but the corresponding receipts/income has been omitted.

How can you rectify the defect?

If the return is found defective, the taxpayer gets 15 days from the date of receiving the notice to rectify the defect in the filed return. One can even seek an adjournment and request an extension. 

Additionally, a taxpayer can authorise someone else to respond to the defective notice under section 139(9).

Meanwhile, if you fail to respond to the defective notice within the stipulated period, then your return may be treated as invalid and therefore, consequences such as penalty, interest, and non-carry forward of losses may occur.

What is a pending assessment?

There could be some delay in getting the refunds when there is a pending assessment or re-assessment. Recently, the income tax department has shared a dummy email to explain why tax refunds are being held up due to pending assessment.

It says that the return was processed under section 143(1)a and the refund was withheld because of pending assessment.

The mail sent by the tax department reads as follows: “Your return/order for the A.Y. 2022-23 has been processed/accounted u/s 1431a on 29-Jul-2023. Since there are pending assessment / re-assessment proceeding in your case, the refund release/withhold will be based on the response provided by Jurisdictional Assessing Officer(JAO) in accordance with the provisions of section 245(2) of the Income Tax Act, 1961.”