Refund cannot be withheld after assessment annulment merely because the Revenue's challenge remains pending.

Refund of tax could not be withheld merely because proceedings challenging the annulment of the assessment were pending before the HC. Once the assessment for the relevant year was annulled, the assessee became entitled to repayment of the tax deposited, and the pendency of the Revenue's challenge did not by itself justify retention of the amount. Section 241 of the Income-tax Act was not available as a basis to deny the refund in these circumstances. The assessing authority was therefore directed not to withhold the refund.

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Issues: Whether the assessing authority could withhold refund of tax that had become due to the assessee merely because proceedings challenging the annulment of the assessment were pending before the High Court.

Analysis: The assessment for the relevant year had been annulled and, as a consequence, the assessee became entitled to refund of the tax deposited. The mere pendency of proceedings initiated by the Revenue to question the annulment did not justify retention of the refund. Section 241 of the Income-tax Act was not available as a ground to withhold repayment in such circumstances.

Conclusion: The assessing authority was not justified in withholding the refund on the ground that the proceedings challenging the annulment were pending before the High Court. The petition was allowed and the respondents were directed not to withhold the refund.

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