Arrears of demand

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PRAKASH (Querist)
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24 March 2012 hi
please tell me what is arrears of demand with one example plz....intimation u/s 245 of the Income Tax Act, 1961.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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24 March 2012 Arrear of demand means any demand raised against you in past which has not been paid by you. Say for assessment year 2008-09 (31.3.2008) assessment was made and as per the department there was a tax liability of Rs. 3,00,000/- against which you paid advance tax and other taxes Rs. 2,00,000/- the balance Rs.1,00,000 is the arrears demand if you have not paid anything besides interest u/s 234A, 234B, 234C. You are also liable for further interest u/s 220(2) till the payment is made or refund of any assessment year say 2009-10 is adjusted. This arrear demand if not paid within 1 year then the matter can be sent to the Tax Recovery Officer for recovery of demand and your bank account can also be blocked u/s 226.

As regards section 245 is concerned the ITO has the power to adjust any refund of any assessment year which you are entitled to reduce the arrears demand in his records. This is done by issuing refund voucher in the name of the department on your account and the same is shown as paid and at the same time shown as received from you..