'Something Seriously Amiss': Delhi High Court Flags Delays In Direct Tax Vivad Se Vishwas Refunds

The Delhi High Court on Tuesday (July 28) expressed concern over recurring delays by the Income Tax Department in processing refunds under the Direct Tax Vivad Se Vishwas Scheme, 2024, observing that there was "something seriously amiss" in the system as assessees were routinely approaching the High Court for release of refunds.

The Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta directed the Chairman of the Central Board of Direct Taxes (CBDT) to ascertain whether the Department's claim regarding the absence of a functional IT system was correct and, if so, ensure that necessary modules are put in place so that refunds are credited promptly, preferably within 90 days of issuance of Form No. 4.

Form No. 4 under the Direct Tax Vivad Se Vishwas Scheme is the official order for full and final settlement of tax arrears issued by the designated income tax authority.

The Court was hearing a petition filed by a finance company, which complained that despite the Income Tax Department issuing Form No. 4 on October 14, 2025 determining that a refund of ₹1.78 crore was payable under the Vivad Se Vishwas Scheme, the amount had not been released.

Previously, the Court had directed the jurisdictional Assessing Officer to file an affidavit explaining the reasons for the inordinate delay and to show cause why interest for the intervening period should not be paid to the assessee and recovered personally from the officer.

The Court had observed that while an assessee is required to deposit the amount determined in Form No. 4 within 15 days under the Scheme, the Revenue should equally be expected to refund amounts within a reasonable period.

In response, the Assistant Commissioner of Income Tax stated in an affidavit that the refund could not be processed because the requisite functionality for processing orders under the Direct Tax Vivad Se Vishwas Scheme, 2024 was unavailable in the Income Tax Business Application (ITBA) system until April 2026.

It was further claimed that there was no portal module reflecting refunds under the Scheme and that the Assessing Officer had been occupied with time-bound proceedings under Sections 148 and 148A of the Income Tax Act.

According to the Department, the refund was processed immediately after the assessee approached it on July 1, 2026.

The Court however found the explanation unsatisfactory.

"On perusal of the affidavit, we find that the Assessing Officer has either taken the lame excuses or there is something seriously amiss in the system and working of the Income Tax Department. It is not a one-off case. Every week, we come across 3-4 such cases, where the assessee has to approach High Court for refunds," it remarked.

Accordingly, the Court directed that a copy of its order be sent to the Chairman, CBDT, to verify whether the Assessing Officer's assertion regarding the absence of the necessary IT module was correct.

It further directed that if the claim was found to be true, the CBDT should ensure that the required modules are put in place and issue necessary directions so that refunds are credited with promptitude, preferably within 90 days of issuance of Form No. 4, particularly since Section 94 of the Direct Tax Vivad Se Vishwas Scheme bars payment of interest on such refunds.

For Petitioner: Senior Advocate Gopal Jain with Advocates Rohit Tiwari, Tanya and Shivani.

For Respondents: Senior Standing Counsel Ruchir Bhatia with Junior Standing Counsels Anant Mann and Pratyakash Gupta; Standing Panel Counsel Ayush Gaur with Advocates Shivranj, Ridhi Kapoor and Varun Parashar; Government Pleader Garvil Singh for Respondent No. 4.