Tax refund delayed? IT dept may be adjusting past dues against refund

If you believe the outstanding tax demand is incorrect, you should furnish an appropriate response online through the e-filing ITR portal

Some taxpayers are getting Income Tax department emails stating that their tax refund will be put on hold as their income tax return (ITR) was currently under assessment or reassessment. The refund will only be processed once the tax officer completes a thorough review.

 

The department is citing Section 245(2) as the legal basis for this step.

 

Section 245 empowers the Income Tax department to adjust any current year’s tax refund against outstanding tax dues from any previous year. Notably, there is no time limit for initiating actions under Section 245.

  What is the nature and intent of this tax notice?

 

According to experts, the tax authorities have the power under Section 245 of the Income-Tax Act, 1961 (IT Act) to set off refund payable to taxpayers against any sum payable by the taxpayer in any previous years and also withhold the refund for up to 60 days in case of pending assessment or reassessment proceedings under the IT Act after giving a written intimation to the taxpayers.

  Hence, in exercise of their power under Section 245 of the IT Act, the tax authorities are sending email notices to taxpayers to inform them that their refund is being withheld for pending tax liabilities or pending proceedings under the IT Act.

 

What can you do in case this notice has been sent to you?

 

“One should start by carefully reviewing the notice, checking which assessment year this has been done for, what was the tax liability status as per your own filings, whether the matter became due under any assessment/disputed liability/confirmed liability etc, whether calculations mentioned in the notice are in order, comparing numbers with your own working for both demand as well as refund. It is also imperative to adhere to timelines if any given under the notice,” said Ritika Nayyar, Partner, Singhania & Co.

  SR Patnaik, partner (head-taxation), Cyril Amarchand Mangaldas, tells what to do if there is any error in the notice?

 

In case of erroneous notices under Section 245, the taxpayer can respond to it on the e-filing portal of the Income Tax department and provide its objections along with relevant documentary proof to justify his/her case.

 

For example, in case the income was not earned by him or her, tax was withheld and the credit for the withholding tax was not granted, tax was paid either as advance tax or as self-assessment tax, but of which has not been given, along with the requisite withholding tax certificate, advance tax or self-assessment tax challans, etc. should be submitted.

 

This should be done by comprehensively reviewing/verifying the outstanding tax demands appearing in the portal as it is possible that the tax demand might be wrongly appearing.