Section 241A bestow discretion to the AO to withhold a refund determined under section 143(1) given that a notice is issued u/s143(2) in the same assessment year and further to that the grant of the refund is likely to adversely affect the revenue of course having prerecorded reasons and getting an approval of his PCIT.
This section came under constitutional challenge by way of a writ in  433 ITR 270 (Del) which involved issue/grant refund due of Rs. 249.39 crores,being the amount of TDS on payments on account of sale by the petitioner of shares of an Indian company and which pay- ment was claimed to be not chargeable to tax in India in terms of article 13(4) of the DTAA between India and Mau- ritius. The petitioner never filed its return of income in India before the present return for refund.
In the natural corollary the Assessing Officer’s/PCIT presented their prima facie case merits in their proposal/report which came under discussion before the Court thereby revealing the case of the revenue for investigation.
In dismissing the petition the High court held that the subject matter in this case is about assessing the tax liability and that the court has not been empowered to assess the tax liability. It held thatwhen this court has not been empowered to assess tax liability in the first instance, it would ordinarily not form a prima facie view even, of what it is not finally empowered to do.
Unfortunately though it also remarked at the end that the AO and the PCIT have in the impugned order given detailed reasons for their choice of investigation and that could go detrimental to the interests of the revenue and likely to cause prejudice to the assessment under way. In a limited way it clarified that the same will have no bearing in the final assessment.
The petitioner in this instance will have enough of reasons in hand to prepare further.