The Central Board of Direct Taxes (CBDT) has issued Instruction No. 2/2023 dated November 10, 2023 to revise the monetary limit and timeline for withholding income tax refunds under Section 245 of the Income Tax Act.
Monetary Limit Increased
The monetary limit for withholding refunds under Section 245(2) is now revised to Rs 10 lakhs and above. Earlier there was no prescribed limit.
Revised Timelines
The timeline for processing refund withholding requests is now limited to:
– 20 days for Faceless Assessment Unit
– 30 days for Jurisdictional Assessing Officer
Procedure for Withholding Refunds
The instruction also prescribes the detailed procedure for withholding refunds:
i) On receiving communication from CPC, the Faceless Assessment Officer (FAO) will inform the Jurisdictional AO (JAO) about likely tax demand.
ii) The JAO will then record reasons in writing after analyzing case details and seek approval of the Principal Commissioner of Income Tax.
iii) The JAO will communicate the final decision on withholding or releasing the refund to the CPC within the revised time limit.
The instruction aims to streamline and bring more transparency in the process of withholding income tax refunds above Rs 10 lakhs pending assessments. The revised timelines will help quicken the resolution of taxpayer grievances.
CBDT Instructions No. 02/2023 dated 10/11/2023: Instruction regarding revision of timelines and monetary limits as well as revision of workflow in the matter of recording of reasons before withholding of refunds u/s 245(2) of the Income-tax Act, 1961
1. The monetary limit for applying provisions of section 245(2) of the Income-tax Act, 1961(‘the Act’) will hereinafter be where the value of refund is Rs 10 lakhs or more.
2. In any case where section 245(2) of the Act is applicable, the Faceless Assessing Officer (FAO), on receipt of communication from CPC, shall intimate the Jurisdictional Assessing Officer (JAO) with regard to demand likely to be raised in the pending assessment(s). The JAO, based on such information shall record in writing, with proper application of mind and after analyzing the factual matrix of the case (which, inter-alia, includes the financial condition of the assessee, past demands, pendency of appeals et al) and seek approval of the jurisdictional Principal Commissioner of Income-tax. The reasons recorded shall not be cursory. Such reasons should reflect the factual analysis of the case by the JAO. The JAO will communicate the final decision regarding withholding/release of refund to the CPC.
3. To finish the above process, the time limit is hereby revised to 20 days for the Faceless Assessment Unit and to 30 days for Jurisdictional Assessing Officer.
4. The detailed workflow chart as delineated above will be issued by DGIT (Systems).