Your refund was adjusted against demands that were already stayed. Is that lawful?
No. Section 245 requires previous intimation of the proposed adjustment, not simultaneous intimation — and the demands adjusted were covered by subsisting stay orders. The full refund was ordered paid within four weeks.
Decided by the High Court (Bombay High Court — Sunil P. Deshmukh J and Abhay Ahuja J) on 2021-04-06, reported as (2021) 435 ITR 632 / (2021) 281 Taxman 162 / [2021] 128 taxmann.com 196 (Bom)(HC); Writ Petition No. 732 of 2021. It bears on section 245, section 143(1), section 244A, section 220(6) of the Income Tax Act 1961, in Demand, Recovery & Stay matters.
It joins the s.245 line already in this library and adds a point that keeps recurring: a stay granted by any forum has to be respected when refunds are adjusted, and adjustment is a form of recovery.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 2019-20 the petitioner returned total income of Rs 638,05,85,060 with tax of Rs 220,62,55,842, claimed credit for tax deducted and collected at source of Rs 425,84,02,174 and claimed a refund of Rs 205,21,46,330. An earlier writ petition had been disposed of on 11 January 2021 with a direction to release the refund due, with interest, within two weeks. The intimation under s.143(1) dated 17 January 2021 then determined a refund of about Rs 227.27 crore inclusive of interest under s.244A, referred to outstanding demands of Rs 153.91 crore for assessment year 2007-08 and Rs 138.26 crore for assessment year 2008-09, both covered by interim orders of the Tribunal, and recorded that an intimation under s.245 proposing the adjustment had been issued separately. The refund was adjusted against those demands.
The petition was allowed in terms of prayer clause b(i) and the respondents were directed to refund the amount for assessment year 2019-20 as determined by the intimation of 17 January 2021, with interest as provided by law, within four weeks of receipt of the order. The adjustment was unsustainable: nothing on the record showed that any separate intimation under s.245 had in fact been issued, and the demands adjusted were covered by interim orders that were operative when the adjustment was made.
The e-mail of 22 January 2021 that the revenue relied on as the assessee's acknowledgment referred to the status of the outstanding demands and to the s.143(1) intimation, not to any intimation under s.245; the respondents produced no record of a separate s.245 intimation having been issued, although the intimation itself said one had been, and the affidavit in reply was silent on the point (paragraph 27). Nor was it the revenue's case that any officer had considered the assessee's contention that no s.245 intimation was received, recorded reasons for rejecting it and communicated those reasons before the refund was adjusted (paragraphs 28 and 29). The Court followed three of its own decisions — A.N. Shaikh Sixteenth, ITO v. Suresh B Jain [1986] 29 Taxman 191 / [1987] 165 ITR 86 (Bom.), that s.245 requires previous intimation of the proposed adjustment and not simultaneous intimation; Hindustan Unilever Ltd. v. Dy. CIT [2015] 60 taxmann.com 326 / 277 ITR 281 (Bom.), that prior intimation is mandatory, its purpose being to let the assessee point out factual errors or later developments, and that the officer must apply his mind, record why the objection is not sustainable and communicate that before or at the time of adjustment; and Milestone Real Estate Fund v. Asstt. CIT [2019] 105 taxmann.com 292 / 415 ITR 467 (Bom.) — and found a stark absence of material showing compliance with any of those requirements (paragraphs 18 to 20 and 30). On a second and independent ground, the Court held that its own suo motu order of 26 March 2020 in Writ Petition No. 2 of 2020, continued from time to time until 31 January 2021, was not confined to eviction or dispossession but on its own terms continued all interim orders of courts, tribunals and authorities subject to the High Court's superintendence. The Tribunal's interim orders for the two earlier years were therefore operative, so the demands adjusted were stayed demands; the revenue's contrary stand, that the order would not cover Tribunal matters because the Union was not a party, was one the Court found difficult to appreciate or approve and not in keeping with the stature of a department expected to act as a model litigant (paragraphs 31 to 33).
There is stark absence of material showing compliance of requirements viz: application of mind to contentions on behalf of the petitioner, reasoned order and its communication to the assessee.
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Handle my notice → Ask a CA on WhatsAppNo. Section 245 requires previous intimation of the proposed adjustment, not simultaneous intimation — and the demands adjusted were covered by subsisting stay orders. The full refund was ordered paid within four weeks. This was decided by the High Court (Bombay High Court — Sunil P. Deshmukh J and Abhay Ahuja J) and bears on section 245, section 143(1), section 244A, section 220(6) of the Income Tax Act 1961. It is reported as (2021) 435 ITR 632 / (2021) 281 Taxman 162 / [2021] 128 taxmann.com 196 (Bom)(HC); Writ Petition No. 732 of 2021. It joins the s.245 line already in this library and adds a point that keeps recurring: a stay granted by any forum has to be respected when refunds are adjusted, and adjustment is a form of recovery. If it applies to you, the first step is this: Check the portal for whether a s.245 intimation was actually issued and served before the adjustment.
For assessment year 2019-20 the petitioner returned total income of Rs 638,05,85,060 with tax of Rs 220,62,55,842, claimed credit for tax deducted and collected at source of Rs 425,84,02,174 and claimed a refund of Rs 205,21,46,330. An earlier writ petition had been disposed of on 11 January 2021 with a direction to release the refund due, with interest, within two weeks. The intimation under s.143(1) dated 17 January 2021 then determined a refund of about Rs 227.27 crore inclusive of interest under s.244A, referred to outstanding demands of Rs 153.91 crore for assessment year 2007-08 and Rs 138.26 crore for assessment year 2008-09, both covered by interim orders of the Tribunal, and recorded that an intimation under s.245 proposing the adjustment had been issued separately. The refund was adjusted against those demands. The matter was decided on 2021-04-06 by the High Court (Bombay High Court — Sunil P. Deshmukh J and Abhay Ahuja J). On those facts the High Court held as follows. The petition was allowed in terms of prayer clause b(i) and the respondents were directed to refund the amount for assessment year 2019-20 as determined by the intimation of 17 January 2021, with interest as provided by law, within four weeks of receipt of the order. The adjustment was unsustainable: nothing on the record showed that any separate intimation under s.245 had in fact been issued, and the demands adjusted were covered by interim orders that were operative when the adjustment was made.
The e-mail of 22 January 2021 that the revenue relied on as the assessee's acknowledgment referred to the status of the outstanding demands and to the s.143(1) intimation, not to any intimation under s.245; the respondents produced no record of a separate s.245 intimation having been issued, although the intimation itself said one had been, and the affidavit in reply was silent on the point (paragraph 27). Nor was it the revenue's case that any officer had considered the assessee's contention that no s.245 intimation was received, recorded reasons for rejecting it and communicated those reasons before the refund was adjusted (paragraphs 28 and 29). The Court followed three of its own decisions — A.N. Shaikh Sixteenth, ITO v. Suresh B Jain [1986] 29 Taxman 191 / [1987] 165 ITR 86 (Bom.), that s.245 requires previous intimation of the proposed adjustment and not simultaneous intimation; Hindustan Unilever Ltd. v. Dy. CIT [2015] 60 taxmann.com 326 / 277 ITR 281 (Bom.), that prior intimation is mandatory, its purpose being to let the assessee point out factual errors or later developments, and that the officer must apply his mind, record why the objection is not sustainable and communicate that before or at the time of adjustment; and Milestone Real Estate Fund v. Asstt. CIT [2019] 105 taxmann.com 292 / 415 ITR 467 (Bom.) — and found a stark absence of material showing compliance with any of those requirements (paragraphs 18 to 20 and 30). On a second and independent ground, the Court held that its own suo motu order of 26 March 2020 in Writ Petition No. 2 of 2020, continued from time to time until 31 January 2021, was not confined to eviction or dispossession but on its own terms continued all interim orders of courts, tribunals and authorities subject to the High Court's superintendence. The Tribunal's interim orders for the two earlier years were therefore operative, so the demands adjusted were stayed demands; the revenue's contrary stand, that the order would not cover Tribunal matters because the Union was not a party, was one the Court found difficult to appreciate or approve and not in keeping with the stature of a department expected to act as a model litigant (paragraphs 31 to 33). In the words reproduced by the source cited on this page: "There is stark absence of material showing compliance of requirements viz: application of mind to contentions on behalf of the petitioner, reasoned order and its communication to the assessee."
It was decided by the High Court on 2021-04-06 and is reported as (2021) 435 ITR 632 / (2021) 281 Taxman 162 / [2021] 128 taxmann.com 196 (Bom)(HC); Writ Petition No. 732 of 2021. 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), section 244A, section 220(6), 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 in terms of prayer clause b(i) and the respondents were directed to refund the amount for assessment year 2019-20 as determined by the intimation of 17 January 2021, with interest as provided by law, within four weeks of receipt of the order. The adjustment was unsustainable: nothing on the record showed that any separate intimation under s.245 had in fact been issued, and the demands adjusted were covered by interim orders that were operative when the adjustment was made. It arises in Demand, Recovery & Stay matters, on section 245, section 143(1), section 244A, section 220(6) of the Income Tax Act 1961, and was decided by Bombay High Court — Sunil P. Deshmukh J and Abhay Ahuja J. 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. List the stay orders covering each demand adjusted, with the forum and date. Treat adjustment as recovery when framing the challenge — a related decision holds recovery is comprehensive and includes it.
Searched for later treatment; none was found. That is not the same as a source affirming it. Later treatment: none found. The report carries no citator banner, no note of a special leave petition and nothing recording a later decision applying, following or doubting the judgment, and a search on its reporter citations turned up nothing later. Absence of contrary authority is not good law, so the status stays unverified. One uncertainty this note previously recorded is resolved: of the two 2021 Bombay entries in this assessee's name that could not be told apart, it is the decision reported at (2021) 435 ITR 632 / 281 Taxman 162 that corresponds to Writ Petition No. 732 of 2021; the entry listed as (2021) 201 DTR 185 / 320 CTR 683 is a different decision. The later matter Tata Communications Transformation Services v. ACIT (Bom.), 29 March 2022, remains a different assessee on a different subject and is not citator material for this entry. 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.
The full text of the judgment has been read, so the reporter citations are now established and the source limitation the note previously recorded no longer applies. One correction of attribution matters. The sentence this entry quoted as the Court's own — that s.245 requires previous intimation of the proposed adjustment and not simultaneous intimation — appears at paragraph 18 within the Court's recital of senior counsel's reliance on A.N. Shaikh Sixteenth, ITO v. Suresh B Jain, and is quoted from that 1986 Bombay decision. The proposition holds, because A.N. Shaikh was followed at paragraph 30, but it should be cited to A.N. Shaikh rather than to this judgment. Two other points have been corrected: the refund claimed in the return, Rs 205.21 crore, and the refund determined by the intimation of 17 January 2021, about Rs 227.27 crore inclusive of interest, are different figures; and the pandemic-period continuation of interim orders is an independent ground of decision rather than a criticism of the department's conduct. 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 in terms of prayer clause b(i) and the respondents were directed to refund the amount for assessment year 2019-20 as determined by the intimation of 17 January 2021, with interest as provided by law, within four weeks of receipt of the order. The adjustment was unsustainable: nothing on the record showed that any separate intimation under s.245 had in fact been issued, and the demands adjusted were covered by interim orders that were operative when the adjustment was made.
TaxSphere, “Tata Communications Ltd v Union of India”, https://taxnotice.vittsphere.com/caselaw/case/tata-communications-v-uoi/ (validity last checked 2026-08-23)
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Your refund was adjusted against an old demand. Did they have to tell you first?
Does a stay granted under s.220(6) lapse after six months, freeing the department to adjust your refund?
My appeal is pending. Can the department take my whole refund against the disputed demand, or only twenty per cent of it?
My refund was simply taken against another year's demand and I was never told. Does the notice have to come first?
