Assessing Officer is entitled to withhold Income Tax Refund if he has doubt

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.

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Income Tax Refund will not be withheld unless Assessing Officer feels that subsequent chances of recovery will be remote
Income Tax Refund will not be withheld unless Assessing Officer feels that subsequent chances of recovery will be remote

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.

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