Did you receive communication on Arrear Demand Notice u/s 245 from Income Tax Department?

Have you got a Notice/Intimation under Section (u/s) 245 of Income Tax Act 1961 from Income Tax department? Even after paying 30% of your income as taxes to the government, they are still sending notices. It’s frustrating isn’t it? But, what can be done sir? When a notice is received, one has to patiently understand the contents, reasons and respond. In the recent past, Notice u/s 245 is most talked about. Almost all the taxpayers have received this notice.

Section 245 of Income Tax Act allows the department to set off of refunds against tax remaining payable. If a refund is due to taxpayer, the tax department, in lieu of payment of the refunds, set off the amount against old/previous outstanding dues, if any. For example, Mr. Aravind has to get a refund of Rs.10000 for the financial year ending March 2014. So, in the normal course, the department has to issue refund cheque, isn’t it? But as per Income Tax records; there was a due of Rs.3000 from him for the financial year ending March 2012. Is it not fair on the part of the department to adjust the old outstanding dues while refunding the amount? They have to pay Rs.7000 isn’t it?

 

That is what the department was doing without informing the taxpayer about adjusting the old dues. However, as per the Law, no adjustment of refund due to assessee can be made without serving a proper notice and without giving a proper opportunity to the taxpayer. In case of ‘Court On its own motion Vs CIT (2013)’ the Delhi High Court directed the Income Tax department to follow the procedure of issuing notice u/s 245 to the taxpayer and giving him sufficient time to respond.

 

The court in its judgment mentioned that –

• The respondents (the department) accept and admit the position that wrong and incorrect demands have been uploaded in the CPC, Bengaluru.

• The respondents have not followed the mandate and requirement of Section 245 of the Act before making the adjustment.

• CPC, Bengaluru did not entertain or accept any application of the assessee questioning past arrears uploaded in their system as they are not custodian of past records.

• Assessing Officer similarly did not entertain any application by the assessee on the ground that the order under Section 143(1) was passed by the CPC, Bengaluru and they do not have the files/return with them

Based on the above judgment, the Income Tax issued Instruction No.6/2013 stating that all procedures lapses will be made good.

 

Thus, wherever tax dues are appearing in the taxpayers account, the department (including CPC, Bangalore) makes a point to send across Notice u/s 245 for arrears demand asking the taxpayers to respond to the dues and make necessary rectification. After hearing from the assessee, the department will go ahead and adjust the outstanding dues, if any against the Tax refunds. 

 

Those who have received notice u/s 245 may kindly check the outstanding dues and respond within 30 days to the department. Delay in response may give an opportunity for the department to adjust the dues.