Refunds to be withheld only in doubtful scrutiny cases: CBDT

It adds refund will not be withheld simply because the case has been selected for scrutiny

Beginning next financial year, the tax department will withhold refund in scrutiny cases only "in exceptional circumstances", like an apprehension that the assessee might flee the country.

In order to address the concerns of assessees in genuine cases, the Finance Bill 2017 has relaxed the norms for refunds for scrutiny cases.

Elaborating on the Budget provision, Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra said Income Tax refund will not be withheld simply because the case has been selected for scrutiny.

"Only in exceptional circumstances, that too with a lot of riders, the Commissioner can order for withholding refund. When we feel that person can leave the country or something," he said.

According to the Finance Bill 2017, refunds can be withheld in doubtful cases if the Assessing Officer is of the opinion that grant of refund may adversely affect the recovery of revenue.

With the approval of the Principal Commissioner or Commissioner, the AO can withhold the refund up to the date on which the assessment is made.

Under the existing rules, Section 143(1D) provides that the processing of a return shall not be necessary, where a scrutiny notice has been issued to the assessee.

"In order to address the grievance of delay in issuance of refund in genuine cases which are routinely selected for scrutiny assessment, it is proposed that provisions of section 143(1D) shall cease to apply in respect of returns furnished for the assessment year 2017-18 and onwards," the Finance Bill said.

These amendments will take effect from April 1, 2017, and, accordingly, apply to returns furnished for Assessment Year 2017-18, it said.