Section 241 — Power to Withhold Refund in Certain Cases (Omitted)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Omitted. Section 241 was omitted by the Finance Act, 2001 with effect from 1 June 2001. It is retained in the text only to mark the omission and the historical numbering.
FA 2026: No amendment by the Finance Act, 2026 (the section having stood omitted since 2001).
A. SECTION COMMENTARY
Section 241 formerly conferred on the Assessing Officer a power to withhold a refund, with the previous approval of the Commissioner, where an order giving rise to the refund was the subject of an appeal or further proceeding and the grant of refund was likely to adversely affect the revenue. It was omitted by the Finance Act, 2001 with effect from 1 June 2001.
After its omission there was, for a period, no general power to withhold a refund pending scrutiny. That gap was addressed first through section 143(1D) (inserted by the Finance Act, 2012 and recast by the Finance Acts of 2016 and 2017) and then by the dedicated provision section 241A (inserted by the Finance Act, 2017), which now governs the withholding of refunds arising on processing under section 143(1). More recently, the withholding power has been relocated into section 245(2).
A vestigial reference to section 241 survives in section 244(2), which provides for interest where a refund was withheld under section 241 — a legacy cross-reference relevant only to the pre-2001 period. There is, naturally, no current operation of section 241 and no fresh case law upon it; the relevant modern jurisprudence is that on section 241A (Vodafone Idea Ltd. v. ACIT) and on section 245.
The section is included here, despite its omission, in fidelity to the user's direction that no section be skipped; its treatment is necessarily historical.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025). Note: '***' marks words or a sub-section omitted by amendment, retained only to show the omission.
241. [Omitted by the Finance Act, 2001, w.e.f. 1-6-2001.]
C. AUTHORITIES
Section 241 stands omitted (Finance Act, 2001, with effect from 1 June 2001) and has no current operation; the candour rule applies. The modern law on withholding of refunds is found under section 241A and section 245(2); the leading authority is Vodafone Idea Ltd. v. ACIT, set out under section 241A.
Successor provision — withholding under section 241A (for context)
The power formerly in section 241 now lives, in reasoned form, in section 241A (and section 245(2)); Vodafone Idea explains the current standard.
Vodafone Idea Ltd. v. ACIT (2020) 424 ITR 664 (SC)
Court: Supreme Court of India; judgment dated 29 April 2020 (2020) 424 ITR 664 / 273 Taxman 91 / 116 taxmann.com 393; affirming the Delhi High Court.
Held: Two distinct regimes govern the withholding of refunds claimed on processing of a return. (i) For assessment years up to 2016-17, section 143(1D) applied: once a notice under section 143(2) had been issued, processing of the return for grant of refund was not necessary and no separate intimation to the assessee was required, the scrutiny notice itself sufficing. (ii) For assessment year 2017-18 and onwards, section 241A applies: the mere issue of a section 143(2) notice does not justify withholding; the Assessing Officer must separately record his satisfaction, having regard to that notice, that grant of the refund is likely to adversely affect the revenue, and must obtain the previous approval of the Principal Commissioner/Commissioner. If those statutory requirements are facially satisfied and the order discloses at least prima facie reasons, a writ court will not compel refund or interfere with the pending assessment.
Significance: The leading authority on section 241A. It marks the shift from the automatic withholding under section 143(1D) to the reasoned, approval-based withholding under section 241A, and sets the standard of judicial review (facial compliance and prima facie reasons).
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the local Act (base text amended up to the Finance Act, 2025); the publisher's footnote apparatus and amendment-marker brackets have been removed, and three asterisks (***) denote words or a sub-section omitted by amendment and retained only to mark the omission. Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported. Where a section has not been the subject of a direct reported decision, that is stated candidly and the nearest governing authority or circular is given. This digest is for professional reference and is not legal advice.
CHAPTER XIX — REFUNDS
Section 241 — Power to Withhold Refund in Certain Cases (Omitted)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Omitted. Section 241 was omitted by the Finance Act, 2001 with effect from 1 June 2001. It is retained in the text only to mark the omission and the historical numbering.
FA 2026: No amendment by the Finance Act, 2026 (the section having stood omitted since 2001).
A. SECTION COMMENTARY
Section 241 formerly conferred on the Assessing Officer a power to withhold a refund, with the previous approval of the Commissioner, where an order giving rise to the refund was the subject of an appeal or further proceeding and the grant of refund was likely to adversely affect the revenue. It was omitted by the Finance Act, 2001 with effect from 1 June 2001.
After its omission there was, for a period, no general power to withhold a refund pending scrutiny. That gap was addressed first through section 143(1D) (inserted by the Finance Act, 2012 and recast by the Finance Acts of 2016 and 2017) and then by the dedicated provision section 241A (inserted by the Finance Act, 2017), which now governs the withholding of refunds arising on processing under section 143(1). More recently, the withholding power has been relocated into section 245(2).
A vestigial reference to section 241 survives in section 244(2), which provides for interest where a refund was withheld under section 241 — a legacy cross-reference relevant only to the pre-2001 period. There is, naturally, no current operation of section 241 and no fresh case law upon it; the relevant modern jurisprudence is that on section 241A (Vodafone Idea Ltd. v. ACIT) and on section 245.
The section is included here, despite its omission, in fidelity to the user's direction that no section be skipped; its treatment is necessarily historical.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025). Note: '***' marks words or a sub-section omitted by amendment, retained only to show the omission.
241. [Omitted by the Finance Act, 2001, w.e.f. 1-6-2001.]
C. AUTHORITIES
Section 241 stands omitted (Finance Act, 2001, with effect from 1 June 2001) and has no current operation; the candour rule applies. The modern law on withholding of refunds is found under section 241A and section 245(2); the leading authority is Vodafone Idea Ltd. v. ACIT, set out under section 241A.
Successor provision — withholding under section 241A (for context)
The power formerly in section 241 now lives, in reasoned form, in section 241A (and section 245(2)); Vodafone Idea explains the current standard.
Vodafone Idea Ltd. v. ACIT (2020) 424 ITR 664 (SC)
Court: Supreme Court of India; judgment dated 29 April 2020 (2020) 424 ITR 664 / 273 Taxman 91 / 116 taxmann.com 393; affirming the Delhi High Court.
Held: Two distinct regimes govern the withholding of refunds claimed on processing of a return. (i) For assessment years up to 2016-17, section 143(1D) applied: once a notice under section 143(2) had been issued, processing of the return for grant of refund was not necessary and no separate intimation to the assessee was required, the scrutiny notice itself sufficing. (ii) For assessment year 2017-18 and onwards, section 241A applies: the mere issue of a section 143(2) notice does not justify withholding; the Assessing Officer must separately record his satisfaction, having regard to that notice, that grant of the refund is likely to adversely affect the revenue, and must obtain the previous approval of the Principal Commissioner/Commissioner. If those statutory requirements are facially satisfied and the order discloses at least prima facie reasons, a writ court will not compel refund or interfere with the pending assessment.
Significance: The leading authority on section 241A. It marks the shift from the automatic withholding under section 143(1D) to the reasoned, approval-based withholding under section 241A, and sets the standard of judicial review (facial compliance and prima facie reasons).
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the local Act (base text amended up to the Finance Act, 2025); the publisher's footnote apparatus and amendment-marker brackets have been removed, and three asterisks (***) denote words or a sub-section omitted by amendment and retained only to mark the omission. Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported. Where a section has not been the subject of a direct reported decision, that is stated candidly and the nearest governing authority or circular is given. This digest is for professional reference and is not legal advice.