Time limit for making assessment or order of assessment

Section 237 of I.T. Act, 1961 provides that if a person satisfies the ITO that the amount of tax paid by him for any assessment year exceeds the amount with which he is properly chargeable for that year, he shall be entitled to a refund of the excess. For the purpose of determining the amount "properly chargeable" the ITO will have to compute the total income of the assesse and determine the tax payable thereon. The making of a return of total income is a condition precedent to the claim for refund. The question of refund of the excess can arise after such determination has been made by him. In other words, an order for refund can be made under the section after an assessment or an order of assessment, whether formal or not, has been made by the ITO. It is therefore, clear that the making of an assessment or order of assessment is a condition precedent to the grant of refund u/s.237. Since an assessment u/s.143 or sec.144 is required to be made within the time limit mentioned in section 153, the claim for refund would have to be disposed of within the time limit prescribed u/s.153 of the I.T.Act, 1961. In the cases where the application for refund together with the return is filed on the last date as provided in section 139(4)(b), the time limit for making an assessment would be extended by one year from the date of the filing of the return as contemplated by section 153(1)(c) of the Act.

These instructions may please be brought to the notice of the officers working in your charge.