Amazon India - Refund not issued even though item was returned and received

Had placed an order for a W for Woman salwar (Order #: ***-*******-*******), which was returned as per Amazon India's return policy for fashion items.
However, even though the item has been returned and received at their end (as confirmed by Amazon), they refuse to refund the amount saying that we sent in the wrong item.
After being an Amazon customer for a decade and spending several lacs on products just this past year, it's bizarre that the company thinks that I have returned the wrong product and am asking for a refund.

The delivery agent who came to pick up the item checked it at my doorstep before leaving with it. If the item was incorrect, it should never have been picked up by the delivery agent in the first place. But it WAS picked up, because he checked and the item matched what he was supposed to pick up.