Your Income Tax Refunds Could Shrink As Dept Sets Off Past Tax Dues — Details

Section 245 empowers the department to adjust the refund due for the current year against any outstanding tax demand from previous years

The income tax return filing process starts when taxpayers begin by submitting the appropriate ITR form

Source : ABPLIVE AI

The Income Tax Department has started sending emails to taxpayers, notifying them that their income tax refund will be put on hold if their Income Tax Return (ITR) is pending assessment or re-assessment. According to the communication, refunds will only be processed after a detailed review by the tax officer. The email cites Section 245(2) of the Income Tax Act as the basis for this action, according to The Economic Times Report.

Section 245 empowers the department to adjust the refund due for the current year against any outstanding tax demand from previous years. Notably, there is no time limit for cases falling under this section.

In the same context, on March 11, 2025, the Deputy Director of Income Tax sent emails to several taxpayers stating, “Since there are pending assessment / re-assessment proceedings in your case, the refund release/withhold will be based on the response provided by Jurisdictional Assessing Officer (JAO) in accordance with the provisions of section 245(2) of the Income Tax Act, 1961,” as per the report.

ITR Filling

To understand the nature of the recent tax notices, it is essential to look at the standard process of income tax return (ITR) filing and scrutiny.  The income tax return (ITR) filing process starts when taxpayers begin submitting the appropriate ITR form, either online or through the Income Tax Department’s official utilities. Once submitted, the Centralised Processing Centre (CPC) processes the return following defined parameters and legal provisions. In cases where the CPC suspects that a tax demand could potentially arise post-processing, the return is flagged and referred to the Jurisdictional Assessing Officer (AO) for further examination and action.

Response Times

As per the report, experts suggest that this type of notice is typically issued when there is an outstanding tax demand from previous years, and the Income Tax Department intends to adjust that amount against the current year’s tax refund. In most cases, taxpayers are given a 21-day window to respond to such notices.