The Central Board of Direct Taxes (CBDT), India's premier income tax regulatory authority under the Ministry of Finance, announced a significant relief measure on Monday, 28 July 2025, by extending processing timelines for income tax returns that were incorrectly invalidated by the Centralised Processing Centre (CPC).

 

In an official statement, the CBDT revealed its decision to invoke special powers under Section 119 of the Income Tax Act, 1961, to relax the stringent timeframe requirements outlined in the second provision of Section 143(1). This relaxation specifically applies to electronic income tax return filings submitted up to 31 March 2024, that faced erroneous rejection during the processing phase.

 

"The Board hereby directs that returns of income filed electronically up to 31 March 2024, which have been erroneously invalidated by CPC, shall now be processed," the CBDT declared in its official communication.

 

Understanding the Problem: Technical Glitches Led to Valid Returns Being Rejected

The decision stems from widespread technical issues that resulted in legitimate tax return filings being incorrectly deemed invalid by the CPC's automated systems. These rejections occurred not due to taxpayer errors or non-compliance, but rather due to technical malfunctions within the processing infrastructure.

 

The scope of this problem became apparent when numerous taxpayers approached the Centralised Processing Centre in Bengaluru with grievances about their returns being wrongfully invalidated. The CBDT's intervention addresses these systemic processing errors that affected returns across different assessment years.

 

According to the tax authority's assessment, the standard processing deadlines for these affected returns had already expired, with the most recent deadline being 31 December 2024, for Assessment Year 2023-24. This created a procedural deadlock where valid returns remained unprocessed due to technical failures rather than taxpayer negligence.

 

Implementation Timeline and Process

The CBDT has established a comprehensive framework for addressing these erroneously rejected returns. Under the new directive, the Income Tax Department must validate and process all affected returns in accordance with existing legal provisions.

 

A crucial component of this relief measure involves direct communication with affected taxpayers. The department will issue official notifications under Section 143(1) of the Income Tax Act to all concerned individuals by 31 March 2026, informing them about the processing of their previously rejected returns.

 

Refund Processing and Important Conditions

Once the returns undergo proper processing, eligible taxpayers will receive applicable refunds along with statutory interest where due. However, the CBDT has imposed a critical condition that could affect refund disbursement for some taxpayers.

 

The tax authority has made it explicitly clear that refunds - whether full or partial - will only be processed for taxpayers whose Permanent Account Number (PAN) cards are properly linked with their Aadhaar numbers. This linkage requirement reflects the government's ongoing efforts to strengthen tax compliance and prevent fraudulent claims.

 

"In those cases where PAN-Aadhaar linkage is not found, refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made," the Income Tax Department emphasized in its statement.

 

Current ITR Filing Season: Extended Deadline for AY 2025-26

While addressing past processing issues, the CBDT announcement comes as Indian taxpayers are actively preparing their income tax returns for Financial Year 2024-25, which corresponds to Assessment Year 2025-26.

 

In a taxpayer-friendly move, the Income Tax Department has extended the standard filing deadline to 15 September  2025, providing additional time for individuals and businesses to complete their tax compliance obligations.

 

Essential Documentation for ITR Filing

For taxpayers preparing their current year returns, the Income Tax Department has outlined the comprehensive documentation required for smooth filing:

 

Identity and Basic Documents: PAN card and Aadhaar card serve as primary identification requirements, with their linkage being mandatory for refund processing.

 

Financial Records: Bank passbooks and statements provide crucial transaction details needed for accurate income reporting and verification.

 

Income Documentation: Tax Deduction at Source (TDS) certificates, Annual Information Statement (AIS), and Taxpayer Information Summary (TIS) offer comprehensive income details from various sources.

 

Investment and Deduction Proofs: Documentation supporting claimed deductions under various sections of the Income Tax Act, including investments in tax-saving instruments.

 

Asset and Capital Gains Information: Detailed statements covering capital gains transactions and comprehensive asset declarations.

 

International Financial Interests: Complete documentation of foreign income sources and overseas asset holdings, as required under international taxation provisions.

 

Historical Tax Records: Previous year tax returns and relevant audit reports for reference and consistency verification.

 

Broader Implications for Tax Administration

This CBDT decision represents a significant acknowledgment of systemic issues within India's digital tax infrastructure and demonstrates the authority's commitment to ensuring that technical failures do not penalize compliant taxpayers.

 

The move also highlights the importance of robust grievance redressal mechanisms, as taxpayer complaints to the CPC Bengaluru directly led to this corrective action. This responsive approach suggests a more taxpayer-centric evolution in India's tax administration.

 

Furthermore, the continued emphasis on PAN-Aadhaar linkage reinforces the government's digital integration strategy for tax compliance, even as it provides relief for past processing errors.

 

The CBDT's decision to extend processing timelines for erroneously rejected returns until March 2024 provides crucial relief to affected taxpayers while addressing systemic technical issues within the tax processing infrastructure. This measure demonstrates the tax authority's flexibility in resolving genuine grievances while maintaining compliance standards.

 

As taxpayers benefit from this relief for past issues, the extended September 2025 deadline for current year filings provides additional breathing room, though the PAN-Aadhaar linkage requirement remains non-negotiable for refund processing. This balanced approach reflects the government's commitment to both taxpayer assistance and systematic compliance enhancement in India's evolving digital tax ecosystem.