Section 245 Tax notice is the notice by the income tax department to the assessee in whose return the IT Department feels that there’s an outstanding demand from earlier years and a refund is claimed in another assessment year. In such a case as per section 245, the AO may adjust refund against the tax demand which is outstanding from the taxpayer.

In simpler words, Intimation under section 245 is received when:

  • A tax demand pending from the IT Department and;
  • Taxpayer may have claimed a refund from IT Department in some other Assessment Year.

Under Section 245, the adjustment of refund and demand can be made only after a proper notice is given to the taxpayer and an opportunity will be given to the assessee to correct any mistake which might have occurred in the raising of the demand.

Time Period

The time period within which the taxpayer has to respond for Section 245 tax notice is 30 days after the notice is being received and if the assessee gives no reply then the adjustment would be completed. It is a good idea to reply to the intimation under section 245 as soon possible.

Specimen of the Section 245 Tax Notice

section 245 tax notice

 

Steps to be taken

1.Check Past Records

Check the past records of the returns filed by you to check whether the amount of demand is correct or not. If you’re confused about the demand amount mentioned, you may consult an expert.

2.Response to the Notice

The details of your outstanding demand can be viewed on Income Tax e-filing portal.

In Response to Outstanding Tax Demand, you can view the details of your demand and can submit a response for the section 245 tax notice.

Three Options that are available is: ‘Demand is correct’, ‘Demand is partially correct’ or ‘Disagree with the demand/Demand is incorrect’

(a)If the demand shown is correct:

  • In the option of outstanding demand, Select the ‘Submit response’ option and then click on ’Agree with Demand’. After this step, the demand will then be adjusted against the refund.

(b)If the demand shown is partially correct:

  • In the option of outstanding demand, Select the ‘Submit response’ option and then click on ’Demand is partially correct’. Then enter the amount of Demand which is correct.
  • For the part of the demand that is incorrect, follow the steps mentioned below in step 3.

(c)If the demand shown is incorrect:

  • In the option of outstanding demand, Select the ‘Submit response’ option and then click on ’Demand is incorrect’.
  • Now give the reasons and attach the documents that are required to show that the demand is incorrect in your view. These documents and the reason given will be reviewed by the Department.

3.Wait for the decision

Once replied to the notice, the taxpayer has to wait for the action taken by the IT department. Usually, the Assessing Officer (AO) examines the reply and communicates with the CPC, Bengaluru. After that, the process of refund and adjustment of the demand initiates, if any.

4. File Grievances

If after the rectification of the return you’re not satisfied with the decision, you can file grievances online through the e-filing portal. After Login Click on Helpdesk>Submit Grievance>CPC then Select A.Y. and category of Grievance and file the grievance.

It may be noted that if you’re not satisfied with the action taken by the CPC/AO after you filed the grievance, then you can file complaint to income tax ombudsman.

Penalty

If a person doesn’t pay the amount of tax demand mentioned in the section 245 tax notice, then he is liable to pay penalty and prosecution as per the provisions of the Income tax Act along with proceedings for recovery listed in Chapter XVII-D of the Income-tax Act, 1961.

For non-payment of demand, an assessee is also liable to pay interest at the rate of 1% for every month for the period of default in accordance with section 220(2) of Income Tax Act.

For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business Return, Bulk Return or Revised Return Filing.