An instruction issued by the Central Board of Direct Taxes, as F. No. 312/109/2015-OT, dated 7 March 2016.
An office memorandum of the Central Board of Direct Taxes revising a timeline it had itself set six weeks earlier. Section 245 of the Income-tax Act, 1961 allows a refund due to an assessee to be set off against an outstanding demand, but only after intimation to him. An earlier office memorandum of the same number, dated 29 January 2016, laid down the procedure to be followed where a notice under section 245 had been issued for returns to be processed during the financial year 2015-16. This memorandum shortens two periods in that procedure.
This is an instruction to the department's own officers. It tells them how to do something — which cases to take up, what to check, how to record it. It is an internal direction, and its whole force runs downwards inside the department.
The memorandum refers to the office memorandum of even number dated 29 January 2016 and to the procedure it specified. It records the difficulty: given the large volume of pending refunds subject to proceedings under section 245, a timeline of thirty days for the assessee to respond to the notice and a further thirty days for the assessing officer to confirm or correct the demand meant that verification and the issue of the refund were taking far too long, and grievances were rising. It then decides that, with a view to clearing the pendency of refunds subject to verification under section 245, the timeline of thirty days for the assessee and for the assessing officer specified in the memorandum of 29 January 2016 may be reduced to fifteen days, in regard to notices under section 245 to be issued in the balance period of the current financial year.
The section 245 adjustment procedure had become the bottleneck in refund issue. Each case carried two consecutive thirty-day windows, one for the assessee and one for the assessing officer, so even a straightforward case took two months before the refund could move, and the department was accumulating grievances from assessees whose refunds were held up over demands that were often wrong or already paid. Halving both windows was the Board's answer to the backlog within the remaining weeks of the financial year.
The memorandum directs the department's officers and fixes the period within which the assessing officer must act. Its shortening of the assessee's own window is administrative convenience and cannot cut down any right he has under section 245 itself; he does not become bound by a period the Board has set. A Tribunal or a court asked whether an adjustment under section 245 was validly made will look at the section, not at this memorandum.
Applies to notices under section 245 issued in the balance period of the financial year 2015-16, that is, from 7 March 2016 to 31 March 2016. It modifies the office memorandum of even number dated 29 January 2016.
The shortened window is the practical risk. Fifteen days to answer a section 245 intimation is easily lost in the post or in an unread email, and if the response is not filed the demand is confirmed and the refund adjusted against a figure that may be stale, already paid or under appeal. The memorandum is also confined to notices issued in the closing weeks of 2015-16, so it is not authority for the timeline in any later year.
the timeline of 30 days for the assessee and the assessing officer specified in the O.M. dated 29.01.2016 may be reduced to 15 days
— the Central Board of Direct Taxes, instruction F. No. 312/109/2015-OT, 7 March 2016. Read it in the department’s own PDF.
| Under the Income-tax Act, 1961 | Now, in the Income-tax Act, 2025 |
|---|---|
| section 245 | section 381, section 438 |
My refund is being held back because scrutiny is pending. Can the officer simply sit on it?
Does a stay granted under s.220(6) lapse after six months, freeing the department to adjust your refund?
CPC has refused my TDS credit and adjusted the refund against an old demand. What did the Delhi High Court actually direct?
My employer deducted tax from my salary but never paid it over. Can the department recover it from me and adjust my refunds?
There is interim protection against recovery for that year. Can the department still adjust my refund?
Your refund was adjusted against an old demand. Did they have to tell you first?
What here is the Board’s and what is ours. The document is the Central Board of Direct Taxes’ own. Its number, its date and the words quoted above are reproduced from the Board’s own PDF, which is here. Everything else on this page is ours: the plain-English account of what the document is and what it does, the reading of which provision it turns on, the note on what to watch, and the choice of cases. Where our account and the document part, the document governs.
An order of the Board binds the department, not you and not a court. The Board writes to its own officers. An assessee may hold the department to an order or an instruction that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves. This is the most common mistake made with this material, and it is worth making twice: a direction of the Board is not a section of the Act.
What we could not settle. The memorandum cites no enabling provision for its own issue, so the authority field is left empty. The underlying office memorandum of 29 January 2016 was not fetched and its full procedure is therefore not described here.