There is interim protection against recovery for that year. Can the department still adjust my refund?
No. Adjustment of a refund against a demand may itself amount to a coercive measure, so doing it for years already covered by interim protection is not a neutral accounting entry. For the year where no prior s.245 notice or intimation had been issued at all, the mandatory procedure had simply not been followed. The adjustment was quashed and the refund ordered released with applicable interest within eight weeks.
Decided by the High Court (Delhi High Court — Vibhu Bakhru and Tejas Karia JJ) on 2025-03-17, reported as [2025] 173 taxmann.com 396 (Delhi); [2026] 489 ITR 594 (Delhi); (2025) 344 CTR 433 / 249 DTR 134 (Delhi); W.P.(C) No. 10867 of 2024. It bears on section 245, section 143(1) of the Income Tax Act 1961, in Refunds, Interest & Condonation and Demand, Recovery & Stay matters.
It shuts down the department's line that a stay covers recovery but not adjustment. Two situations it covers directly: a set-off made despite an existing stay or writ order between the same parties, and a set-off made with no s.245 intimation at all. It also shows the point worth asking for — an outer time limit for release, since a quashed adjustment otherwise leaves the money in limbo while the department reprocesses.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner challenged a rectified intimation of 7 July 2022 under s.143(1) by which a refund of Rs 19,37,43,880 due for assessment year 2020-21 was adjusted against outstanding demands for 2016-17, 2017-18 and 2018-19 — Rs 7,12,46,726 against 2017-18, Rs 3,13,20,749 against 2018-19, and Rs 3,02,64,095 and Rs 6,09,12,310 against 2016-17. For 2017-18 and 2018-19 the Tribunal had, by order of 23 September 2022, stayed recovery of the balance demand on condition that Rs 10 crore be paid. For 2016-17 there was no stay order as such: the Tribunal had by an order of 26 November 2021, extended from time to time, adjourned the stay application and directed the department to take no coercive action meanwhile, and the stay application itself was still undecided. The Revenue's position was that an order barring coercive action does not bar adjustment of refunds. For 2017-18 and 2018-19 the petitioner had already succeeded in an earlier petition, W.P.(C) 10835 of 2024 decided 4 December 2024, in which a refund for 2022-23 adjusted against the 2018-19 demand was ordered to be refunded.
The petition was allowed, the Revenue's action was set aside, and the refund determined was directed to be paid with applicable interest, preferably within eight weeks (para 19). The two limbs rest on different grounds. For 2017-18 and 2018-19 the Tribunal had stayed the demand, so a refund for another year could not be adjusted against demands that were raised and stayed — a point already covered by the Court's decisions in Lease Plan India and in the petitioner's own earlier writ petition (paras 4 to 6). For 2016-17 the Court did not hold that adjustment against a bar on coercive action was itself impermissible. It accepted that adjustment may in some cases amount to a coercive measure, but held that an appellate authority may confine a stay to other coercive measures and leave adjustment of refunds untouched, and that where there is ambiguity the course is to apply to that authority for clarification, which neither party had done (paras 13 and 14). It read the Tribunal's repeated interim orders as intended to stop the Revenue taking any step in the meanwhile, the stay application being still undecided (para 15), and then rested the conclusion on a separate and sufficient ground: no prior notice or intimation under s.245 had been issued, so the mandatory requirement for an adjustment had not been met (para 16). Following Vijay Singh Kadan, an ex post facto notice cannot cure that defect (para 17).
The Court identified the principal controversy as whether an order restraining the Revenue from taking coercive steps extends to adjustment of refunds (para 12). It set the Punjab and Haryana High Court's view in Kulbhushan Goyal, that a unilateral adjustment is itself a coercive measure, against its own Division Bench decision in Maruti Suzuki, which holds that an appellate authority may stay recovery in absolute terms, or may stay recovery by coercive methods while leaving adjustment of refunds available, but that where a stay of recovery is granted in simple and absolute terms it would be improper for the Revenue to recover by adjustment (paras 10 to 13). It resolved that by accepting the Punjab and Haryana proposition only in a qualified form — adjustment may in some cases be a coercive measure — while holding that the appellate authority remains free to draw the line, and that ambiguity should be taken back to that authority rather than litigated here; neither party had done so (para 14). What tipped the 2016-17 limb was, first, the inference that orders adjourning an undecided stay application and directing no coercive action were meant to stop the Revenue doing anything meanwhile (para 15), and second, the mandatory character of s.245: prior intimation not having been given, the adjustment could not stand, and Vijay Singh Kadan forecloses curing that by a later notice (paras 16 and 17).
We are inclined to accept that adjustment of refund against outstanding demand may in some cases amount to a coercive measure as held by the Punjab and Haryana High Court in Kulbhushan Goyal (supra). However, as held by this court, it is open for the appellate authority to further specify that the stay order is limited to interdicting other coercive measures for recovery and would not extend to adjustment of refunds.
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Handle my notice → Ask a CA on WhatsAppNo. Adjustment of a refund against a demand may itself amount to a coercive measure, so doing it for years already covered by interim protection is not a neutral accounting entry. For the year where no prior s.245 notice or intimation had been issued at all, the mandatory procedure had simply not been followed. The adjustment was quashed and the refund ordered released with applicable interest within eight weeks. This was decided by the High Court (Delhi High Court — Vibhu Bakhru and Tejas Karia JJ) and bears on section 245, section 143(1) of the Income Tax Act 1961. It is reported as [2025] 173 taxmann.com 396 (Delhi); [2026] 489 ITR 594 (Delhi); (2025) 344 CTR 433 / 249 DTR 134 (Delhi); W.P.(C) No. 10867 of 2024. It shuts down the department's line that a stay covers recovery but not adjustment. Two situations it covers directly: a set-off made despite an existing stay or writ order between the same parties, and a set-off made with no s.245 intimation at all. It also shows the point worth asking for — an outer time limit for release, since a quashed adjustment otherwise leaves the money in limbo while the department reprocesses. If it applies to you, the first step is this: Put the existing stay or writ order on record and characterise the adjustment as a recovery step taken in the teeth of it, not as a bookkeeping entry.
The petitioner challenged a rectified intimation of 7 July 2022 under s.143(1) by which a refund of Rs 19,37,43,880 due for assessment year 2020-21 was adjusted against outstanding demands for 2016-17, 2017-18 and 2018-19 — Rs 7,12,46,726 against 2017-18, Rs 3,13,20,749 against 2018-19, and Rs 3,02,64,095 and Rs 6,09,12,310 against 2016-17. For 2017-18 and 2018-19 the Tribunal had, by order of 23 September 2022, stayed recovery of the balance demand on condition that Rs 10 crore be paid. For 2016-17 there was no stay order as such: the Tribunal had by an order of 26 November 2021, extended from time to time, adjourned the stay application and directed the department to take no coercive action meanwhile, and the stay application itself was still undecided. The Revenue's position was that an order barring coercive action does not bar adjustment of refunds. For 2017-18 and 2018-19 the petitioner had already succeeded in an earlier petition, W.P.(C) 10835 of 2024 decided 4 December 2024, in which a refund for 2022-23 adjusted against the 2018-19 demand was ordered to be refunded. The matter was decided on 2025-03-17 by the High Court (Delhi High Court — Vibhu Bakhru and Tejas Karia JJ). On those facts the High Court held as follows. The petition was allowed, the Revenue's action was set aside, and the refund determined was directed to be paid with applicable interest, preferably within eight weeks (para 19). The two limbs rest on different grounds. For 2017-18 and 2018-19 the Tribunal had stayed the demand, so a refund for another year could not be adjusted against demands that were raised and stayed — a point already covered by the Court's decisions in Lease Plan India and in the petitioner's own earlier writ petition (paras 4 to 6). For 2016-17 the Court did not hold that adjustment against a bar on coercive action was itself impermissible. It accepted that adjustment may in some cases amount to a coercive measure, but held that an appellate authority may confine a stay to other coercive measures and leave adjustment of refunds untouched, and that where there is ambiguity the course is to apply to that authority for clarification, which neither party had done (paras 13 and 14). It read the Tribunal's repeated interim orders as intended to stop the Revenue taking any step in the meanwhile, the stay application being still undecided (para 15), and then rested the conclusion on a separate and sufficient ground: no prior notice or intimation under s.245 had been issued, so the mandatory requirement for an adjustment had not been met (para 16). Following Vijay Singh Kadan, an ex post facto notice cannot cure that defect (para 17).
The Court identified the principal controversy as whether an order restraining the Revenue from taking coercive steps extends to adjustment of refunds (para 12). It set the Punjab and Haryana High Court's view in Kulbhushan Goyal, that a unilateral adjustment is itself a coercive measure, against its own Division Bench decision in Maruti Suzuki, which holds that an appellate authority may stay recovery in absolute terms, or may stay recovery by coercive methods while leaving adjustment of refunds available, but that where a stay of recovery is granted in simple and absolute terms it would be improper for the Revenue to recover by adjustment (paras 10 to 13). It resolved that by accepting the Punjab and Haryana proposition only in a qualified form — adjustment may in some cases be a coercive measure — while holding that the appellate authority remains free to draw the line, and that ambiguity should be taken back to that authority rather than litigated here; neither party had done so (para 14). What tipped the 2016-17 limb was, first, the inference that orders adjourning an undecided stay application and directing no coercive action were meant to stop the Revenue doing anything meanwhile (para 15), and second, the mandatory character of s.245: prior intimation not having been given, the adjustment could not stand, and Vijay Singh Kadan forecloses curing that by a later notice (paras 16 and 17). In the words reproduced by the source cited on this page: "We are inclined to accept that adjustment of refund against outstanding demand may in some cases amount to a coercive measure as held by the Punjab and Haryana High Court in Kulbhushan Goyal (supra). However, as held by this court, it is open for the appellate authority to further specify that the stay order is limited to interdicting other coercive measures for recovery and would not extend to adjustment of refunds." The decision followed or applied Lease Plan India v. Dy. CIT 2012:DHC:5280-DB (Delhi); Huawei Telecommunications India Company (P.) Ltd. v. Asstt. CIT, W.P.(C) No. 10835 of 2024 (Delhi), 4 December 2024; Kulbhushan Goyal v. Union of India 2018 SCC OnLine P&H 103 (accepted in qualified terms); Vijay Singh Kadan v. Chief CIT [2016] 384 ITR 69 (Delhi); Kshipra Jatana v. Asstt. CIT 2022:DHC:1997-DB (Delhi).
It was decided by the High Court on 2025-03-17 and is reported as [2025] 173 taxmann.com 396 (Delhi); [2026] 489 ITR 594 (Delhi); (2025) 344 CTR 433 / 249 DTR 134 (Delhi); W.P.(C) No. 10867 of 2024. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 245, section 143(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The petition was allowed, the Revenue's action was set aside, and the refund determined was directed to be paid with applicable interest, preferably within eight weeks (para 19). The two limbs rest on different grounds. For 2017-18 and 2018-19 the Tribunal had stayed the demand, so a refund for another year could not be adjusted against demands that were raised and stayed — a point already covered by the Court's decisions in Lease Plan India and in the petitioner's own earlier writ petition (paras 4 to 6). For 2016-17 the Court did not hold that adjustment against a bar on coercive action was itself impermissible. It accepted that adjustment may in some cases amount to a coercive measure, but held that an appellate authority may confine a stay to other coercive measures and leave adjustment of refunds untouched, and that where there is ambiguity the course is to apply to that authority for clarification, which neither party had done (paras 13 and 14). It read the Tribunal's repeated interim orders as intended to stop the Revenue taking any step in the meanwhile, the stay application being still undecided (para 15), and then rested the conclusion on a separate and sufficient ground: no prior notice or intimation under s.245 had been issued, so the mandatory requirement for an adjustment had not been met (para 16). Following Vijay Singh Kadan, an ex post facto notice cannot cure that defect (para 17). It arises in Refunds, Interest & Condonation and Demand, Recovery & Stay matters, on section 245, section 143(1) of the Income Tax Act 1961, and was decided by Delhi High Court — Vibhu Bakhru and Tejas Karia JJ. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Take each adjusted year separately and ask for each whether a prior s.245 intimation was issued — the defect, and the argument, differ year by year. Ask the court or the officer for a specific time limit for release of the refund with applicable interest, not merely for the adjustment to be set aside.
Validity check could not be completed. Decided 17 March 2025. The report carries no later-treatment note and no case review of this decision, and no case applying, following or affirming it was found on the full read. The propositions it applies are older and are not in doubt: Lease Plan India and Vijay Singh Kadan in Delhi on the mandatory character of prior intimation under s.245, and Maruti Suzuki on the scope of a stay. What is not established is any later treatment of this judgment itself, or whether the Revenue has appealed. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Be careful how this case is used. It is often reported as authority that adjusting a refund against a demand is a coercive measure. The Court accepted that only in a qualified form and preferred the Delhi line in Maruti Suzuki: an appellate authority may stay recovery absolutely, or may bar other coercive steps while leaving adjustment of refunds available, and where the order is ambiguous the parties should go back to that authority for clarification rather than to the writ court. The year for which there was no stay order was decided on a different and narrower ground — that no prior notice or intimation under s.245 had been given, which is mandatory and cannot be cured by a notice issued afterwards. For the two years where the Tribunal had stayed the demand, the adjustment fell because a stayed demand cannot be satisfied out of another year's refund. No later treatment of this judgment was identified and it is not recorded whether the Revenue has appealed. What the Tribunal ultimately did with the stay application for assessment year 2016-17, still undecided when this judgment was delivered, is not on the record read. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition was allowed, the Revenue's action was set aside, and the refund determined was directed to be paid with applicable interest, preferably within eight weeks (para 19). The two limbs rest on different grounds. For 2017-18 and 2018-19 the Tribunal had stayed the demand, so a refund for another year could not be adjusted against demands that were raised and stayed — a point already covered by the Court's decisions in Lease Plan India and in the petitioner's own earlier writ petition (paras 4 to 6). For 2016-17 the Court did not hold that adjustment against a bar on coercive action was itself impermissible. It accepted that adjustment may in some cases amount to a coercive measure, but held that an appellate authority may confine a stay to other coercive measures and leave adjustment of refunds untouched, and that where there is ambiguity the course is to apply to that authority for clarification, which neither party had done (paras 13 and 14). It read the Tribunal's repeated interim orders as intended to stop the Revenue taking any step in the meanwhile, the stay application being still undecided (para 15), and then rested the conclusion on a separate and sufficient ground: no prior notice or intimation under s.245 had been issued, so the mandatory requirement for an adjustment had not been met (para 16). Following Vijay Singh Kadan, an ex post facto notice cannot cure that defect (para 17).
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