Delay in Income Tax refund after Income Tax Appeal – Orissa High Court in the case of Daimond Plaza Private Limited dated 12 February 2026

Details of the Case

Court: High Court of Orissa

Case No.: W.P.(C) No. 26536 of 2025

Order Date: 12th February 2026

Assessment Year: 2009-10

What happened in this case?

Daimond Plaza Private Limited was assessed under Section 153A of the Income Tax Act, and the Assessing Officer passed an order on 28 December 2016 making certain additions to the company’s income. Since the company did not agree with these additions, it filed an appeal before the Commissioner of Income Tax (Appeals)-2, Bhubaneswar.

The appeal was decided in favour of the company on 14 June 2018. The appellate authority deleted all the additions made by the Assessing Officer. As a result, the tax paid on those additions became excess tax.

Why did the refund issue arise?

Once the appeal was allowed, the law was very clear. Under Section 240 of the Income Tax Act, any excess tax paid must be refunded when an assessment is reduced or set aside. Along with this, Section 244A provides that interest must also be paid on such refund.

Despite this clear legal position, the Income Tax Department did not release the refund or the interest for several years. The taxpayer kept waiting even though the appeal had been allowed way back in 2018.

Why did the taxpayer approach the High Court?

Left with no effective remedy, the company filed a writ petition before the Orissa High Court under Articles 226 and 227 of the Constitution of India. The grievance was simple: the department had failed to give effect to the appellate order and had withheld the refund along with statutory interest.

The company specifically argued that:

• Refund under Section 240 is not optional but mandatory, and

• Interest under Section 244A is a legal right and not a concession.

What was the Department’s response?

During the hearing, the Income Tax Department informed the Court that a rectification order had been passed on 11 February 2026 under Section 154 read with Section 251. According to the Department, this order gave effect to the appellate decision and steps had been initiated to issue the refund along with interest.

What did the Court say?

The High Court noted that the grievance raised by the taxpayer had technically been addressed since the refund process had been initiated. However, the Court also made it clear that merely starting the process is not enough. What really matters is that the taxpayer actually receives the refund.

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Final outcome

The Court disposed of the writ petition with a clear direction to the Income Tax Department to release the refund along with interest calculated up to the actual date of payment. The entire exercise was ordered to be completed within two weeks. All pending applications were also closed.

Why this case matters

This judgment is a reminder that once an income tax appeal is allowed, the Department cannot sit over the refund indefinitely. Refund and interest follow as a matter of right. If there is an unreasonable delay, taxpayers are well within their rights to approach the High Court, and courts will step in to ensure compliance.

Practical takeaway

If your appeal has been allowed and the tax department is delaying your refund, the law is clearly on your side. Refund under Section 240 and interest under Section 244A are enforceable rights, and writ jurisdiction can be invoked when administrative delay becomes unreasonable.

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Frequently Asked Questions (FAQ)

Q1. Under which provision was the assessment framed?

The assessment order was passed under Section 153A of the Income Tax Act.

Q2. When was the assessment order passed?

The assessment order was passed on 28.12.2016.

Q3. What happened to the assessment order in appeal?

The appeal was allowed by the Commissioner of Income Tax (Appeals)-2, Bhubaneswar, and all additions were deleted by order dated 14.06.2018.

Q4. What relief arose consequent to deletion of additions?

Consequent upon deletion of additions, the petitioner became entitled to refund under Section 240 of the Income Tax Act along with interest under Section 244A.

Q5. Why was the writ petition filed?

The writ petition was filed as refund and interest were not granted despite the appellate order.

Q6. Under which Articles of the Constitution was the writ petition filed?

The writ petition was filed under Articles 226 and 227 of the Constitution of India.

Q7. What stand was taken by the Income Tax Department during hearing?

During the course of hearing, the Department produced a Rectification Order dated 11.02.2026 passed under Section 154 read with Section 251 of the Income Tax Act.

Q8. What did the rectification order indicate?

The rectification order indicated that steps had been taken to grant refund along with interest.

Q9. What observation was made by the Court?

The Court observed that the grievance of the petitioner stood redressed and that no useful purpose would be served in keeping the writ petition pending.

Q10. What final direction was issued by the Court?

The Court directed the Income Tax Department to release the refund amount along with interest up to the date of actual payment.

Q11. Within what time was the refund directed to be paid?

The refund was directed to be paid within a period of two weeks.

Q12. What happened to the writ petition?

The writ petition was disposed of.

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