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, 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.
As per 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.