Budget 2026 should end refund delays after ITAT orders
Whenever any taxpayer wins their case in the Income Tax Appellate Tribunal or other tax appellate authorities, the income tax department has the option to file an appeal. However, before they do that, they must give effect (implement) the taxpayer’s favourable order issued by ITAT and others. This process is called order giving effect (OGE) and is usually done automatically. Additionally, the income tax return (ITR) filing portal also has an online option where you can request the Assessing Officer (AO) to give OGE.
However, chartered accountants say that even after securing favourable appellate orders, taxpayers frequently encounter prolonged and unexplained delays in the issuance of OGE by the AOs.
Sandeep Bhalla, Partner, Dhruva Advisors, says: “As a result, refunds determined pursuant to such appellate relief often remain notional confined to records and computations, without actually being credited to the taxpayer’s bank account.”
Bhalla says these delays effectively nullify the benefit of appellate relief and amount to judicial indiscipline to a certain extent. It also perpetuates cash-flow constraints, and causes avoidable financial hardship, particularly where substantial amounts have been locked up for extended periods.
Mihir Tanna, associate director, S.K Patodia LLP, said to ET Wealth Online: CAG Report No. 14 of 2024 ("Outstanding Demand on Income Tax Assesses") mentioned that figures of outstanding demand as per income tax records continued to include nullified demands.
According to Tanna, delay in giving effect to appeal orders resulted in delayed issue of refunds; tax dept had to refund the inflated demands collected along with interest under section 244A of the Income Tax Act. CBDT in its Action plan 2025 gave target that Appeal effect orders to be passed preferably within one month and in no circumstances beyond the statutory time limit.
Tanna says: "In certain cases of our clients, we have received appeal effect order in 1-2 weeks. In some cases, refund is pending even after receiving appeal effect due to outstanding demand of earlier year wherein CPC has provided opportunity of being heard before adjustment of demand."
What should Budget 2026 do about the order giving effect?
Bhalla suggests that the government should come out with a system where passing of OGEs should be system-driven and done mandatorily within three months from receipt of the appellate order.
Bhalla says: “To ensure accountability, the interest payable under Section 244A(1A) for delays attributable to the Department may be made personally recoverable from the concerned AO, which would act as a strong deterrent against administrative inertia.”
Bhalla points out that while the Assessing Officer is required to prepare a scrutiny report disclosing, inter alia, the date of passing of the Order Giving Effect, this requirement does not seem to be followed in a consistent or effective manner.
Bhalla says: “It is therefore suggested that such reports be mandatorily uploaded on the income-tax portal and made accessible to the assessee. This transparency would serve as an indirect but effective deterrent against omission or delay in reporting, and would encourage greater accountability in the timely implementation of appellate orders.”
What else can Budget 2026 improve in procedural aspects?
Bhalla from Dhruva Advisors suggests these changes:
Making rectifications against CPC adjustments meaningful
Adjustments made by the Central Processing Centre (CPC) under Section 143(1), particularly on account of alleged mismatches with tax audit reports, often give rise to unnecessary disputes. While the law provides for rectification under Section 154, in practice, the online rectification process has become largely mechanical and ineffective, with CPC frequently confirming additions without addressing the taxpayer’s reconciliation.
The portal should allow taxpayers to submit detailed reconciliations, and time- bound CPC orders under Section 154 must record clear reasons why such explanations are rejected. Plus, in all cases where the CPC, after considering the assessee’s submissions, is ready to confirm the proposed adjustments, an opportunity of personal hearing through video conference should be given to the taxpayer.
This would give the assessee a fair and meaningful opportunity of being heard, enhancing transparency, reducing mechanical confirmations, and fostering greater trust in the automated process. It would transform rectification from a procedural formality into a genuine grievance-redressal mechanism.
Time-bound disposal of high-pitched assessments
Once an assessment is identified as “high-pitched” and examined by the High-Pitched Assessment Committee, the matter should not be allowed to languish indefinitely.
To ensure fast resolution, the Board may consider assigning or transferring appeals relating to high-pitched assessments from the CIT(A) to the jurisdictional Principal Commissioner for close monitoring and administrative oversight.
The Principal Commissioner should be mandated to ensure disposal of such appeals within a defined timeframe of 6–9 months, failing which, the very objective of setting up a High-Pitched Assessment Committees gets defeated.
Direct access to the Tribunal for long-pending appeals
Ongoing disputes and delays in getting appellate relief lead to significant working-capital being tied up and management’s focus being pulled away from productive business activity. The scale of the issue is clear from the litigation backlog: around 5.4 lakh appeals pending before the Commissioner of Income-tax (Appeals) [CIT(A)], involving disputed demands exceeding Rs 18 lakh crore. This underscores the pressing need for structural reforms in dispute resolution.
Appeals pending before the CIT(A) for more than two years cause undue hardship to taxpayers, particularly where disputed demands continue to remain outstanding. In such cases, the assessee should be given an option to approach the Income-tax Appellate Tribunal (ITAT) directly, without being compelled to await disposal at the first appellate level.
A structured mechanism could be set up where the taxpayer approaches the Range Head (Additional / Joint CIT), who then creates a brief factual and legal factsheet of the case. This factsheet, along with the appeal records, may then be submitted directly to the Tribunal for adjudication. This approach would help reduce the workload at the CIT(A) level and ensure quicker resolution of cases that have been pending for a long time.
At the same time, we need to make sure that institutional accountability is part of the system to speed up the hearing of appeals that have been sitting for over two years without any delay caused by the assessee. This way we can ensure that long wait times are not seen as just a normal administrative outcome but rather as something we can measure in terms of performance.
Avoiding repetitive appeals by the Income Tax Department
Even with clear rulings from the Supreme Court and High Courts, the income tax department often continues to file appeals on issues that are already settled. This leads to avoidable litigation and shakes taxpayer confidence.
To tackle this, the CBDT should issue authoritative “Position Papers” on key recurring issues, particularly those that affect specific industries. Once a higher court has settled an issue and the Department has accepted it, field officers should be prevented from taking opposing stances or filing further appeals, with accountability resting on the AO and PCIT to ensure they comply with binding precedents.
However, chartered accountants say that even after securing favourable appellate orders, taxpayers frequently encounter prolonged and unexplained delays in the issuance of OGE by the AOs.
Sandeep Bhalla, Partner, Dhruva Advisors, says: “As a result, refunds determined pursuant to such appellate relief often remain notional confined to records and computations, without actually being credited to the taxpayer’s bank account.”
Bhalla says these delays effectively nullify the benefit of appellate relief and amount to judicial indiscipline to a certain extent. It also perpetuates cash-flow constraints, and causes avoidable financial hardship, particularly where substantial amounts have been locked up for extended periods.
Mihir Tanna, associate director, S.K Patodia LLP, said to ET Wealth Online: CAG Report No. 14 of 2024 ("Outstanding Demand on Income Tax Assesses") mentioned that figures of outstanding demand as per income tax records continued to include nullified demands.
According to Tanna, delay in giving effect to appeal orders resulted in delayed issue of refunds; tax dept had to refund the inflated demands collected along with interest under section 244A of the Income Tax Act. CBDT in its Action plan 2025 gave target that Appeal effect orders to be passed preferably within one month and in no circumstances beyond the statutory time limit.
Tanna says: "In certain cases of our clients, we have received appeal effect order in 1-2 weeks. In some cases, refund is pending even after receiving appeal effect due to outstanding demand of earlier year wherein CPC has provided opportunity of being heard before adjustment of demand."
What should Budget 2026 do about the order giving effect?
Bhalla suggests that the government should come out with a system where passing of OGEs should be system-driven and done mandatorily within three months from receipt of the appellate order.
Bhalla says: “To ensure accountability, the interest payable under Section 244A(1A) for delays attributable to the Department may be made personally recoverable from the concerned AO, which would act as a strong deterrent against administrative inertia.”
Bhalla points out that while the Assessing Officer is required to prepare a scrutiny report disclosing, inter alia, the date of passing of the Order Giving Effect, this requirement does not seem to be followed in a consistent or effective manner.
Bhalla says: “It is therefore suggested that such reports be mandatorily uploaded on the income-tax portal and made accessible to the assessee. This transparency would serve as an indirect but effective deterrent against omission or delay in reporting, and would encourage greater accountability in the timely implementation of appellate orders.”
What else can Budget 2026 improve in procedural aspects?
Making rectifications against CPC adjustments meaningful
Adjustments made by the Central Processing Centre (CPC) under Section 143(1), particularly on account of alleged mismatches with tax audit reports, often give rise to unnecessary disputes. While the law provides for rectification under Section 154, in practice, the online rectification process has become largely mechanical and ineffective, with CPC frequently confirming additions without addressing the taxpayer’s reconciliation.
The portal should allow taxpayers to submit detailed reconciliations, and time- bound CPC orders under Section 154 must record clear reasons why such explanations are rejected. Plus, in all cases where the CPC, after considering the assessee’s submissions, is ready to confirm the proposed adjustments, an opportunity of personal hearing through video conference should be given to the taxpayer.
This would give the assessee a fair and meaningful opportunity of being heard, enhancing transparency, reducing mechanical confirmations, and fostering greater trust in the automated process. It would transform rectification from a procedural formality into a genuine grievance-redressal mechanism.
Time-bound disposal of high-pitched assessments
To ensure fast resolution, the Board may consider assigning or transferring appeals relating to high-pitched assessments from the CIT(A) to the jurisdictional Principal Commissioner for close monitoring and administrative oversight.
The Principal Commissioner should be mandated to ensure disposal of such appeals within a defined timeframe of 6–9 months, failing which, the very objective of setting up a High-Pitched Assessment Committees gets defeated.
Direct access to the Tribunal for long-pending appeals
Ongoing disputes and delays in getting appellate relief lead to significant working-capital being tied up and management’s focus being pulled away from productive business activity. The scale of the issue is clear from the litigation backlog: around 5.4 lakh appeals pending before the Commissioner of Income-tax (Appeals) [CIT(A)], involving disputed demands exceeding Rs 18 lakh crore. This underscores the pressing need for structural reforms in dispute resolution.
Appeals pending before the CIT(A) for more than two years cause undue hardship to taxpayers, particularly where disputed demands continue to remain outstanding. In such cases, the assessee should be given an option to approach the Income-tax Appellate Tribunal (ITAT) directly, without being compelled to await disposal at the first appellate level.
A structured mechanism could be set up where the taxpayer approaches the Range Head (Additional / Joint CIT), who then creates a brief factual and legal factsheet of the case. This factsheet, along with the appeal records, may then be submitted directly to the Tribunal for adjudication. This approach would help reduce the workload at the CIT(A) level and ensure quicker resolution of cases that have been pending for a long time.
At the same time, we need to make sure that institutional accountability is part of the system to speed up the hearing of appeals that have been sitting for over two years without any delay caused by the assessee. This way we can ensure that long wait times are not seen as just a normal administrative outcome but rather as something we can measure in terms of performance.
Avoiding repetitive appeals by the Income Tax Department
Even with clear rulings from the Supreme Court and High Courts, the income tax department often continues to file appeals on issues that are already settled. This leads to avoidable litigation and shakes taxpayer confidence.
To tackle this, the CBDT should issue authoritative “Position Papers” on key recurring issues, particularly those that affect specific industries. Once a higher court has settled an issue and the Department has accepted it, field officers should be prevented from taking opposing stances or filing further appeals, with accountability resting on the AO and PCIT to ensure they comply with binding precedents.
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