Tax Court: Punish and Indu Malhotra v. Director, Division of Taxation, Docket No. 010788-2018; opinion by Orsen, J.T.C., decided December 16, 2021. For plaintiffs - Punish and Indu Malhotra (Self-represented); for defendant - Miles Eckardt, Deputy Attorney General (Andrew J. Bruck, Acting Attorney General of New Jersey, attorney).
Plaintiffs sought relief from penalties and interest after being assessed for an erroneous income tax refund due to an error on their tax return for New Jersey income tax withholding. Defendant filed a motion for summary judgment seeking recovery of the erroneous refund with applicable penalties and interest. Plaintiffs filed a cross motion for summary judgment requesting that penalties and interest be abated due to the lengthy passage of time for assessment.
The court first determined whether defendant had statutory authority to recover the erroneous refund pursuant to the applicable statute of limitations. Defendant argued that the statute of limitations to obtain the erroneous refund was either three years from the date the tax return was due or an extended five-year statute of limitations due to a misrepresentation of material fact on the tax return. Plaintiff argued that the mistake on the tax return does not qualify as a misrepresentation.
The court found that the three-year statute of limitations expired three years from the making of the refund and the five-year statute of limitations did not apply because plaintiffs’ mistake did not rise to the level of a misrepresentation. Accordingly, the court denied defendant’s motion for summary judgment to recover the erroneous refund. Plaintiffs’ motion for summary judgment was granted to abate the penalties and interest as there was no tax due and any payments made, or tax refunds withheld, were to be returned with applicable interest.