Taxpayers who had made refund claims with income-tax department will now have to wait for the payouts if their tax returns were to have been selected for scrutiny.
The Central Board of Direct Taxes (CBDT) has clarified that processing of returns cannot be undertaken after notice has been issued in scrutiny cases.
This instruction --issued few days back--would affect cash flows of taxpayers who had sought refund.
It would however end up bolstering the revenue collection picture of the Central Government.
For the Modi-led Government, every rupee saved is rupee earned--especially when it is facing the daunting task of keeping the fiscal deficit at 4.1 per cent of GDP.
"Though the clarification would hurt the refund seeking taxpayers by impacting their cash flow, it is a welcome move.
This is because the clarification provides certainty on timing of refunds which had been a pain area for taxpayers. This shows the intention of the Government to provide certainty to the taxpayers", Amit Maheshwari, Partner, Ashok Maheshwary & Associates, a firm of chartered accountants, said.
Simply put, the CBDT has said that where a notice has been issued to a taxpayer for scrutiny assessment, processing of returns for grant of refund shall not be made till the completion of assessment.
Aseem Chawla, Partner, MPC Legal, said the CBDT instruction was clarification in nature.
Being an instruction binding on the tax administration, it seems to pave out a path for Government to protect its revenue base, by stalling the process of issuance of refunds where notices for scrutiny assessments are issued, Chawla told Business Line.
With nine months of the financial year already completed, the Centre is staring at revenue shortfall of nearly Rs. 1 lakh crore as against the budget estimates for 2014-15.