The Central Board of Direct Taxes has held that Assessing Officer is entitled to withhold Income Tax refund in any case if he has doubt regarding the recovery of revenue.
Dealing on the Budget provisions, the Chairman of The Central Board of Direct Taxes (CBDT) Mr. Sushil Chandra said that Income Tax refund will not be withheld merely on the ground that the case has been picked up for scrutiny.
Starting from the following financial year, the income tax department will withhold refund in scrutiny cases only in exceptional situations such as cases involving apprehension that the assessee might run away the country.
Income Tax Refund ordinarily not to be withheld- Provisions to protect genuine tax payers:
The Finance Bill 2017 has relaxed the norms for income tax refund for scrutiny case in order to safeguard the interests of assessees in genuine cases.
Amendment to Provisions of section 143(1D) to expedite refund in Scrutiny Cases
To address the grievance of delay in getting refund in genuine cases that are normally selected for scrutiny assessment, it has been proposed that provisions of section 143(1D) of the Income Tax Act shall not apply in case of returns filed for the assessment year 2017-18 onwards.
The provisions of sub-section (1D) of section 143 of the Income Tax Act states that the processing of an income tax return shall not be necessary, where a notice has already been served upon the assessee under sub-section (2) of the section143.
Amendment to the said sub-section as per the Finance Act, 2016 provides that from assessment year 2017-18, processing of a return under section 143(1) has to be done before passing an order of assessment.
Existing provisions governing refund of income tax:
Under the present rules, Section 143(1D) of the Income Tax Act provides that the processing of a return is not required when a notice for scrutiny has been issued to the assessee.
The amendments will take effect from 1.4.2017 and shall apply to returns filed for the Assessment Year 2017-18.
As per new rules the Assessing Officer can withhold the refund up to the date when the assessment is made after getting the approval of the Principal Commissioner or Commissioner.
However the chairman of the Central Board of Direct Taxes (CBDT) has assured that law abiding citizens will not be harassed by the income tax department while dealing with scrutiny cases.
Selecting cases for scrutiny by Income Tax Department:
CBDT, being the administrative authority of the income tax department, has received information from banks on deposits of huge amount. After registering a disproportionate assets case against an assessee, CBI carried out searches in several cities revealing properties disproportionate to the sources of income.
The department has used a software to analyse the data received by it and has segregated deposits, especially those over Rs. 1 crore, not matching with returns of the previous year.
Mr. Chandra said at a seminar that the department has segregated data on cash deposits amounting to Rs. 2 lakh and more where officials have been asked not to enquire deposits of up to Rs. 2.5 lakh.