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Protecting your interest in case of tax adjustments
May, 23rd 2013

In many cases they have no idea of what is actually happening as the tax department undertakes adjustments according to the information available with them while the taxpayer is working on the basis of some other detail. A lot of cases have been seen recently wherein refunds of tax payers have not been received because they have been adjusted against the tax outstanding of the previous years. Here is a look at the manner in which this could have happened and what can be done to tackle the situation.

Actual situations
The actual experience for the individual tax payer has recently been related to the refund position. In this situation there could be a refund that has to be received and when the assessment for this period is received it is found that the refund has been adjusted against some past demand which they did not know about. The tax payer is agitated due to the fact that instead of actually getting their money back they realise that the amount is not going to come to them. In some cases it is a situation where the tax department actually slaps an additional demand on them which is even more baffling for the honest tax payer.

Real position
It is important to look at the actual position with respect to the demand against which the amount has actually been adjusted. Unless this is taken care of it would not be possible for the individual to resolve this issue. The actual time period or the year for which the demand has been raised has to be checked. One situation is that the individual has not received the initial intimation of the demand notice itself so the fact that there is something outstanding is a shock. In this case it would be important for the person to go to the past records and then see whether there is actually a demand that can arise for the income that has been assessed.

The other case is where the demand was made but the individual just ignored it. The act of ignoring the earlier details has now come back to haunt the person and hence it is important that every communication from the tax department is handled effectively and none of it is left without any action being taken because there can be some blowback at some later point of time. There is also a third situation that could have arisen which is that there is a demand that might have been raised but this was already paid and this is not reflecting in the records of the tax department.

There is a need for the individual taxpayer to determine the actual position and then take some action in this regard. If the demand is genuine and this has not been paid then the adjustment is proper so nothing more needs to be done. If this is not the case and there is no demand that is outstanding then the tax department needs to be intimated about the position with all the relevant details so that there can be the necessary change made in the position with the refund. It could be that in many cases there is a need to ensure that there was a demand which was not told to the tax payer so in this position the individual would have to first sort out the situation for the earlier year in determining the position and then act on the current or the latest years adjustments that have actually been made.

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