Section 245 of the Income Tax Act: Understanding Intimation u/s 245

The Income Tax Act of India grants the Income Tax Department the power to adjust any pending tax payable from previous years with the current year's refund. To exercise this power, the department sends an intimation notice u/s 245 to taxpayers, allowing them to confirm or dispute the offsetting of their tax liabilities. In this comprehensive guide, we will delve into the intricacies of Section 245 and discuss the process of responding to an intimation u/s 245 notice.

What is Intimation u/s 245?

Intimation u/s 245 is a notice issued by the Income Tax Department to inform taxpayers that their previous year's pending tax payable will be adjusted with the current year's refund. Section 245 of the Income Tax Act empowers the department to make such adjustments. However, before exercising this power, the department must send an intimation u/s 245 to the taxpayers and provide them with an opportunity to respond.

For example, let's consider the case of Mr. Sharma. In the financial year 2012-13, the Income Tax Department raised a demand of Rs. 21,000 from Mr. Sharma. However, Mr. Sharma disagreed with the demand as the department did not consider his TDS. He filed for rectification u/s 154, and the demand was rectified. In the subsequent financial year, 2016-17, Mr. Sharma filed his return with a refund of Rs. 15,000. Instead of receiving the refund, he received an intimation u/s 245 stating that his refund would be adjusted against the demand raised in the financial year 2012-13.

How to Respond to the Intimation u/s 245?

Upon receiving the intimation u/s 245 notice, it is crucial to carefully review its contents and note the specified time within which a response must be submitted. Generally, the time provided is 30 days. Failure to respond within the stipulated time will result in the automatic adjustment of the outstanding demand against the taxpayer's refund.

There are two possible scenarios when responding to the intimation u/s 245 notice:

Option 1: Agreeing with the Outstanding Demand

If you agree with the outstanding demand mentioned in the notice, you can easily submit your response online through the Income Tax Department's e-filing portal. Here's a step-by-step guide on how to proceed:

1. Log in to www.incometax.gov.in using your user ID and password.
2. Navigate to the "Pending Actions" tab and select "Response to Outstanding Demand."
3. Submit your response by selecting the option "Demand is correct" and clicking on "Submit."

Even if you do not respond within the specified time, the demand will be automatically adjusted with your refund.

Option 2: Disagreeing with the Outstanding Demand

If you disagree with the outstanding demand mentioned in the intimation u/s 245 notice, you can submit your response online through the Income Tax Department's e-filing portal. Here's a step-by-step guide on how to proceed:

1. Log in to www.incometax.gov.in using your user ID and password.
2. Navigate to the "Pending Actions" tab and select "Response to Outstanding Demand."
3. Submit your response by selecting the option "Disagree with the demand (Either in full or in part)" and clicking on "Submit."

In cases where you disagree with the demand, you will need to provide reasons for your disagreement, such as payment already made, demand reduced by rectification/revision, or an appeal filed. It is advisable to seek the guidance of a Chartered Accountant before taking any action.

Verifying Outstanding Tax Demand

Before responding to the intimation u/s 245 notice, it is essential to verify the details of the outstanding tax demand mentioned in the notice. Here's how you can do it:

1. Log in to the Income Tax portal using your user ID and password.

2. Go to the "Pending Actions" tab and select "Response to Outstanding Demand."

3. Review the details of the outstanding tax demand displayed on the page.

Filing an Online Response

To file an online response to the intimation u/s 245 notice, follow these steps:

1. Log in to the Income Tax portal using your user ID and password.

2. Select the option "Pending Actions" and then "Response to Outstanding Tax Demand."

3. Click on "Submit a Response" to proceed.

4. You will be directed to a page where you need to choose one of the available response options.

Option 1: Agreeing with the Demand

Should the assessees choose "Demand is correct," the following pop-up appears. When you click the submit button, a confirmation message confirming the demand's acceptance appears on the screen. If a refund is required, the interest and outstanding balance will be deducted from the refund. If not, you have to pay the demand right away.

Option 2: Disagreeing with the Demand

If you disagree with the demand mentioned in the notice, follow these steps:

Step 1. Select the option "Disagree with demand (Then Click “Add Reasons).

Step 2. Click Apply on "Submit."

Step 3.Select each of the reasons you provided in Step 2 on the Response to Outstanding Amount page, and then enter the relevant information for each one after you have chosen the right justifications for your disagreement.

Consequences of Not Responding to the Notice

Failure to respond to the intimation u/s 245 notice within the specified time (generally 30 days) will result in the automatic adjustment of the outstanding demand against your refund. The department will consider the outstanding demand as on that date for adjustment, along with any applicable interest. It is essential to respond promptly to avoid any legal consequences.

Finding the Jurisdictional Assessing Officer

To find your jurisdictional Assessing Officer, follow these steps:

1. Log in to the Income Tax portal using your user ID and password.\

2. Select "My Profile" in the Profile Icon.

3. Click on "Jurisdiction Details" to view the relevant information.

Responding to the Assessing Officer

In most cases, responding to the Assessing Officer is not required when submitting an online response to the intimation u/s 245 notice. Additional compliances for responding to the Assessing Officer may be necessary only if specifically requested by the department.