Section 241A of ITA, 1961 : Section 241A: Withholding Of Refund In Certain Cases

Explanation using Example

Imagine Mr. Sharma, a salaried employee, files his income tax return for the assessment year 2021-22, claiming a refund due to excess TDS deducted by his employer. The Income Tax Department processes his return and determines that he is indeed eligible for a refund. However, Mr. Sharma's return is also selected for a detailed scrutiny, and a notice under section 143(2) is issued to him for further verification of his claims.

The Assessing Officer, upon reviewing Mr. Sharma's case, believes that issuing a refund at this stage might result in a loss of revenue for the government, as the scrutiny might reveal tax liabilities that exceed the refund amount. With this concern, and after obtaining the required approval from the Principal Commissioner or Commissioner, the Assessing Officer decides to withhold Mr. Sharma's refund under the provisions of Section 241A of the Income-tax Act, 1961, until the completion of the scrutiny assessment.