What exactly is Intimation u/s 245?
Intimation u/s 245 is issued by the Income Tax Department to intimate you that they are adjusting your previous year’s pending tax payable with the current year’s refund.
Section 245 gives the Income Tax Department power to adjust any previous year’s demand of tax payable with the current year’s refund. But to exercise this power, it’s mandatory on their part to send intimation u/s 245 to the tax payers and give them opportunity to submit their response on it whether they agree with it or not.
For example, Income Tax Department had raised a demand for tax of Rs 21,000 from Mr. Sharma in the F.Y. 2012-13 after he filed his return. Mr. Sharma did not agree with the demand as the department did not consider his TDS. So, he simply filed for rectification u/s 154 for it and lived peacefully thereafter.
Then came F.Y. 2016-17, Mr. Sharma like every year filed his return, but this time with a refund of Rs 15,000. But instead of getting refund, he got an intimation from the Income Tax Department u/s 245 stating that his refund of Rs 15,000 is being adjusted with the demand raised by the department in the F.Y. 2012-13. This gave Mr. Sharma the goosebumps of the F.Y. 2012-13 when he struggled with that dreaded demand of Rs 21,000 and after consulting with professionals had filed a rectification u/s 154. Apparently, Income Tax Department did not agree with the rectification u/s 154 at that time, and the demand still remained.