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Section 245 of Income-Tax Act, 1961

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Section 245 of Income-Tax Act, 1961 deals with the topic of Set off of refunds against tax remaining payable

From the Act

Where under any of the provisions of this Act, a refund is found to be due to any person, the [Assessing] Officer, [Deputy Commissioner (Appeals)] [, Commissioner (Appeals)] or [Chief Commissioner or Commissioner], as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.

Recent Cases / Related Cases / Case Laws

  • January 2012: Where Assessing Officer while making refund, adjusted amount payable by assessee for earlier assessment year against amount of refund due without following procedure prescribed under section 245 i.e. advance intimation and opportunity of hearing, impugned adjustment was to be set aside - [2012] 17 LNIN 145 (Delhi)
  • [2011] 16 LNIN 40: Delhi: Word 'recovery' is comprehensive and includes both coercive steps to recover demand and adjustment of refund to recover demand; adjustment under section 245 is a form/method of recovery
  • State Bank of Patiala v. CIT [1999] 239 ITR 421 (Punj. & Har.). [Also see CIT v. J.K. Industries Ltd. [2000] 245 ITR 457 (Cal.) and Fosroc Chemicals (India) Ltd. v. CIT [2001] 248 ITR 607 (Kar.)]: Prior intimation to assessee whether mandatory - The condition requir­ing that an intimation in writing has to be given to the assessee about the proposed set off must be strictly followed. Obviously, the object is to inform the assessee about the proposed action of set off so as to enable him to put forward his objection, if he so desired. If the legislative intent was simply to give an intimation about the set off to the assessee, there would not be a requirement of giving an intimation before making the adjustment. It would defeat the purpose of the provision if it is said that an intimation simpliciter, while making the adjustment of the refundable amount towards tax demands of other years, was sufficient
  • Brij Bhushan Lal & Sons v. Designated Authority [2000] 246 ITR 353 (All.).: While making set off of refunds against tax remaining payable, intimation is certainly not a jurisdictional requirement and absence thereof is merely an irregularity and, therefore, want of intimation would not vitiate the adjustment
  • Japson Estates (P.) Ltd. v. Dy. CIT [2006] 285 ITR 40 (AP).: Where at the footnote of the intimation under section 143(1), it had been inscribed, ‘Adjusted against demand (partly) for the assessment year 2003-04 at Rs. 45,14,870’, by no stretch of imagination it could be treated as ‘intimation’ under section 245. It may be true that section 245 does not contemplate a show-cause notice or an inquiry but, at the same time, it requires a prior intimation in writing of the proposed action of adjustment. Admittedly, such a notice was not given to the petitioner. Since there had been no intimation in terms of section 245, the petitioner had been deprived of his right to raise any objections to the order of adjustment. Therefore, the intimation to the extent of adjusting the amount, was to be quashed
  • Archana Shukla v. Joint CIT [2000] 112 Taxman 573/244 ITR 829 (Delhi): Refund due to assessee cannot be adjusted against demand raised, against a third party - Section 245 is very clear that an adjust­ment in respect of a demand can be made relating to a person to whom refund is due. The provision authorises the prescribed officer to set off, after intimation to the claimant, the amount to be refunded or any part thereof against any sum payable under the Act by the person to whom the refund is due.
    • Where, admittedly, the demand did not relate to the petitioner and related to some other person, the action of the department in making adjustment and/or not grant­ing refund flowing from the intimation under section 143(1)(a) of the Act, could not be maintained in law.

Related Sections from the Act

Sections of the Indian Income Tax Act, 1961