Demand, Refund and Corrective Action

After an Income-tax Return, or ITR, is filed and successfully verified, it is ordinarily processed by the Centralised Processing Centre, commonly known as CPC. Once processing is completed, the Income Tax Department may issue an intimation showing whether:

• the information reported in the return has been accepted
• a refund is payable
• additional tax, interest or fee is payable
• the refund claimed has been reduced
• the declared income or loss has been adjusted

Under the Income-tax Act, 1961, this communication is generally referred to as an intimation under section 143(1). The corresponding provision under the Income-tax Act, 2025 is section 270.

Which law applies?

Returns for Financial Year 2025-26, corresponding to Assessment Year 2026-27, continue to be filed and processed under the Income-tax Act, 1961. The Income-tax Act, 2025 applies to Tax Year 2026-27 beginning on 1 April 2026. Proceedings concerning earlier years continue under the 1961 Act.

What adjustments can be made while processing an ITR?

Section 143(1) permits specified preliminary adjustments while processing a return. Similar provisions are contained in section 270 of the Income-tax Act, 2025.

Adjustments may include:

• correction of an arithmetical error in the return
• correction of an incorrect claim that is apparent from the information contained in the return
• disallowance of a loss claimed where the return required for carrying forward or setting off that loss was furnished after the prescribed due date
• disallowance of expenditure, or increase of income, indicated in a tax audit report but not considered while computing income in the return
• disallowance of certain deductions where the return was not furnished within the legally prescribed time 
• other prescribed inconsistencies that may be adjusted under the applicable law

Before making an adjustment that affects the returned income, the Department ordinarily sends a communication describing the proposed adjustment. The taxpayer is generally given 30 days to submit a response. The response, if submitted within the permitted period, must be considered before processing is completed.

Is section 143(1) processing the same as scrutiny assessment?

No. These are different proceedings.

When can the intimation be issued?

Under section 143(1), an intimation cannot ordinarily be sent after the expiry of nine months from the end of the financial year in which the return was furnished.

For example, where a return is furnished during Financial Year 2026-27, the normal statutory period for issuing the intimation would run until nine months from 31 March 2027, subject to any legally valid extension or special order.

How to download the intimation

1. Log in to the Income Tax e-Filing portal.
2. Go to e-File.
3. Select Income Tax Returns.
4. Click View Filed Returns.
5. Select the relevant Assessment Year.
6. Click Download Intimation Order or the corresponding download option.

The intimation may also be sent to the email address registered on the e-Filing portal. Taxpayers should download it directly from their e-Filing account before acting on any demand or refund information received through email.

What should you check in the intimation?

Review the following details:

• name and PAN
• Assessment Year or applicable tax year
• ITR acknowledgement number
• date of filing and verification
• income reported in the return
• income computed by CPC
• deductions and exemptions claimed
• TDS and TCS credit
• advance tax and self-assessment tax credit
• interest and late-filing fee, if any
• refund claimed and refund determined
• tax demand, if any
• the reason or adjustment code mentioned against each difference

Possible results of section 143(1) processing

1. No demand and no refund

The Department’s computation may match the return, with no additional amount payable and no refund due. Where no adjustment has been made and no amount is payable or refundable, the acknowledgement of the return may be treated as the intimation.

In some cases, an adjustment may change the amount of loss to be carried forward even though no tax demand or refund arises. Such an adjustment should still be examined because it may affect the taxpayer’s position in later years.

2. Refund determined

A refund may be determined where the taxes paid or credited exceed the final tax liability. The refund determined may:

• match the refund claimed in the return;
• be higher because of an accepted tax credit or recalculation; or
• be lower because of an adjustment, tax-credit mismatch or other difference.

A refund is generally issued to a validated bank account selected for refund purposes on the e-Filing portal. Refund payment may be affected by an invalid bank account, incorrect account details, PAN-bank linkage issues or adjustment against an existing outstanding demand.

3. Demand determined

A demand may arise where the Department determines that additional tax, interest or fee is payable after considering the income, deductions and tax credits available in its records.

Common reasons include:

• TDS or TCS credit claimed in the return not matching the Department’s records;
• self-assessment tax challan details not entered correctly in the ITR;
• incorrect Assessment Year or payment code used while paying tax;
• income appearing in the return but tax not fully paid;
• deduction exceeding the statutory limit;
• loss or deduction disallowed because the return was filed late;
• interest under the applicable provisions being recalculated; or
• an adjustment proposed during processing being confirmed.

What should you do when a demand is raised?

Step 1: Reconcile the computation

Compare the intimation with:

• the ITR and computation filed by you
• Form 26AS or the corresponding tax-credit statement
• Annual Information Statement
• Taxpayer Information Summary
• Form 16 and Form 16A
• advance-tax and self-assessment-tax challans
• bank-interest and investment records
• deduction and exemption documents

Step 2: Decide whether the demand is correct

After reconciliation, the demand may be accepted fully, accepted partly or disputed.

Step 3: Submit a response on the e-Filing portal

1. Log in to the e-Filing portal.
2. Go to Pending Actions.
3. Select Response to Outstanding Demand.
4. Locate the relevant demand.
5. Select Pay Now or Submit Response, as applicable.
6. Choose the appropriate response and provide the required details.

How to pay an accepted demand

An accepted demand should normally be paid electronically through the e-Pay Tax facility available on the Income Tax e-Filing portal.

Select the applicable Assessment Year or tax year and the correct payment category. For a demand arising after processing or assessment under the 1961 Act, the relevant payment category is generally Tax on Regular Assessment. Carefully verify the PAN, year, payment type and amount before completing the transaction.

After payment, save the challan receipt and submit or update the response against the outstanding demand, where required. Payment of tax alone may not automatically record your response to the demand in every case.

When should a revised return be filed?

A revised return is appropriate when the error or omission was in the return originally filed by the taxpayer. Examples include:

• income was omitted
• an incorrect deduction was claimed
• the wrong ITR form was used
• tax-payment details were omitted or entered incorrectly
• a bank account or other reporting detail was incorrect
• income was reported under the wrong head

For Assessment Year 2026-27, a revised return under section 139(5) may generally be furnished up to 31 March 2027 or before completion of the assessment, whichever is earlier, subject to the applicable conditions and portal availability.

A revised return cannot ordinarily be used after the permitted time has expired. Depending on the nature of the omission and statutory eligibility, an updated return may be considered, but an updated return cannot be used merely to claim or increase a refund or to reduce the tax liability.

When should a rectification request be filed?

A rectification request is appropriate where there is a mistake apparent from the record in an intimation or order already passed by CPC or another income-tax authority.

Examples may include:

• a tax-payment challan available in the records not being given credit
• TDS credit reflected in the relevant records not being considered
• an evident arithmetical error in the intimation
• incorrect processing of information already furnished in the return
• an obvious inconsistency between the order and the information available on record.

A rectification request cannot generally be used to introduce a new claim requiring investigation, submit an entirely new source of income or reargue a debatable legal issue.

Steps to submit a rectification request

1. Log in to the Income Tax e-Filing portal.
2. Go to Services.
3. Select Rectification.
4. Click New Request.
5. Select the applicable Assessment Year and order or intimation.
6. Select the appropriate rectification request type.
7. Enter or confirm the required information.
8. Submit and e-verify the request, where required.

Revised return versus rectification

Can an intimation under section 143(1) be appealed?

Where an adjustment made in an intimation affects the returned income or creates a disputed liability, an appeal may be available under the applicable provisions. Rectification and appeal serve different purposes:

• Rectification is for an evident mistake apparent from the existing record.
• Appeal may be required where the taxpayer disputes the legal or factual basis of an adjustment and the issue is not merely an obvious error.

The appropriate remedy depends on the nature of the adjustment, the applicable year and the statutory time limit. Taxpayers should not file a rectification request as a substitute for an appeal where the issue is debatable or requires detailed examination.

Common mistakes to avoid

• Treating every section 143(1) intimation as a scrutiny notice.
• Paying a demand without first reconciling the calculation.
• Ignoring a demand because it appears incorrect.
• Filing a rectification request to correct an error that originated in the taxpayer’s own ITR.
• Filing a revised return where the revision deadline has already expired.
• Using the wrong Assessment Year while paying the demand.
• Failing to submit a response after making the tax payment.
• Relying only on an email attachment without checking the intimation on the official e-Filing portal.
• Confusing an intimation with a separate notice for defective return, scrutiny, reassessment or adjustment of refund.

Intimation under section 143(1) versus other Income-tax communications

The following communications are legally different and should not all be described as “intimations under section 143(1)”:

• Notice for a defective return: issued where the return contains a specified defect and requires correction.
• Notice seeking information or documents: issued for inquiry or assessment proceedings.
• Scrutiny notice: informs the taxpayer that the return has been selected for detailed examination.
• Reassessment notice: relates to income that may have escaped assessment and is governed by separate statutory conditions.
• Notice of demand: specifies tax, interest, fee, penalty or another amount payable pursuant to an order or intimation.
• Refund-adjustment communication: relates to a proposal to adjust a refund against an outstanding demand.

Each communication has a separate purpose, response procedure and time limit. The section number, Assessment Year, date of issue and response deadline should therefore be checked before taking action.

Conclusion

An intimation under section 143(1) is the result of preliminary processing of an Income-tax Return. It may confirm the return, determine a refund, reduce a refund, adjust a loss or raise a tax demand.

The taxpayer should compare the Department’s computation with the filed return and supporting tax records. Where the demand is correct, it should be paid and an appropriate response should be submitted. Where the return itself contains an error, a revised return may be required. Where the intimation contains an evident mistake based on the information already on record, a rectification request may be appropriate.

For disputed adjustments, large demands, cross-year tax-credit issues or matters involving legal interpretation, professional assistance should be considered before selecting a remedy.

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