Successive Writ Petitions and Unlawful Withholding of Income-tax Refunds under Section 245: Commentary on Rajneesh Agarwal v. Income Tax Officer, Ward 22(2)

Court: Calcutta High Court (Original Side, Constitutional Writ Jurisdiction)

Bench: Raja Basu Chowdhury, J.

Decision Date: 3 November 2025

Case No.: WPO/398/2025

1. Introduction

This decision of the Calcutta High Court in Rajneesh Agarwal v. Income Tax Officer, Ward 22(2) is significant on two distinct but interrelated questions:

Maintainability of a second writ petition after an earlier writ on a broadly similar issue has been withdrawn without express liberty to file afresh; and
The limits on the Income Tax Department’s power under Section 245 of the Income-tax Act, 1961 (“the Act”) to withhold or adjust income-tax refunds in the absence of any demonstrable tax demand.

The petitioner, a practising Chartered Accountant, challenged the Revenue’s prolonged and partially unexplained withholding of a substantial refund admittedly due to him for Assessment Year (AY) 2018–19. The central grievances were:

The Department’s invocation of Section 245 to withhold ₹22,73,833 without any pending or existing tax liability against the petitioner; and
The refusal or failure to release the full refund even after a rectification order under Section 154 quantified the refund and partially released it.

Against this backdrop, the Court was called upon to decide:

Whether the present writ petition was barred because the petitioner had earlier withdrawn a prior writ petition on a similar subject; and
Whether, on the admitted facts, the Department could legally continue to withhold the remaining refund amount and, if not, what relief should follow.

The judgment clarifies the application of the Supreme Court’s decision in Sarguja Transport Service v. State Transport Appellate Tribunal, (1987) 1 SCC 5, in the context of successive writ petitions, and reaffirms the principle that tax authorities cannot retain monies without a clear statutory charging provision or demonstrable tax demand.

2. Summary of the Judgment

2.1 Outcome

The High Court:

Rejected the Revenue’s preliminary objection that the writ petition was not maintainable due to the earlier withdrawal of a prior writ petition on a similar issue.
Held that the cause of action in the present writ petition was distinct from that in the earlier petition, because:
- Between the two petitions, the Department had made part payment of the refund; and
- The subsequent non-release of the remaining amount and the breach of assurance gave rise to a fresh or continuing cause of action.
Found that the Department had no justification to withhold ₹22,73,833 under Section 245, because:
- There was no subsisting tax demand or proceeding against the petitioner in respect of which the refund could be adjusted; and
- The Department could not demonstrate that any amount was “payable” or “due” from the petitioner.
Allowed the writ petition and directed:
- Release of the withheld refund amount; and
- Payment of interest “in accordance with law” (i.e., statutory interest on delayed refund).
Directed the Department to complete the refund process within ten weeks from the date of communication of the order, with no order as to costs.

2.2 Core Legal Holdings

On successive writ petitions:
- The principle of Order 23 Rule 1(4) of the Code of Civil Procedure, 1908 (“CPC”), as extended to writ petitions by Sarguja Transport, bars a second petition only when the earlier petition is withdrawn on the same cause of action and in respect of the same subject matter.
- Where, between the first and second petitions, material events occur—such as part refund and violation of an assurance by the State—the subsequent petition is based on a distinct cause of action and is therefore maintainable.
On Section 245 and withholding of refunds:
- Section 245 permits set-off of a refund only against a “remaining tax payable”.
- In the absence of any outstanding tax demand or ongoing proceeding, the Revenue has no authority to retain the refund.
- “Law does not sanction recovery of tax in absence of any specific charging statutory provision.” This principle extends to the retention of monies: the State cannot retain funds without statutory backing.

3. Factual Background and Procedural History

3.1 Key Facts

The petitioner, a practising Chartered Accountant, maintains his accounts on a cash basis and filed his return for AY 2018–19 in ITR-3 on 14 August 2018.
Declared net income: ₹37,09,520.
Tax payable on declared income: ₹9,53,117.
Tax deducted at source (TDS) reflected in the return: ₹39,51,350, making the petitioner prima facie eligible for a substantial refund.

3.2 Intimation under Section 143(1)

On 7 January 2020, the Centralised Processing Centre (CPC) issued an intimation under Section 143(1) for AY 2018–19, which recorded:

Net amount payable by the assessee: ₹9,75,430 (a demand); and
TDS allowed: only ₹1,68,300.

This was inconsistent with the petitioner’s claim and appears to have been the subject of rectification later on.

3.3 Rectification under Section 154

On the petitioner’s rectification application under Section 154:

By an order dated 16 January 2024, the Department determined:
- Gross refundable amount: ₹55,54,357
- Amount shown as withheld under Section 245: ₹22,73,833
- Net refund sanctioned: ₹32,80,524
However, in reality, the petitioner received only ₹18,26,159 on 18 March 2024.
Thus, beyond the disclosed withholding of ₹22,73,833 under Section 245, a further amount (approximately ₹14.65 lakh) remained unexplained and unpaid.

3.4 Representations and First Writ Petition

The petitioner:

wrote on 20 March 2024 requesting:
- Release of ₹22,73,833 shown as withheld under Section 245; and
- Release of the further amount of about ₹14.65 lakh allegedly “wrongly adjusted”.
filed another rectification application under Section 154 on 2 August 2024 seeking refund of ₹37,28,184 and details of the withholding; and
lodged a grievance on the e-Nivaran platform on 4 October 2024.

Having failed to secure a complete refund administratively, the petitioner filed a writ petition before the High Court, registered as WPA No. 6316 of 2025.

During the pendency of that writ:

The petitioner received an additional refund of ₹14,99,725 on 5 May 2025.
On the Revenue’s assurance that the issue would be resolved, the petitioner withdrew WPA No. 6316 of 2025 on 7 May 2025.

3.5 Fresh Cause of Action and Second Writ Petition

Despite the withdrawal of the first writ petition:

No further action was taken by the Department to release the remaining amount of ₹22,73,833.
The petitioner addressed a detailed letter on 13 May 2025, calling upon the Department:
- To explain the withholding; and
- To supply calculation details justifying any retention under Section 245.
When no effective steps were taken, the petitioner filed the present writ petition, WPO/398/2025.

The relief sought included a direction to process and release the refund of ₹22,73,833, together with interest “under Section 243 (wrongly recorded as Section 244A)” up to the date of payment.

4. Precedents Cited and Their Role

4.1 Sarguja Transport Service v. State Transport Appellate Tribunal, (1987) 1 SCC 5

The Revenue relied heavily on the Supreme Court’s decision in Sarguja Transport to contend that the present writ petition was not maintainable.

4.1.1 Principle in Sarguja Transport

In Sarguja Transport, the Supreme Court held:

Though the CPC does not apply to writ proceedings proprio vigore, the underlying principles of Order 23 Rule 1(4) should be applied to writ petitions under Article 226.
Where a writ petition is withdrawn unconditionally without obtaining liberty to file a fresh petition, a subsequent writ petition on the same cause of action before the same High Court is not maintainable.
The rationale was to prevent:
- “Bench hunting” (i.e., choosing a different bench in the hope of a favourable decision); and
- Multiplicity of proceedings and harassment of the opposite party.

The Revenue argued that since the petitioner had withdrawn WPA No. 6316 of 2025, he had effectively abandoned his claim, and thus, by analogy with Order 23 Rule 1(4) CPC and Sarguja Transport, the present writ petition was barred.

4.2 Sarva Shramik Sanghatana (Kv), Mumbai v. State Of Maharashtra, (2008) 1 SCC 494

The petitioner, in response, relied on Sarva Shramik Sanghatana, where the Supreme Court had clarified and limited the scope of Sarguja Transport.

4.2.1 Clarification in Sarva Shramik

In Sarva Shramik, the Supreme Court:

Reiterated that Sarguja Transport was motivated by the need to prevent abuse of the writ jurisdiction through bench hunting.
Emphasised that the principle embodied in Order 23 Rule 1(4) CPC:
- Applies only where the second proceeding is based on the same cause of action and seeks the same relief; and
- Should not be extended mechanically to bar bona fide proceedings or proceedings under other statutory frameworks or on distinct causes of action.

The petitioner argued that:

After the withdrawal of the earlier writ petition, new events intervened:
- an additional part of the refund (₹14,99,725) was released; and
- the Department failed to fulfil its assurance to resolve the entire dispute.
These intervening events gave rise to a fresh or at least a modified cause of action, so the bar under Sarguja Transport was inapplicable.

4.3 Order 23 Rule 1(4) CPC – Relevance in Writ Jurisdiction

Order 23 Rule 1(4) CPC provides that:

If a plaintiff withdraws from a suit or abandons part of a claim without the permission of the court, he shall be precluded from instituting any fresh suit in respect of such subject matter or such part of the claim.

While this is a provision formally applicable to civil suits, the Supreme Court in Sarguja Transport held that its principle applies by analogy to writ petitions. The High Court in the present case had to decide:

Whether this principle should bar the petitioner’s second writ petition; and
Whether the causes of action in the first and second writ petitions were identical.

As will be seen from the reasoning, the Court answered these questions in the negative.

5. Legal Reasoning

5.1 On Maintainability of the Second Writ Petition

5.1.1 Distinction in Cause of Action

Justice Raja Basu Chowdhury undertook a careful chronological analysis of events:

Initially, a quantified refund was withheld in part and a part of the sanctioned refund amount was not disbursed.
The first writ petition (WPA No. 6316 of 2025) was filed to challenge this.
During its pendency, the Department:
- Released ₹14,99,725 on 5 May 2025, and
- Gave an assurance that the remaining dispute would be resolved, leading to the withdrawal of that petition.
The Department, however, did not resolve the dispute or release the remaining ₹22,73,833, despite a further letter dated 13 May 2025 from the petitioner.

On these facts, the Court held:

It is “equally true that the cause of action for the previous writ petition and the present writ petition are not identical.”
“In the interregnum, a part of the petitioner's claim has already been allowed.”

This temporal and factual break—created by:

Part payment of the refund; and
The failure of the Department to honour its assurance and release the balance—

generated a fresh cause of action. Consequently, the second writ petition could not be treated as a simple re-litigation of the earlier withdrawn petition.

5.1.2 Application and Distinction of Sarguja Transport

The Court acknowledged the Revenue’s reliance on Sarguja Transport and the principle of Order 23 Rule 1(4) CPC but held that:

The bar against a second writ petition is attracted only if:
- The subject matter and
- The cause of action
are identical in both petitions.
Here, due to the intervening payment and subsequent inaction, the requisite identity was absent.

Therefore, the principle in Sarguja Transport could not be used to defeat the petitioner’s legitimate claim, particularly when:

The State had already admitted liability to refund the amount through its own rectification proceedings.
Only the actual disbursement of the balance amount was in issue.

The judgment expressly concludes that in light of the changed circumstances:

“... since the cause of action for the instant petition is distinct from the previous petition, the judgment delivered in the case of Sarguja Transport (supra) cannot assist the [respondent].”

(The text of the judgment uses “cannot assist the petitioner”; on a contextual reading, this is clearly a typographical slip, as the discussion throughout that paragraph is about the Revenue’s reliance on Sarguja Transport.)

5.2 On the Legality of Withholding Refund under Section 245

5.2.1 Admitted Entitlement and Absence of Demand

Crucially, the Court noted:

It was “admittedly” the case that the petitioner was entitled to a refund of ₹22,73,833 out of the overall refund determined by the Department.
The Revenue’s counsel, on instructions, categorically stated that:
- No independent proceeding had been initiated against the petitioner in respect of the withholding of ₹22,73,833; and
- The Department could not demonstrate that any amount was “payable” or “due” from the petitioner.

This admission was fatal to the Department’s attempt to justify withholding under Section 245.

5.2.2 Scope and Preconditions of Section 245

Section 245 of the Act empowers the Department to:

set off the amount to be refunded to the assessee against any sum remaining payable by the assessee under this Act and to notify the assessee of such set-off.

The Court underscored that:

Section 245 presupposes the existence of a “remaining tax payable” by the assessee.
In other words, there must be a subsisting, enforceable tax demand or liability against which a refund can be adjusted.
Absent such a demand, the Department has no power to withhold or appropriate the refund.

The judgment therefore concluded:

“It is true that Section 245 of the said Act authorises the Income Tax Department to set off refund against remaining tax payable. Unfortunately, in the instant case, the respondent has not been able to demonstrate that any amount is payable or is due from the petitioner.”

5.2.3 Constitutional Principle: No Tax Without Authority of Law

The Court articulated a broader principle in these terms:

“Law does not sanction recovery of tax in absence of any specific charging statutory provision.”

This sentence reflects and resonates with the constitutional mandate under Article 265 of the Constitution of India:

No tax shall be levied or collected except by authority of law.

Although Article 265 is not expressly cited, the reasoning is congruent with:

The idea that both levy and collection of tax must have statutory authority; and
The corollary that retention of money by the State without such authority is impermissible.

By applying this principle, the Court held that:

In the absence of any charging provision or pending demand, the Department’s retention of the petitioner’s money amounted to an unauthorised exaction.
There was “no scope for the respondent to hold on the aforesaid amount.”

5.3 Grant of Relief and Interest

Having rejected the preliminary objection and found the withholding under Section 245 unjustified, the Court directed:

Release of the refund amount of ₹22,73,833; and
Payment of interest in accordance with law.

The phrase “in accordance with law” is important:

Although the petition refers to Section 243 and mentions that it was “wrongly recorded as 244A,” the current statutory provision governing interest on refunds is Section 244A of the Act.
Section 244A mandates payment of interest on any refund due to the assessee, subject to certain conditions and time periods.

Rather than specifying a precise figure, the Court left it to the Department to compute and pay statutory interest as per the Act, while imposing a strict time frame of ten weeks to complete the process.

6. Impact and Significance

6.1 Clarification on Successive Writ Petitions

This decision reinforces and operationalises the Supreme Court’s jurisprudence on successive writ petitions:

The bar under Sarguja Transport is not absolute.
The key test is whether the second petition is based on the same cause of action and same subject matter as the first.
Where there are intervening events—such as part compliance by the State or emergence of fresh illegality—a new or modified cause of action arises, and a fresh writ petition is maintainable.

This is particularly important in revenue and administrative matters where:

The State may induce withdrawal of a petition by partial redress or assurances; and
Subsequently fail to perform fully, leaving the citizen without an obvious remedy if a strict bar on successive writs were applied.

The judgment thus protects bona fide litigants from being penalised for withdrawing petitions in reliance on the State’s assurances and ensures that the State cannot take advantage of its own non-compliance.

6.2 Limits on the Use of Section 245 for Withholding Refunds

For tax administration, the judgment sends a clear message:

Section 245 is a limited power to set-off refunds against existing tax dues—not a general license to withhold or delay refunds.
Before invoking Section 245, the Department must:
- Establish and be able to demonstrate the existence of a valid, quantifiable tax demand against the assessee; and
- Follow the procedural requirement of notification/intimation to the assessee.
Where, as in this case, there is no outstanding demand and no ongoing proceeding, any withholding of refund amounts to unauthorised retention of money.

This reinforces the larger jurisprudential theme in tax law that:

Revenue authorities are creatures of statute and can act only within the four corners of the law; and
Administrative convenience or internal departmental issues cannot justify prolonged withholding of monies admittedly due to taxpayers.

6.3 Practical Implications for Taxpayers and Practitioners

From a practical standpoint, the judgment:

Empowers taxpayers to challenge unjustified withholding of refunds, particularly when:
- A rectification or assessment order already quantifies the refund; and
- The Department, despite no pending demand, delays or refuses disbursement.
Provides a template for:
- Asserting that successive writ petitions are maintainable where new facts arise; and
- Framing the challenge in terms of absence of statutory authority, not just administrative delay.

For the Department, it serves as a cautionary precedent:

Ad hoc or unexplained withholding of refunds is likely to be struck down.
Courts may not only order release of refunds but also direct payment of statutory interest, increasing the financial cost of non-compliance.

7. Complex Concepts Simplified

For ease of understanding, key legal and tax concepts referenced in the judgment are explained below.

Writ Petition (Article 226)

A petition filed directly in a High Court seeking relief against violation of legal or fundamental rights by the State or its authorities. Common writs include mandamus (to compel performance of duty), certiorari (to quash orders), and prohibition (to prevent unlawful exercise of jurisdiction).

Cause of Action

The bundle of essential facts that gives a person the right to seek relief from a court. If these essential facts change—e.g., because the State partially complies or commits a new wrong—a new cause of action may arise.

Order 23 Rule 1(4) CPC

A provision of civil procedure law which states that if a plaintiff withdraws a suit or abandons a claim without court’s permission to file afresh, he is barred from bringing another suit on the same subject matter. By analogy (per Sarguja Transport), similar principles are applied to writ petitions in certain situations.

Intimation under Section 143(1)

After processing a return of income, the Department issues an “intimation” under Section 143(1), which can:

Accept the return as filed; or
Make certain arithmetical or apparent adjustments and determine tax payable or refund due.

It is an automated, limited-scope process and not a full assessment.

Rectification under Section 154

Section 154 allows the Department to correct “mistakes apparent from the record” in orders or intimations. It can be used both by the Department and by taxpayers (through applications) to correct obvious errors in calculation, overlooking of TDS, or similar patent mistakes.

Section 245 – Set-off of Refunds

This provision permits the Department to adjust a refund due to an assessee against any tax amount “remaining payable” by that assessee under the Act. It:

Requires that there must be an existing tax demand; and
Requires that the assessee be notified of the set-off.

It does not authorise indefinite or unexplained withholding where no demand exists.

Interest on Refunds (Section 244A)

Under Section 244A, where tax has been paid in excess of what is properly chargeable, the assessee is entitled to interest on the amount of refund at a statutory rate, for the period of delay. The reference in the petition to “Section 243 wrongly recorded as 244A” appears to be a drafting inconsistency; the operative provision today is Section 244A.

Article 265 of the Constitution

It states that “No tax shall be levied or collected except by authority of law.” Courts interpret this to mean that both the imposition and retention of tax monies by the State must have clear statutory backing. Any collection or retention without such authority is unconstitutional.

8. Conclusion

The decision in Rajneesh Agarwal v. Income Tax Officer, Ward 22(2) serves as a twofold reaffirmation of foundational principles in public law and tax administration:

On procedural law: The judgment clarifies that the rule against successive writ petitions (drawn from Sarguja Transport and Order 23 Rule 1(4) CPC) is not a blunt instrument. It is conditioned by the requirement that the second petition must be based on the same cause of action. Where new events occur—such as partial compliance by the State or fresh inaction—litigants are not barred from re-approaching the Court. This protects citizens who withdraw petitions in reliance on governmental assurances.
On substantive tax law: The Court firmly holds that Section 245 is not a carte blanche for the Income Tax Department to withhold refunds. In the absence of a demonstrable outstanding demand, any retention of refunds is without authority of law. The Department’s own rectification order having quantified the refund, and no demand remaining, the continued withholding of ₹22,73,833 was held to be indefensible. The Court therefore directed refund with statutory interest within a defined timeframe.

In a broader sense, the judgment reiterates a simple but powerful proposition: the State cannot retain a citizen’s money without clear statutory authority, and cannot rely on procedural technicalities to shield such unauthorised retention. For taxpayers and practitioners, this decision is a useful precedent in contesting arbitrary use of Section 245 and in framing successive writ petitions where new facts arise.

Note: This commentary is intended for academic and informational purposes and does not constitute legal advice.

Successive Writ Petitions and Unlawful Withholding of Income-tax Refunds under Section 245: Commentary on Rajneesh Agarwal v. ITO, Ward 22(2)