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The Delhi High Court in [2021] 18 ITR-OL 1 (Del) in their landmark order issued constructive ease of doing business advice to the revenue to hear the assessee before passing an order for withholding the amount of refund claimed in the ITR.
Section 241A entitles the revenue to withhold a refund in a case where the scrutiny notice has been issued and further subject to pre-approved notings with the reasons to say that the grant of the refund is likely to adversely affect the revenue.
The question arose whether the officer should provide reasons for the withholding of refund on-demand and confer an opportunity to the assessee to file objections before issuing any such order and the Court held prima facie that the mere issuance of the scrutiny notice under section 143(2) of the Act cannot stall the remittance of refund to the assessee. Following the SC dictum in the famous GKN Driveshafts case, it held that the officer is mandatorily required to pass a formal order disposing of the objections against proposed action of withholding of refund, and further in disposing of such objections the officer is also required to balance the interests of both the assessee and revenue.
The High court further advised the Revenue to leverage as much as it may thus take security in the form of bank guarantee or other solvent security instead where the assessees are looking for liquidity in the form of money received via refund.

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