Till AY 2016-17, if a scrutiny notice u/s 143(2) is issued, the return is not required to be processed u/s 143(1) for grant of refund to the assessee. From AY 2017-18 & onwards, a different regime is prescribed by Parliament. S. 241A requires separate recording of satisfaction on part of the AO that having regard to the issue of notice u/s 143(2), the grant of refund is likely to adversely affect the revenue. The withholding of refund requires the previous approval of the PCIT with reasons to be recorded in writing.  When assessment pursuant to notice under section 143(2) was pending and likelihood of substantial demands upon assessee after completion of scrutiny could not be ruled out, refund claim could not be allowed .  Court  observed that

since the requisite action is not even initiated  court  directed  that the amount of Rs.733 Crores shall be refunded to the appellant within four weeks from today subject to any proceedings that the Revenue may deem appropriate to initiate in accordance with law.  Court also directed  the respondents to conclude the proceedings initiated pursuant to notice under sub-section (2) of Section 143 of the Act in respect of AY 2016-17 and 2017-18 as early as possible. (AY. 2014 -15 , to 2017-18)    (CA No.2377 of 2020 Arising out of SLP(Civil) No.1169 of 2019, Dt. 29/4/2020)