Adjustment of refund against demand — Section 245

What this section is

Section 245 allows the AO to set off a refund payable to the assessee against any sum remaining payable under the Act. A prior intimation must be issued giving the assessee an opportunity to be heard.

When it is issued

Whenever a refund is being processed and there is an outstanding demand on record, including disputed and stayed demands.

What you should do

1. 1Verify whether the demand actually exists. CPC's records often carry stale demands that have been deleted at the AO level.
2. 2If the demand is incorrect, respond on the portal disagreeing and attach the supporting order, rectification, or appeal effect.
3. 3If the demand is under stay, respond and attach the stay order.
4. 4If the demand is correct, agree to the adjustment.

Documents typically needed

• Section 245 intimation
• Earlier rectification / appeal effect orders
• Stay order (if applicable)

Common mistakes

• Letting the 21 days lapse — the refund is then adjusted automatically and reversal becomes painful.
• Disagreeing without uploading proof.