Landmark Judgements of Supreme Court on Section 241A [Withholding of refund in certain cases]

Assessing Officer cannot withhold refund merely because assessee declared huge income in immediately preceding year; SLP dismissed on ground of delay

Assessee filed its return declaring loss and, consequently, claimed refund of entire amount of tax paid at source. Assessing Officer determined amount of refund while completing assessment under section 143(1). However, he withheld said refund as per provisions of section 241A on grounds that in return for immediately preceding assessment year assessee had declared an income of huge amount, however, in relevant year, assessee had declared huge loss, therefore, return for relevant assessment year needed thorough investigation. High Court by impugned order held that merely because in immediately preceding assessment year, assessee had declared a positive income as against substantial loss declared in relevant assessment year, it could not be a ground to doubt contents of return or claim of assessee with respect to loss suffered and withhold refund claimed by assessee. Special Leave Petition filed against impugned order of High Court was to be dismissed on ground of delay. [In favour of assessee] (Related Assessment year : 2017-18) – [DCIT, CPC, Bangalore v. Vodafone Idea Ltd. (2021) 131 taxmann.com 128 (SC)]

SLP dismissed against High Court ruling that in absence of any cogent reasons justifying withholding of refund due to assessee under section 143(1), approval granted by Principal Commissioner for withholding such refund under section 241A was unjustified

High Court by impugned order held that in respect of assessment year 2016-17 section 143(1D) would be applicable for refund, and refund could not have been denied solely on ground that scrutiny assessment had been initiated against assessee pursuant to issuance of notice under section 143(2). It further held that for assessment years 2017-18 and 2018-19, refund mechanism would be governed by section 241A and in absence of any cogent reasons justifying withholding of refund due to assessee under section 143(1), proposal as well as approval granted by Principal Commissioner for withholding refund under section 241A was not justified. Special leave petition filed against impugned order was to be dismissed, [In favour of assessee] (Related Assessment years : 2016-17, 2017-18 and 2018-19) – [Addl. CIT v. Ericsson India (P) Ltd. (2021) 128 taxmann.com 418 (SC)]

Review petition dismissed against finding that section 241A requires a separate recording of satisfaction on part of Assessing Officer that having regard to fact that a notice has been issued under section 143(2), grant of refund is likely to adversely affect revenue whereafter, with previous approval of Principal Commissioner or Commissioner and for reasons to be recorded in writing, refund can be withheld

Refund - Power to withhold, in certain cases (Scope of) - Court in impugned order held that in respect of assessment years ending on 31. 03.2017 or before, if a notice is issued under section 143(2), it shall not be necessary to process refund under section 143(1) and requirement to process return shall stand overridden and in such cases, no separate intimation is required to be given to assessee that processing of return in terms of section 143(1) would stand deferred; issuance of notice under sub-section (2) itself is sufficient indication. It was also held that section 143(1D) does not contemplate either issuance of any such intimation or further application of mind that processing must be kept in abeyance and, therefore, it would not be proper to read into said provision requirement to send a separate intimation. However, insofar as