Intimation Under Section 245

Tax compliance is a crucial responsibility for every taxpayer in India. One such important aspect is the intimation under Section 245 of the Income Tax Act, which often raises questions and concerns. This intimation is issued by the Income Tax Department when there is an adjustment of refunds against outstanding tax demands. Understanding what this intimation entails, why it is issued, and how to respond to it is essential to avoid penalties and ensure smooth tax proceedings.

Intimation under Section 245 of the Income Tax Act is a formal communication issued by the Income Tax Department. It notifies taxpayers about the adjustment of their pending income tax refund against any outstanding tax demand from previous assessment years.

This intimation serves as a mechanism to ensure that taxpayers clear their outstanding dues before receiving a refund. The department is legally required to notify the taxpayer before making any such adjustment, giving them an opportunity to either accept or contest the claim.

For example, if you are eligible for a refund of Rs. 10,000 for the current financial year, but there is an outstanding tax demand of Rs. 5,000 from a prior year, the department will send an intimation under Section 245 to inform you about the adjustment.

The Income Tax Department issues the intimation under Section 245 in the following scenarios:

• Outstanding Tax Demand: If there are unpaid tax dues from any previous assessment year.
• Refund Claim: When you have claimed a refund in the current financial year.
• Adjustment Decision: To inform you about the department’s decision to adjust the refund against the outstanding demand.

The primary purpose of this intimation is to ensure that taxpayers are informed about the adjustment process and are given a chance to respond. This aligns with the principles of natural justice, as taxpayers have the right to either agree with or dispute the adjustment.

The intimation under Section 245 contains several key details that taxpayers should carefully review:

1. Taxpayer Details: Information such as your name, PAN, and assessment year.
2. Refund Amount: The refund amount claimed for the current financial year.
3. Outstanding Demand: Details of the unpaid tax demand from previous years, including the assessment year and demand amount.
4. Adjustment Details: The amount of refund being adjusted against the outstanding demand.
5. Response Timeline: The time frame within which you need to respond to the intimation.

It is essential to verify all the details mentioned in the intimation to ensure accuracy and avoid any discrepancies.

Responding to an intimation under Section 245 is a straightforward process. Here are the steps you need to follow:

1. Log in to the Income Tax Portal: Visit the official Income Tax e-filing portal and log in using your credentials.
2. Navigate to the Pending Actions Tab: Under the ‘Pending Actions’ section, locate the intimation under Section 245.
3. Review the Intimation: Carefully check the details of the refund and outstanding demand.
4. Choose Your Response:
   • If you agree with the adjustment, provide your consent on the portal.
   • If you disagree, file a response with supporting documents to contest the demand.
5. Submit Your Response: Ensure that your response is submitted within the stipulated timeline mentioned in the intimation.

Proactive communication with the Income Tax Department can help resolve any discrepancies and avoid further complications.

Failure to respond to an intimation under Section 245 can lead to several consequences, including:

1. Automatic Adjustment: If you do not respond within the specified timeline, the department may proceed with the adjustment of your refund against the outstanding tax demand.
2. Interest and Penalties: Non-compliance may attract interest and penalties, increasing your financial liability.
3. Future Tax Proceedings: Ignoring the intimation can complicate future tax filings and lead to additional scrutiny from the department.
4. Legal Notices: Persistent non-compliance may result in the issuance of legal notices or further recovery actions by the Income Tax Department.

To avoid these repercussions, it is crucial to respond to the intimation promptly and accurately.

Understanding the intimation under Section 245 of the Income Tax Act is essential for every taxpayer. This communication ensures transparency in the adjustment of refunds against outstanding tax demands. By responding promptly and accurately, you can avoid penalties, ensure compliance, and maintain a smooth relationship with the Income Tax Department.