1. Section 245 of the Income Tax Act mandates the tax department to send an intimation to the taxpayer before implementing any adjustments. This intimation includes details such as the amount of refund owed, the outstanding tax demand, and the proposed adjustment.
2.
The taxpayer is granted a 30-day window to respond to the
intimation, either agreeing or disagreeing with the proposed adjustment. If the
taxpayer concurs, the department proceeds to offset the refund against the
demand and issues any remaining refund. In cases of disagreement, where the
Assessing Officer finds the Assessee's claim untrue based on available
information and explanations, the department may still adjust the refund.
3.
Preceding the commencement of the Financial Year 2023-24,
Section 241A empowers the Assessing Officer to withhold a refund if it becomes
due to an Assessee after ITR processing, but assessment or reassessment
proceedings are pending. This withholding, intended to prevent adverse impacts
on government tax revenue, requires prior approval from the Principal
Commissioner or Commissioner. The provision is applicable to assessment years
from 2017-18 onward.
4.
The Finance Act of 2023 amalgamated Section 241A with Section
245. The amended Section 245 now allows the Assessing Officer to withhold a
refund if, despite a partial set-off or no set-off, a refund is due to a person
while assessment or reassessment proceedings are pending. This withholding
requires approval from the Principal Commissioner or Commissioner.
5.
Amendments to Section 244A stipulate that interest on income
tax refunds will not be provided for the period between the date of withholding
the refund and the completion of assessment or reassessment
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