AO can’t withhold refund mere on reasons that there is a probability of additions during assessment: HC


AO can’t withhold refund mere on reasons that there is a probability of additions during assessment: HC


Income tax refund is still a matter of biggest grievance by the taxpayers. No matter, how much publicity is done on the income tax refund speedy disposal by the Government, it still continue to haunt the taxpayers.


There are various cases wherein the income tax refund are unnecessarily blocked by the taxmen.


It may be noted that section 241A empower the AO to withheld the income tax refund in certain case. Section 241A reads as under:


Withholding of refund in certain cases.

241A. For every assessment year commencing on or after the 1st day of April, 2017, where refund of any amount becomes due to the assessee under the provisions of sub-section (1) of section 143 and the Assessing Officer is of the opinion, having regard to the fact that a notice has been issued under sub-section (2) of section 143 in respect of such return, that the grant of the refund is likely to adversely affect the revenue, he may, for reasons to be recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, as the case may be, withhold the refund up to the date on which the assessment is mad




This section 241A is often invoked by the AO casually in various cases by the AO. In some of the cases the power in invoked with the revenue target in mind as well.




Here was one such case before Delhi HC as under:


Ericsson India (P.) Ltd.

[2022] 136 228 (Delhi)




In this case, HC quashes AO’s order u/s 241A with a direction to release of refund as AO’s estimate of additional tax liability not founded on rational and congent grounds.



Where AO’s order of withholding refund u/s 241A was made without taking into account assessee’s financial wherewithal and was based on an estimate of assessee’s tax liability which was not founded on rational and cogent grounds order was to be set aside by High Court and refund directed to be made.


The following jdugemnet may also be referred:

1.      Addl. Commissioner of Income-tax v. Ericsson India (P.) Ltd. [2021] 128 418 (SC)

2.      • Ericsson India (P.) Ltd. v. Addl. Commissioner of Income Tax [2020] 117 381 (Delhi)