Recovering Income Tax Refunds for Unfiled Returns: A Complete Guide to the Section 119(2)(b) Condonation Mechanism

Introduction

It is not uncommon for an assessee to realise, sometimes long after the fact, that tax was deducted at source or paid in excess during a financial year for which no Income Tax Return was ever submitted. Once both the original filing deadline and the belated return window under Section 139(4) have passed, the ordinary routes to reclaiming that refund are effectively closed. Fortunately, the Income-tax Act, 1961 does not leave such assessees entirely without remedy.

Section 119(2)(b) of the Income-tax Act, 1961 provides a statutory mechanism through which the Central Board of Direct Taxes (CBDT), or an income-tax authority acting under its delegation, may permit an assessee to file a return and claim a refund even after the standard limitation periods have expired — provided the delay is attributable to genuine hardship. This guide walks through the legal foundation of this provision, the current governing circular, the prescribed procedure, and the judicial principles that support a liberal approach to such applications.

This is particularly relevant for assessees who missed filing returns for FY 2023-24 (AY 2024-25) and FY 2024-25 (AY 2025-26).

The Statutory Foundation

What Does Section 119(2)(b) Provide?

Section 119(2)(b) of the Income-tax Act, 1961 confers power upon the CBDT, for the purpose of avoiding genuine hardship, to authorise any income-tax authority to:

• Admit an application or claim for any exemption, deduction, refund, or relief under the Act after the prescribed period for making such claim has expired; and
• Deal with such application on merits, in accordance with law.

Why Is This the Only Route in Many Cases?

Two key limitations make Section 119(2)(b) the sole available option in several situations:

1. Section 139(8A) — Updated Returns: An updated return filed under this provision cannot be used to claim or enhance a refund. It is designed primarily for assessees who wish to offer additional income to tax, not to recover excess payments.

2. Section 139(4) — Belated Returns: The belated return window carries a hard deadline. Once that cut-off passes without a return being filed, this route is permanently foreclosed for the relevant assessment year.

Consequently, where an assessee has not filed any return at all and a genuine refund is due, a condonation application under Section 119(2)(b) remains the only lawful avenue to recover that refund.

The Governing Framework: CBDT Circular No. 11/2024

The CBDT's authoritative and current instructions on this subject are set out in Circular No. 11/2024, dated 1st October 2024. This circular has been issued in supersession of all prior instructions on the matter, including Circular No. 9/2015 and Circular No. 7/2023. The substantive provisions of this circular are outlined below.

1. Monetary Limits and the Competent Authority

The authority empowered to decide a condonation application is determined by the quantum of the refund or loss claimed:

Correctly identifying the competent authority is critical before drafting and submitting the application.

2. The Five-Year Outer Time Limit

No condonation application will be entertained if it is filed beyond five years from the end of the relevant assessment year. This outer limit applies uniformly across all delegated authorities.

One exception exists: where the refund arises as a consequence of a Court order, the period during which the matter remained pending before the Court is excluded from this calculation — provided the condonation application is filed within six months of the Court's order (or the end of the relevant financial year, whichever is later).

3. Disposal Timeline

Applications should, as far as possible, be disposed of within six months from the end of the month in which they are received by the competent authority.

4. Conditions for Acceptance

For an application to succeed, the competent authority must be satisfied that:

• The assessee was prevented by reasonable cause from filing the return within the due date; and
• The matter constitutes a case of genuine hardship on merits.

The authority has the discretion to direct the jurisdictional Assessing Officer to conduct necessary inquiries to verify both the hardship and the correctness of the refund claim.

5. Restriction on Interest Under Section 244A

Where a refund is granted through this condonation route, no interest under Section 244A is payable on such belated claims. Additionally, the income in question must not be assessable in the hands of any other person under the Act.

Step-by-Step Procedure for Filing a Condonation Application

The following steps outline the practical process an assessee should follow: