Tax dept holds assessing officer responsible for delay in adjustment-related refund claims
Taxpayers will get income tax refund sooner in case of adjustment. The Income Tax Department has cut the time allowed for the assessing officer (AO) to respond to 21 days from 30 days. Also, the AO will be held responsible for any delay.
“For the sake of clarity, it is hereby reiterated that If the assesees (taxpayer) either does not agree or partially agrees for adjustment, the matter shall be referred by CPC (Centralised Processing Centre) immediately to the Assessing Officer, who shall, within 21 days from the date of such reference, shall provide feedback to CPC as to whether the adjustment should be made or not, and in case of partial adjustment to be made then, amount of demand to be adjusted for each A.Y. needs to be specified in demand portal. If no feedback is received from the Assessing Officer within 21 days, CPC shall either release the refund without adjustment, or adjust the refund to the extent of demands agreed for adjustment by the assessee,” an instruction issued by Directorate of Income Tax (System) said.
Section 245 of the Income Tax Act prescribes the mechanism for set-off of refunds against tax remaining payable. Accordingly, in case of refunds due, on the basis of 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 grievance against the demand, the taxpayer can approach the AO who, in turn, is required to respond within 30 days by either rectifying or confirming the demand. In the interim period, the CPC will hold the refund; after feedback from the AO, it will adjust against the demands.
However, there have been several issues. The department noticed that sometimes the taxpayers had responded on the demand portal that the demands were incorrect, inasmuch as the demands were stayed by AO/ITAT/High Court. It has been reported that incorrect categorisation of such demand as “correct and collectible” or absence of feedback from the AO on the taxpayer’s response has resulted in incorrect adjustment of refunds by CPC, leading to grievances and litigations.
It was also observed that the AO often did not respond on time, leading to avoidable delays in refunds, grievances and litigations. Such delay in refunds causes additional burden of interest. Also, there is now a system of allowing taxpayers and the AO to respond online. All these factors necessitated reducing the response time, the department said.
The instruction also said the AO will unfailingly update the demand portal after taking into account the submissions of the assessees in response to intimation under the law. He/she will also update the demand portal with the correct status of collectability or otherwise of the demands, based on the correctness of the demand. The status of stay, instalments and so on granted by various authorities/ courts shall be updated immediately on the portal and submitted to CPC, to avoid incorrect adjustments. The supervisory officers will regularly monitor the execution of all these, the instruction said.