Sunday, 8 March 2015

Notice u/s 245 of Income Tax Act - How to deal with it?

What is Notice u/s 245 of Income Tax Act?

With rising number of assessees filing their income tax returns online for the sake of better correspondence and transparency still they face some hardships. Once such hardship is notice u/s 245 of Income tax Act.

Now the question is what to do if you receive a notice u/s 245 of Income tax Act?

 First and foremost thing to do in case of any correspondence from Income tax department is to put a date of receipt of notice first. Now read the notice carefully. You will it says that there was some previous outstanding demand that is pending for payment by the assessee and now since in the year under process there is refund due to assessee, the tax department is going to adjust the current year’s refund against the previous outstanding demand.

Options available to Assessee in response to above notice:
The assessee can either accept the demand or reject the demand based on the facts and documents available with him/her.

Case 1: In case Assessee is of an opinion that the demand is correct
Login to your Income tax efiling account, Click on my pending cases on the home screen and proceed. When you click show outstanding demand the system will show the demand figure. In this window you can accept or reject the demand. If the assessee accepts the demand then the current year’s ITR against which the previous outstanding demand is proposed to be adjusted will get adjusted.  Then the ITR will be processed and refund due to assessee will get adjusted against the previous outstanding demand and balance if any payable or refundable will be worked accordingly and a separate of same will be sent to assessee.

Case 2: In case Assessee is of opinion that demand is incorrect

In this case assessee will simply reject the demand and then the assessee will have to approach his/her local AO. Since the notice u/s 245 is being issue for adjustment of outstanding demands for the ITR’s filed manually. Now assessee will have to file rectification application to his local AO and get the mistake or error rectified from the AO. Once the AO uploads the rectification at the online income tax system, the demand won’t show again at the online efiling portal and ITR will get processed and the refund amount due to assessee will be paid accordingly in full.


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