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Received a tax notice? Heres what you do
January, 14th 2016

The number of tax notices under Section 245 of the Income-Tax Act has seen a sharp spurt, specially to those who had claimed a refund in their returns this fiscal. Taxpayers have been receiving "outstanding demand" notifications under the pending actions section of the income-tax filing website. Demands date back to assessment year 2005-06 and range from a meagre Rs 300 to amounts as high as Rs 2-3 lakh. Chartered accountants say the sudden spate in these demands is mainly because the tax department has just completed assessment of old tax records that are being updated now. A spokesperson of the Central Board of Direct Taxes did not confirm the trend but said that "details of outstanding demand have been available on the taxpayers' account in the e-filing portal of the Income Tax Department since April 2014."

The Central Board of Direct Taxes (CBDT) has issued two press releases on 17 April 2014 and 19 May 2015. However, prior to any adjustment against refunds, Central Processing Centre( CPC ), Bengaluru has been sending emails to taxpayers requesting them to notify in case of any incorrect entry," said Shefali Shah, official spokesperson, CBDT. In cases where the taxpayer has confirmed the demand, the CPC has made the adjustment against refunds.

There can be some data entry errors too because the migration from offline to online is being done manually. "In 60% of these cases it is a tax credit error," Varun Advani, COO, The department is adjusting these demands against the refunds claims that are due to assessees. One has the choice to either accept the demand and pay up or dispute the claim. While for smaller demands, individuals are mostly settling the demand, taxpayers with higher outstanding demands plan to dispute the claim. "We have been getting requests from our customers to dispute the claim and file rectifications," says Advani. "Since the demands are historical, most taxpayers are confused about how the department computed the demand," adds Srini Angadipurram, a Bengaluru-based chartered accountant.

The option to rectify the errors on line is only available from assessment year 2009-10. So, if the demand pertains to a more recent year, the taxpayer can contest it by filing an an electronic rectification under Section 154 for that particular assessment year through the department's website. However, if the demand is for an assessment year where the return was manually filed, the taxpayer would have to get in touch with the jurisdictional assessment officer. the standard practice is to write a letter to your AO clearly stating that the demand raised is in dispute, accompanied by documents that support your claim for negation of the same," says Advani. The rule says, historical demands below Rs 1 lakh can be made only up to past four years while demands above Rs 1 lakh can be made up to past six years. "The department is committed to resolving the issue of outstanding demand, particularly for smaller taxpayers and requests that taxpayers may provide their responses online," says Shah. There seems to be another glitch in the e-verification process. Many individual taxpayers who had e-verified there ITR-Vs this year using electronic verification, are getting reminder notifications from the CPC that the verification is still pending. Moreover, the I-T website is not accepting re-verifications electronically. In fact, the taxpayers are being asked to print, sign and mail the document to CPC Bengaluru before January 31.

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