Tax Talk: Resurrection of old demands: Reply on I-T portal first | The Financial Express

Tax Talk: Resurrection of old demands: Reply on I-T portal first

Section 245 empowers the income tax authorities to adjust any previous year’s demand with the refund amount due to the taxpayer.

Tax Talk: Resurrection of old demands: Reply on I-T portal first
There is no time limitation for adjusting outstanding demands with refunds due.

E-filing of income tax returns (ITR) has made life easier for the taxpayer and tax department. The procedure of processing ITRs, issuing intimation under Section 143(1), filing rectification under Section 154 and processing of refunds is much faster when done online.

However, it has been observed that in many cases, taxpayers have received intimations under Section 245, wherein old outstanding demand for earlier years is being adjusted against the current year’s refund. In some cases, the demands adjusted pertain to assessment years prior to AY 2012-13, i.e., when e-filing was not mandatory. The question that now arises is, is it enough to merely file a response on the income tax portal?

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Adjustment with refunds

Section 245 empowers the income tax authorities to adjust any previous year’s demand with the refund amount due to the taxpayer. There is no time limitation for adjusting outstanding demands with refunds due. Thus as per law, tax demand for AY 2000-01 can be adjusted against the refund due for AY 2021-22. However, such an adjustment can be made only after giving an intimation in writing to the taxpayer and providing him with an opportunity to respond to the proposed adjustment. The response must be filed through the portal. The income tax portal provides the taxpayer the option to either agree or disagree with the demand and the proposed adjustment. The CPC provides 30 days from the date of issue of intimation (communicated on registered email address) to file a response. If the response is not filed within 30 days, the taxpayer is deemed to have accepted the outstanding demand and the refund gets adjusted accordingly. So, it is critical that the taxpayer submits his disagreement on the portal within 30 days.

Examine the intimation

The next step would be to understand where the demand is rising. However, the intimation only provides the amount of the outstanding demand (tax amount and interest) and the year to which the demand pertains to. Details, break up, nature and back-up documents of the tax demand are not available with the intimation. In such a case the taxpayer would need to approach his jurisdictional assessing officer and request for the breakup/details with back-up supporting the demand and file a rectification application accordingly.

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There may also be a situation where the outstanding demand pertains to an assessment year, for which the demand has already been paid or reduced by an appellate order. In such cases disagreement along with the details of the challan or assessment order can be updated online and CPC will process and update your details.

The resurrection of old demands appears to be a teething phase, wherein taxpayer information is being updated by CPC and streamlined based on the data available with the jurisdictional assessing officer. This process may cause some hardships to the taxpayer, but in the long run, this process will help the taxpayer to avoid any other surprises or setbacks.

The writer is partner, Nangia Andersen India. Inputs from Neetu Brahma

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