Section 435 — Refund on appeal, etc. Successor to s.240 of the 1961 Act.
Section 435 is in Chapter XX — Refunds, which runs from section 431 to section 438.
Sub-section (1) requires the Assessing Officer to refund, without any claim by the assessee, any amount that becomes due as a result of an order passed in appeal or other proceeding under the Act, except where the Act provides otherwise. Sub-section (2) qualifies when the refund becomes due in two situations: where the assessment is set aside or cancelled with a direction to make a fresh assessment, the refund becomes due only once that fresh assessment is made; and where the assessment is annulled, the refund is limited to tax paid in excess of the tax chargeable on the total income the assessee returned.
It makes an appellate success self-executing on the refund side so the taxpayer does not have to file a fresh claim. Sub-section (2) prevents the money going out prematurely where the matter is going back for fresh assessment, and prevents an annulment producing a refund of tax that was due on the assessee's own returned income.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Refund where the assessment is annulled | Only the tax paid in excess of the tax chargeable on the total income returned by the assessee | An annulment does not refund tax due on the returned income | Sub-section (2)(b) |
| Refund where the assessment is set aside or cancelled with a direction for fresh assessment | Becomes due only on the making of the fresh assessment | Nothing is refundable in the interim | Sub-section (2)(a) |
You do not have to apply — sub-section (1) places the duty on the Assessing Officer to refund on his own once an appellate or other order creates the refund. But do not expect money immediately on a remand: where the order sets aside the assessment and directs a fresh one, nothing becomes due until that fresh assessment is completed. On an annulment, the ceiling is the excess over the tax on your returned income, so tax properly payable on what you yourself returned stays with the department.
An appellate authority sets aside a company's assessment and directs a fresh one. The Rs. 80 lakh already paid does not come back at that point: sub-section (2)(a) makes the refund due only on the making of the fresh assessment, so the money stays with the Department in the meantime. Contrast an annulment — if the company had returned income on which the tax chargeable was Rs. 30 lakh and had paid Rs. 80 lakh, sub-section (2)(b) refunds only the Rs. 50 lakh excess, not the whole Rs. 80 lakh, because tax due on the returned income is not touched. In either case, once the refund does become due the Assessing Officer must make it without the company having to claim it.
In the refund that follows an appellate or other order, issued by the Assessing Officer without any claim from you; and, where the assessment was set aside, in the fresh assessment order, since the refund only becomes due when that fresh assessment is made.
the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf
See the full 1961 to 2025 concordance.