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Income tax department clarifies on tax refund adjustment of startups
April, 22nd 2020

Amid complaints that start-ups are being "arm-twisted" by adjusting outstanding their tax demands with refunds, the income tax department today clarified that such emails have been sent to almost 1.72 lakh income tax assessees as per law.

In a statement, the Central Board of Direct Taxes (CBDT) said that its email seeking clarification from all those who are entitled to get tax refund but also have outstanding tax to pay cannot be misconstrued as harassment.

These emails are auto-generated under Section 245 of the Income Tax Act in refund cases where there is any outstanding demand payable by the assessee. In case the outstanding demand has already been paid by the taxpayer or it has been stayed by the higher tax authorities, the taxpayers are requested through these mails to provide the status update so that while issuing the refund, these amounts are not held back and their refunds are released forthwith.

The CBDT said that such communications are just a request for seeking an update response from the assessee for the proposed adjustment of refund with the outstanding demand and cannot be misconstrued as a notice of recovery or be perceived as so-called arm-twisting by the Income Tax department because the department is duty bound to protect public money by adjusting the outstanding demand before releasing the refund.

Explaining the extant procedure pertaining to recovery of outstanding demands in the case of an assessee, the CBDT said that an opportunity is provided by the department to taxpayers to either clear the demand or intimate the status of said demand to the taxman.

The CBDT further requested start-ups to respond to its emails at the earliest so that further necessary action can be taken by the I-T Department to release the refunds immediately.

To give relief to taxpayers during the coronavirus lockdown, the income tax department has expedited the process of issuing all pending income tax refunds up to 5 lakh. The department said till date, the CBDT has issued nearly 14 lakh refunds involving an amount of over 9,000 crore to various taxpayers.

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