No refund will be issued for returns that are selected for scrutiny, the Income-Tax Department has said. “The processing of a return cannot be undertaken after notice has been issued under sub-section (2) of Section 143 of the Income-Tax Act, 1961,” an instruction, dated January 13, issued by the tax authorities to all its officials said.

It further said that it will, however, be desirable that scrutiny of assessments in such cases be completed expeditiously. Tax refunds are issued only after the assessment is completed.

Heavy refund outflow

The clarification comes at a time when the revenue authorities are facing a tough time in achieving the collection target for the current year, along with heavy refund outflow. The Centre aims to get ₹7.36-lakh crore through direct taxes (personal income, corporate, securities transaction and wealth taxes), while the net collection in the first six month stood at ₹2.69-lakh crore. The main worry, however, is that total refunds estimated in the current fiscal are around ₹1.20-lakh crore, of which, ₹80,850 crore was paid during April 1-October 20, 2014.

When one files an income-tax return, there is a possibility of getting either of two alerts from the tax department. One, saying that the return has been processed and there is neither demand nor return. The second alert asks a filer to give more information before his/her return is processed, which is termed as ‘scrutiny’.

As per the norms, any return can be picked up for further investigation.

The tax department’s latest clarification has also been issued keeping in mind the language of the provision (sub-section 1(D) of Section 143) of the I-T Act, which says that in cases where a notice has been issued “it shall not be necessary” to process the returns.

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