An income tax assessee will get 21 days to respond to notices issued by the Central Processing Centre (CPC) regarding set-off and withholding of refund.

The Income Tax Department says this will help in avoiding delays in the issuance of refunds. The time limit for assessees to respond is at par with the time allowed for the assessing officer (AO) to respond which was lowered last year to 21 days from 30 days. Also, it has already been said that AO will be held responsible for any delay.

An instruction issued by the Directorate of Income Tax (Systems), dated May 31 said, “Consequent to the deployment of online response mode, which is in place for a sufficiently long period of time and also in order to avoid delays in issue of refund, the time limit of 21 days is provided to the assessee to respond to intimation u/s 245(1) of the Income Tax Act issued by Centralised Processing Centre. This will apply with immediate effect.”

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Section 245 of the Income Tax Act prescribes the mechanism for the set-off of refunds against tax remaining payable. Accordingly, in case of refunds due, based on the demand uploaded, CPC issues prior intimation to the taxpayer to adjust the refund against the correct and legitimate actionable demand due.

In case of a grievance against the demand, the taxpayer can approach the AO who, in turn, is required to respond within the specified time. In the interim period, the CPC will hold the refund; after feedback from the AO, it will adjust against the demands.

‘Streamlining process’

According to Vishwas Panijar, Partner with Nangia Andersen LLP, the latest instructions is another endeavour on the part of the Tax authorities to streamline the process of resolution of refund adjustment against the demand.

The online facility for the response to such intimations was deployed based on decade-old instructions, which provided the facility of assessee to approach the AO for resolution of the discrepancy and to prevent refund adjustments against erroneous outstanding demands.

“Whilst the steps can be seen as a genuine endeavour to avoid delay and incorrect adjustment of refund, further steps in this direction would be required to provide a complete redressal for the assesses with respect to the refund adjustment and releasing of funds, such as mandatory online uploading/issuance of a stay of demands orders by the AOs,” he said.

Mitesh Jain, Partner, Economic Laws Practice said that as the online mechanism to submit responses to outstanding tax demands is available and functional on the income tax portal for the last few years, the revised time limit should be reasonable for taxpayers to file their response.

Additionally, the revised time limit will also expedite the time taken for receiving refunds from CPC. “Further, the instruction also provides a step-by-step procedure for the taxpayers to furnish a response to intimation under Section 245(1) of the Act on income tax portal,” he said.

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