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Did you receive communication on Arrear Demand Notice u/s 245 from Income Tax Department?

Have you got a Notice/Intimation under Section (u/s) 245 of Income Tax Act 1961 from Income Tax department? Even after paying 30% of your income as taxes to the government, they are still sending notices. It’s frustrating isn’t it? But, what can be done sir? When a notice is received, one has to patiently understand the contents, reasons and respond. In the recent past, Notice u/s 245 is most talked about. Almost all the taxpayers have received this notice.

[READ: Step by Step procedure to handle notice received u/s 245 of Income Tax]

Section 245 of Income Tax Act allows the department to set off of refunds against tax remaining payable. If a refund is due to taxpayer, the tax department, in lieu of payment of the refunds, set off the amount against old/previous outstanding dues, if any. For example, Mr. Aravind has to get a refund of Rs.10000 for the financial year ending March 2014. So, in the normal course, the department has to issue refund cheque, isn’t it? But as per Income Tax records; there was a due of Rs.3000 from him for the financial year ending March 2012. Is it not fair on the part of the department to adjust the old outstanding dues while refunding the amount? They have to pay Rs.7000 isn’t it?

That is what the department was doing without informing the taxpayer about adjusting the old dues. However, as per the Law, no adjustment of refund due to assessee can be made without serving a proper notice and without giving a proper opportunity to the taxpayer. In case of ‘Court On its own motion Vs CIT (2013)’ the Delhi High Court directed the Income Tax department to follow the procedure of issuing notice u/s 245 to the taxpayer and giving him sufficient time to respond.

The court in its judgment mentioned that –

  • The respondents (the department) accept and admit the position that wrong and incorrect demands have been uploaded in the CPC, Bengaluru.
  • The respondents have not followed the mandate and requirement of Section 245 of the Act before making the adjustment.
  • CPC, Bengaluru did not entertain or accept any application of the assessee questioning past arrears uploaded in their system as they are not custodian of past records.
  • Assessing Officer similarly did not entertain any application by the assessee on the ground that the order under Section 143(1) was passed by the CPC, Bengaluru and they do not have the files/return with them

Based on the above judgment, the Income Tax issued Instruction No.6/2013 stating that all procedures lapses will be made good.

Thus, wherever tax dues are appearing in the taxpayers account, the department (including CPC, Bangalore) makes a point to send across Notice u/s 245 for arrears demand asking the taxpayers to respond to the dues and make necessary rectification. After hearing from the assessee, the department will go ahead and adjust the outstanding dues, if any against the Tax refunds.

Those who have received notice u/s 245 may kindly check the outstanding dues and respond within 30 days to the department. Delay in response may give an opportunity for the department to adjust the dues. [ Read: How to check your Outstanding Income Tax Demand appearing in e-Filing portal and submit response to Outstanding Tax Demand ]

Thought for the day

 The less you respond to negative people, the more peaceful your life will become. In case of Income Tax it’s a little different – timely response will help you in peaceful living!

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Frequently Asked Question (FAQ) on Intimation of Demand u/s 245 of Income Tax Act

How do I know if the Demand is already adjusted at CPC against subsequent refund claim?

If the Arrear Demand as notified and accepted is subsequently adjusted at CPC, the transaction against the PAN will be reflected as a Minor Head 400 challan payment through Tax Payer Payments (OLTAS) and will be visible in the OLTAS system providing information on the same. Alternatively, tax  payer can check the entries in From  26 AS.

I didn’t received Demand Order/Intimation u/s 143(1) to check nature of demand? What should I do now?

Tax payer can file online request for intimation of demand. There are two ways a taxpayer can place an intimation resend request

  1. Efiling -Assessee can use the Efiling site to place a resend request.
  2. CPC Customer Service- Assessee can call CPC toll free no. 18004252229 and request for a resend request.

However, if the  Demand Pertaining to or raised by Assessing Officer (AO), he has to  Contact Local AO.

Why is demand raised due to tax credit mismatch, even though I have claimed Tax as per form 16/16A/26AS (AT, SAT, TDS and TCS)?

Following could be the reasons

  • Tax Deducted amount has not been deposited by the Deductor
  • Deducted Tax has been deposited after the return processed by the deductor
  • Tax Deposited Partially by the deductor
  • Tax Deposited under Wrong PAN by the deductor
  • Taxes paid under wrong minor/major head
  • Taxes paid for the Incorrect Assessment Year
  • Partial Tax Paid/Taxes is not as per Tax claiming / order
  • Tax Credit Claimed under incorrect ITR Schedules
  • As per Form 26 AS Tax Credit Status shows other than F (Final).

Please revisit Form 26AS and Rectify as per collections by filing Revised/Rectification Return. For further clarification please call CPC Customer Care No.1800 425 2229

Why did I receive an email notice u/s 245 from Central Processing Centre (CPC), Bangalore

This notice indicates that the return under processing has resulted in a refund. CPC proposes to adjust this refund against outstanding demand as indicated in the notice.

What should I do if demand as per notice u/s 245 from CPC is correct?

The response can be submitted in the e-filing website under MY Account -> Outstanding tax demand screen. You can download, Income tax department manual on Response to Outstanding Tax Demand, to know detailed process of submitting the response to outstanding tax demand.

What should I do if proposed adjustment of refund against incorrect demand shown in the notice u/ 245 from CPC?


Still have doubts? raise your query in the comment section below. Alternatively you can mail it to [email protected]

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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]
  • ashraf

    I have received a proposal of adjustment u/s 143(1)(a). I had claimed interest and principal amount of home loan in income tax retrun.
    the adjustment says to include the above income as taxable income of 190000 interest and 150000 principal amount.
    Eventhough the return i have filed is correct.I have received the intimation.Please help in this case what should i do.



  • jayanth

    I received a notice u/s245 for outstanding demand of rs 45000/- due to non consderation of TDS of Rs. 41,000/-and deposited self-assessment tax Rs.4000 for the same A. Year 2014-15.

    Honestly I filed return online for A.Y. 2014-15. as per my income without having Form16. Rs.41000 deducted from my salary & rest rs. 4000 deposited as SAT in SBI.

    Self Asst tax of Rs.4000 paid is appearing in form 26AS of A.Y.2013-14. and However TDS as stated above is not appearing in form 26AS for the A.Y. 2014-15.

    I retired in nov.13. from Indian railways. now railway department is not interest in filing revised tds Return.

    Can you guide me what I should do in this circumstances.

  • Nikhil

    I have one query & hope you can provide me some clarification in this regards.

    I got a intimation letter u/s 143 (1) to pay Rs. 150 for AY 2014-15. I login & responded outstanding tax demand as “Demand is correct”.

    Then I paid Rs. 150 via challan 280 in “400 – tax on regular assessment.

    Is there any further action pending from my side now?

    What should I expect to get from I tax office?

    • simplifiedlaws

      No further action is required and Demand appearing in the portal will automatically get deleted within couple of days time. For the time being, CPC is not sending any communication with respect of deleting demand.

  • Niraj Jaiswal

    i have not received any notice u/s 245 and 143(1) from IT Dept but then too when i log in to income tax site it shows outstanding demand. When i tried to get notice us 143 then it says that no intimation order exist for this A.Y.

    What should I do now ??
    I don’t have any intimation for demand by mail from Income tax dept but on site demand is showing.

    please reply as soon as possible.

    • simplifiedlaws

      Hi Niraj

      Please check Who has uploaded demand (CPC or AO) You will get this information form status of outstanding demand in the income tax portal.

      If demand is uploaded by Assessing Officer (AO) follow steps mentioned in our other article Step by Step procedure to handle notice received u/s 245 of Income Tax (https://simplifiedlaws.com/notice-us-245-income-tax-how-to-handle/)

      • Niraj Jaiswal

        it is showing uploaded by CPC and rectification right are with CPC. even i have not rcvd any notice for intimation of demand and u/s 245.
        as much as i know 245 is for adjustment of refund against previous years demand. but i haven’t claimed refund also.

      • simplifiedlaws

        Please send a mail with complete details to [email protected]. We will try to help you in resolving the issue.

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  • Sachin

    I would like to pay out standing demand , what should i do, should i sumbit return againd or should i click demand is correct, if I select demand is correct what will happen next ?? income tax department will
    send scrutnity notice or tax demand notice please reply soon

    • simplifiedlaws

      Please verify whether demand determined by CPC/ AO is correct. Pay tax by using challan No 280 and don’t forget to select payment type as “Tax on regular Assessment(400)”. After making payment, submit online response and follow steps which is self explanatory.

      To know Step by Step procedure to handle notice received u/s 245 of Income Tax https://simplifiedlaws.com/notice-us-245-income-tax-how-to-handle/

  • Ashok Gupta

    Recently I noticed Outstanding
    Tax Demand in my account is Rs.22255 for A.Y 2008-09. When I checked IT Return
    history of F.Y. 2008-09 it shows status as Return uploaded instead of ITR
    Processed. I had uploaded the IT R-1 form but it was not processed. I do not
    know the reason for that. I am an Employee and I think that my employer had
    paid the tax. But I am not having form 16 of A.Y, 2008-09.

    Please advice how can I get to know the reason why ITR-1 was not processed and
    what should I do in this situation?

    • simplifiedlaws

      Showing return status as “Return Uploaded” doesn’t necessarily means that your return is not processed at all. IT has not been processed by CPC. IT appears that your return is processed and demand is determined by your assessing officer. You have to visit and check your assessing officer to find out the reason for demand. You may have to file rectification application manually.

      To know Step by Step procedure to handle notice received u/s 245 of Income Tax visit https://simplifiedlaws.com/notice-us-245-income-tax-how-to-handle/

  • Shashank

    I just wanted to know, in case I do not respond to the tax
    demand u/s245 within 30 days, is it certain that I will be getting my balance
    refunds (after adjustements) ? Or is there still a chance that I may also be
    issued a notice u/s 142(1) or any other section ?

    If I am certain to get refunds, typically how long will that
    take ?

    • simplifiedlaws

      For the purpose of getting refund early, it is advisable to respond to the demand outstanding, if demand raised by the CPC or AO is correct. An opportunity of 30 days given to tax payer u/s 245 of income tax Act, doesn’t mean that CPC will process refund immediately after 30 days. I have come across cases of not sending refund even after 3 months from the end of 30 days. Hence i suggest you to submit your response by selecting Demand is correct if so.

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