Withholding of income-tax refund requires recorded satisfaction and prior approval before Revenue protection can justify the restraint.

Refund under section 241 of the Income-tax Act can be withheld only if the Assessing Officer records the requisite satisfaction, with prior Commissioner approval, that payment of refund is likely to adversely affect the Revenue because the assessment is under appeal or further proceedings. Where the order does not disclose recorded reasons or a speaking decision showing that statutory precondition, the power is not validly exercised. On the facts noted, the withholding order lacked such satisfaction and was therefore invalid; the impugned order was liable to be quashed.

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Issues: Whether the withholding of refund under section 241 of the Income-tax Act, 1961 was valid when the order did not record satisfaction that grant of refund was likely to adversely affect the Revenue.

Analysis: Section 241 permits withholding of refund only when the Assessing Officer forms the requisite opinion, with previous approval of the Commissioner, that payment of refund is likely to adversely affect the Revenue because the assessment order is under appeal or further proceedings. The impugned order did not show that such satisfaction had been formed. In the absence of recorded reasons or a speaking order reflecting the statutory precondition, the power could not be validly exercised.

Conclusion: The withholding of refund was invalid and the impugned order was liable to be quashed.

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