Income Tax Law / Refunds

Section 242 of the Income-tax Act, 1961: Correctness of Assessment Not to Be Questioned

Section 242 restricts the scope of refund claims: a taxpayer cannot challenge a final assessment or obtain a review of a concluded matter merely by requesting a refund. The corresponding provision in the Income-tax Act, 2025 is Section 436.

Law applicable from 1 April 2026: Section 436 of the Income-tax Act, 2025 carries forward this rule. Section 242 of the 1961 Act remains relevant to matters governed by the earlier law, subject to applicable transition and saving provisions.

What does Section 242 mean?

The provision appears in Chapter XIX (Refunds) of the Income-tax Act, 1961. It prevents a refund proceeding from becoming a substitute for an appeal, rectification, revision or other statutory remedy against an assessment that has already attained finality.

Text and effect of Section 242

In a claim under this Chapter, it shall not be open to the assessee to question the correctness of any assessment or other matter decided which has become final and conclusive or ask for a review of the same, and the assessee shall not be entitled to any relief on such claim except refund of tax wrongly paid or paid in excess.

Meaning: If an assessment or decision has become final and conclusive, the taxpayer cannot use a refund claim to reopen its merits. The refund proceeding is confined to establishing and obtaining a refund of tax wrongly paid or paid in excess, consistently with the operative assessment and other applicable provisions.

Important expressions explained

Assessment

An assessment is the statutory determination of taxable income and tax liability by the income-tax authority under the applicable assessment provisions.

Final and conclusive

A matter that can no longer be challenged through the relevant ordinary statutory process, or has otherwise attained legal finality. Whether a particular order is final depends on the facts, time limits and available remedies.

Refund of tax wrongly paid or paid in excess

Repayment of an amount collected or paid beyond the tax legally due, subject to the refund provisions and the effect of any binding order.

Practical illustration

Suppose an assessment determines a particular taxable income and the assessee does not challenge it within the prescribed period. The assessee cannot ordinarily file a refund claim and ask the refund authority to recalculate that already-final assessment on a different basis. If, however, the tax actually collected exceeds the liability established by the operative order, a refund may be available under the applicable provisions.

How to challenge an incorrect assessment

Where the dispute concerns the assessment itself, the appropriate course may be a statutory appeal, rectification of an apparent mistake, revision, or another legally available remedy. Each has distinct conditions and limitation periods. A refund application alone does not ordinarily replace these procedures.

Section 436 of the Income-tax Act, 2025

Section 436, in Chapter XX (Refunds), is titled Correctness of assessment not to be questioned. It retains the same substantive limitation: a refund claim cannot challenge an assessment or other matter that has become final and conclusive, and relief on the claim is restricted to refund of tax wrongly paid or paid in excess.

The Income-tax Act, 2025 came into force on 1 April 2026. For earlier years and proceedings, determine which enactment applies by reference to the relevant commencement, repeal and saving provisions.

Section 237, 1961 Act: General entitlement to refund where tax paid exceeds the amount properly chargeable.
Section 239, 1961 Act: Form and procedure for claiming refund.
Section 240, 1961 Act: Refund becoming due as a result of an appellate order or other proceeding, ordinarily without a separate claim.
Section 244A, 1961 Act: Interest on refunds, subject to statutory conditions.
Section 245, 1961 Act: Set-off and withholding of refunds in specified circumstances.

Frequently asked questions

Can a taxpayer reopen a completed assessment through a refund claim?

No. Section 242 prevents a refund claim from being used to challenge a matter that has become final and conclusive. Separate statutory remedies may be available depending on the facts and time limits.

Is Section 242 the same as Section 242 of the 2025 Act?

No. The corresponding refund provision in the Income-tax Act, 2025 is Section 436. Section 242 of the 2025 Act concerns jurisdiction of Assessing Officers.

Can an excess payment still be refunded?

Yes, where the tax is wrongly paid or paid in excess and the applicable refund requirements are satisfied, without reopening a final determination through the refund claim.

Official statutory references

Updated: 27 October 2026. This article is general legal information; applicability to a specific tax year or pending proceeding requires checking the governing legislation and orders.