A company's return for AY 2021-22 was processed and a refund of Rs 47 lakh was determined. Before it was issued, the portal showed the refund adjusted against an outstanding demand of Rs 39 lakh for AY 2016-17, a demand that arises from an assessment already under appeal and on which the officer had granted stay in 2019 on part payment. The intimation of proposed adjustment appears on the portal bearing a date two days after the adjustment was actually given effect, and the company can prove the adjustment date from its own portal downloads. Separately, the refund of Rs 22 lakh for AY 2024-25 has not been released at all, with the officer stating orally that scrutiny is pending. No order recording satisfaction for withholding has been communicated. The company holds the stay order for AY 2016-17, the appeal acknowledgement, the portal screenshots with timestamps, and the demand and refund ledgers.
Establish the sequence of two dates for the adjusted year: when the intimation of the proposed set-off was given, and when the set-off was actually effected. Prior intimation is the statutory condition, and an intimation issued simultaneously with or after the adjustment does not satisfy it, so a proven out-of-sequence date can undo the entire adjustment without touching the merits of the old demand. Download and preserve the portal pages with their timestamps immediately, because that evidence is the whole case.
A refund can be set off against a sum remaining payable only after an intimation in writing of the proposed action, and that intimation must come before the set-off is effected, neither simultaneously with it nor afterwards. Failure to follow the mandatory prior requirement has rendered adjustments wholly illegal, with directions to refund the amount with statutory interest, and adjusting without prior notice has been quashed even where the department relied on earlier correspondence. The library now holds the source of that reading - a High Court's directions, given on its own motion, that the provision is a two-stage one, with a prior intimation, a reply the officer must consider and an order to follow - and the Board's own instruction implementing those directions, which binds the officer administratively and is the cleaner thing to put in a letter. It also records that no appeal lies against the set-off itself, a conclusion resting on the statutory list of appealable orders rather than on any decision, so the representation and then a writ are the route. Frame the representation on the sequence of dates rather than on the correctness of the old demand.
Where the demands sought to be adjusted are covered by subsisting stay orders, the adjustment has been quashed and the full determined amount directed to be refunded. An adjustment made despite a stay has separately been declared illegal and arbitrary with a direction to release the refund with statutory interest. Attach the stay order and the appeal acknowledgement to the representation so that the point is self-proving.
A stay granted while the appeal is pending operates until disposal of the appeal and does not lapse merely because six months have gone by, and an adjustment made without written intimation before it has been treated as fatally flawed. That matters here because the stay dates from 2019 and the department's likely first response is that it is spent. Where interim protection exists, an adjustment of refund can itself amount to a coercive measure.
Withholding a refund because scrutiny is pending is not the same act as setting it off against a demand, and it carries its own conditions: separate recording of satisfaction by the officer and prior approval, with the withholding power now sitting in the set-off provision. An oral statement that scrutiny is pending is not an order, so the first step is to demand the recorded satisfaction and the approval. For older years the position was different, which is why the year in question has to be identified before the argument is chosen.
Where the department pays the refund but not the interest that has accrued on it, the entire amount including accrued interest has been directed to be paid, on the footing that this is not compounding but simply non-payment of the total refundable amount. What cannot be claimed is interest on that statutory interest, since only the interest the statute itself provides may be claimed. The older authority that appeared to allow compensation for delayed payment of interest is recorded in this library as overruled and should not be pressed.
Adjustments made without a provable prior intimation, or against a demand that was under a subsisting stay, are frequently reversed on a writ with a direction to release the amount within a fixed number of weeks. Interest on the released amount is granted in many cases but is not automatic, particularly where the underlying demand is still contested. Withheld refunds are usually released once the assessee forces the recorded satisfaction and approval into the open, though the department may simply record them properly and withhold again.