Holding legitimate refund due to the assessee assigning the reason that Miscellaneous Application is filed before the Income Tax Appellate Tribunal  is not as per Sections 240 and section 241 of  Income Tax Act, 1961. Section 240 covers the refund in case of Appeal effect.

Punjab and Haryana High Court:

Naurata Ram v. CIT [1998] 100 Taxman 266

A conjoint reading of the provisions of sections 240 and 241 shows that in the ordinary circumstances the Assessing Officer has to refund the amount which has become due to the assessee as a result of any order passed in appeal or other proceedings under the Act. Proviso to section 240 specifies two circumstances in which the refund cannot be granted as a matter of course. Section 241 empowers the competent authority to withhold refund in certain cases provided that the Assessing Officer forms an opinion that the grant of refund is likely to adversely affect the revenue. Such an order can be passed only with the previous approval of the Chief Commissioner or Commissioner. The power to withhold the refund cannot be exercised merely because some proceedings are pending before the authorities constituted under the Act or a Court of law. In other words, mere pendency of the proceedings cannot itself be a ground to deny the refund on the assumption that such refund would adversely affect the revenue. The competent authority has to form an opinion on the basis of relevant material for coming to the conclusion that the order of refund will necessarily cause prejudice to the revenue of the State. If the Legislature had intended to prohibit the refund of the amount due to the assessee only on the ground that the revenue has preferred an appeal/revision, etc., then section 240 would have been couched in a different phraseology. Absence of specific provision in the statute providing for withholding of refund only on the ground of pendency of the proceedings is clearly indicative of the intention of the Legislature that pendency of proceedings will not by itself be a ground for withholding the refund.

Hence, the writ petition was allowed, and the Assessing Officer directed to refund the amount due to the assessee.

Shreyans Industries Ltd. v. CIT [1998] 101 Taxman 498/[2001] 252 ITR 544 (Punj. & Har.),

Section 241 authorises the Assessing Officer to withhold the refund with the previous approval of the Commissioner for such time as may be determined by the Commissioner, but some facts are required to be brought on record to justify the withholding of refund. The mere fact and the only fact that the order was under challenge either before the High Court or before the Tribunal, was no ground to withhold the refund or to reach a conclusion that the refund would adversely affect the revenue. In the instant case, a huge amount had been withheld only on the ground that the appeal against the order of the Commissioner (Appeals) was pending before the Tribunal. No material was forthcoming on the record which could justify the withholding of the refund. The petitioner who was an assessee was not shown to be in default in the payment of income-tax dues or even in the matter of filing of returns. Once that was so the order of the Assessing Officer recommending the withholding of refund and the order of the Commissioner granting the approval for withholding of the refund, could not be justified under the provisions of section 241. Therefore, the orders of the Commissioner withholding refund were quashed and the revenue was directed to pay the amount to the petitioner in accordance with law.

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Qualification: LL.B / Advocate
Company: S.K.Jain & Co.
Location: Faridabad, Haryana, India
Member Since: 16 May 2019 | Total Posts: 39
I am S.K.Jain , Tax Consultant cum Advocate practising in Income Tax , GST , Company Matters . The name of the concern is S.K.Jain & Co. and I am prop. of this concern . I am in practice for the last 30 years . Those who have joined the profession recently and want to discuss on the particular i View Full Profile

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May 2021