Income Tax: How to respond to an intimation under Section 245 of Income Tax Act

The Income Tax Department may send an intimation to the taxpayer when it has a tax demand pending or when the taxpayer has claimed a refund from the department for some other assessment year. This is sent under Section 245 of the Income Tax Act, that empowers the assessing officer (AO) to adjust the previous year’s demand of tax payable with current year refund amount.

However, before making this adjustment the officer gives an opportunity to the assessee in the form of an intimation

What the intimation exactly says

The intimation usually states that taxpayers need to respond to the assessing officer or CPC Bangalore regarding why such adjustments shall not be made.

What should taxpayers do after receiving the intimation?

Taxpayers will have to submit the response of this intimation, said Manoj Yadav, tax advocate, while talking to

“There are two possibilities — either the assessee agrees with the outstanding demand or the assessee disagrees/partially disagrees with outstanding demand,” Yadav said.

So, after receiving the intimation, the taxpayer should first verify if there is any outstanding income tax demand reflecting on the tax portal.

It is also possible that a taxpayer has filed for a rectification due to an apparent error in the tax return and it was not processed earlier, due to which the tax demand continued to reflect there, said Yeeshu Sehgal, Head of Tax Market, AKM Global.

” A taxpayer may submit his/her response to the earlier tax demand showing on the portal if he/she believes that the demand is correct, incorrect, and partially correct etc. Generally, the taxpayer can respond to the notice within one month from receiving the notice and hence, should be prompt in responding to avoid such set-off from the refund due,” Sehgal told

If the response is not filed within a month, the taxpayer is deemed to have accepted the outstanding demand and the refund gets adjusted accordingly.

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